Five significant and interrelated forces are transforming the financial services industry, according to EY’s Global banking outlook 2014-15. Collectively, these forces threaten a number of the traditional competitive advantages co-ops have held over banks.
“Co-ops were founded on a member-centric culture,” says Paul Battista, EY’s Canadian Financial Services Advisory leader. “But to survive – and thrive – in the face of things like new regulations, changing customer expectations and disruptive technology, they must respond with strategies that address key dimensions of their businesses.”
The five forces EY identifies as threatening to co-ops’ competitive advantage include:
- Regulation: global and local
- Customer: demands and expectations
- Technology and innovation: enabler, differentiator, disruptor
- Competition: old and new
- Society: politicians, citizens, activists
“Getting member interactions right is critical,” explains Battista. “Retail customers across the board are demanding greater transparency, personalized products and seamless transition between channels.”
According to EY, by harnessing a digital-first strategy, co-ops can enable members to personalize when, how and where they bank.
“Digital is quickly becoming the primary service channel and a key component of an omni-channel strategy for financial institutions,” says Battista. “At the same time, branches are focusing more on complex advice and sales.”
Especially in the face of increased competition, Battista says targeting defined member segments can enhance a co-op’s competitive position and offer comparatively better revenue growth opportunities.
“We’re already seeing dramatic changes in the financial services landscape,” adds Battista. “To stay competitive, co-ops must recommit to their member-centric culture, and invest in an integrated, dynamic plan for both digital and physical channels, informed by comprehensive analytics of member preferences.”