Until recently, personal finance services have been highly standardized. Most banks have offered very similar types of accounts, online banking features, and standardized credit cards. As a result, people often view banks as being cut from the same mould. In the UK, this standardization has been identified as a major reason for low levels of account-switching. Why go to the hassle of changing banks if they all offer the same packages, and at similar price points?
But today, retail banks are by no means the only financial service provider. In fact, virtually all services that banks provide can now be purchased from other kinds of companies. Whether you want to make a payment, transfer money, buy insurance, or take out a loan, you no longer have to rely on a bank at all. Changes to regulations and the digitalisation of financial products are making it easier for new financial service providers to enter the market, which means more options for consumers.
As a result, personal finance is becoming far more individual-centric as these new financial service providers compete for business. Customers now expect products tailored to their needs. Consumers can increasingly integrate apps with their bank accounts, change the interfaces they use to access information, set preferences for what information they want to see. They can create their own financial toolboxes with elements from different providers, buying health insurance from one provider, travel insurance from another, transferring money through different companies, and so on. Consumers can access most, if not all, of these services through their mobile phones, meaning they do not even have to leave the couch or the café to manage their money.
This trend in personalisation has potential to offer sigificant social benefits. There is a long-held belief that consumers do not find financial products interesting, but rather only use them to achieve some other goal. This belief persists in part because it is notoriously difficult to get people to engage with their finances. Most of us are reluctant to save money, plan for retirement, shop around for the best interest rates, and so on.
Explanations for our reluctance to plan our finances have usually cited financial literacy and our general disinterest in money as the main roadblocks. But what if the real problem lies in how financial products and services are designed and marketed?
Making money interesting and fun may sound ambitious, but it is not so far-fetched. The idea that people are uninterested in money is not entirely true. In fact, decades of social science research shows that people do often take a personal interest in their finances, and may even feel affection towards them. Money helps individuals to achieve their goals, such as buying a new outfit or car. Financial order helps families to enjoy each other’s company and plan for future goals. And money itself can be interesting and highly social, which is why governments go to such lengths to adorn banknotes and coins with historical and cultural designs.
Personalisation has the potential to overcome our apathy towards our finances and even increase our trust in financial service providers. Creating products and services that are functional, pleasant, tailored to the user’s experience, and include principles of gamification could well encourage financial engagement.
Businesses can accommodate this expectation by offering customisable digital products (such as apps with different interface options) and tangible products (such as credit cards with a personalised design).
Providers that are lagging behind this trend, such as pension funds, will also need to jump onto the customised bandwagon, or they will find their customers developing loyalty to other brands and business models. The market is simply becoming too competitive, and dissatisfied consumers will use their choice to source financial products that suit their aesthetic preferences and social needs.