From music to entertainment to travel to newspapers, the new digital wave has disrupted traditional business practices and value chains across several industries. Frequently, these customer-centric disruptions have taken hold by meeting needs that consumers may not have even recognized they had–a desire to own just one song not the album, a more interesting way to travel or a better way to order delivery. And in most cases, their success relies on offering better access to goods, improvements in service offerings or greater seamlessness in execution.
While disruptors have been innovating across industries, disruption itself–and more importantly, its diffusion and adoption–tends to follow a general pattern: As suggested by Geoffrey Moore’s Technology Lifecycle model1 adoption begins when innovative start-ups create disruptive products and/or business models that start to spread as early adopters embrace the new product or service. As savvy incumbent businesses adjust to these innovations and begin to incorporate them, they accelerate the uptake and the level of adoption reaches a tipping point. As the mass of consumers adopt the innovation, the end result becomes the creation of a new normal. For those incumbent businesses that lag behind their savvier competitors, this can be the death knell.
Two primary factors have been key to fueling this new digital wave. First, the growing comfort–led in large part by younger generations–with the use of smartphones and applications to complete a broad array of tasks. And second, the ever-shortening timeframe for incorporating new disruptions into the mainstream. The bell curve is tightening.
Critical lessons for financial institutions to stay ahead of the curve
The history of disruption in other industries suggests certain lessons for financial institutions as they look ahead. Primary among these is the need to innovate beyond current capabilities. Regardless of how secure they feel, financial institutions need to constantly evolve their product and service offerings to incorporate and predict the changes in consumer behavior generated by digitization. For example, increasing usage of mobile banking creates opportunities to deliver on proximity payments and geo-located offers.
A second lesson for financial institutions is the need to invest in connectivity. Connectivity in this case means offering a diversity or suite of services for customers to interact with—not standalones. In this way, institutions can create and enhance their data collection, the personalization they can offer and ultimately the overall value that yields stickiness for consumer audiences.
Third, financial institutions need to embrace the disruption that precedes them and recognize the impact and potential benefits of the technological changes. Whether that involves enabling payments through IoT devices for their connected customers or delivering banking services through emerging channels like chatbots and virtual reality, institutions consequently need to develop products that build on top of these innovations, responding to consumers’ adoption of these technological advancements.
Fourth, issuers need to build the change they want to see by utilizing consumer data to better meet their customers’ desires. Financial institutions can better leverage their customer data (with customer consent) by building recommendation engines to suggest the products that their customers should buy next. These recommendations can be delivered digitally through banking app or website and reinforced in-branch by relationship managers.
And finally, agility may be the ultimate watchword. Technology, innovation and disruption in the digital sphere move quickly, and financial institutions must eschew the longstanding, traditional ways of doing business to ensure they are can act (or react) quickly when necessary to create value.
Visa supports agile innovation
With the onslaught of innovation and digital disruption, Visa represents a key resource for issuers to handle the challenges.
Visa is continually expanding its capabilities to deliver innovation in payment processes both online and in store while keeping security as a priority. And issuers can leverage Visa’s innovations and network to improve their product offerings and gain access to third-party collaborations to increase their customer loyalty.
From Visa Checkout to Visa Token Service, Visa Developer Platform or Visa Direct, continuing innovation from the Visa team provides issuers with the tools to meet evolving payment requirements. Moreover, Visa provides the analytical tools and capabilities to understand customers’ interests and preferences, thereby facilitating the opportunity for issuers to innovate.
In short, Visa not only enables issuers to manage disruptions in this new digital age, but it facilitates the development of new innovations across the value chain.
To learn more read the final post in the series: Visa's playbook to digital disruption, or the full report: The next wave in digital payments.