Transparency, accessibility, and mobility are the order of the day when it comes to customer needs in the wake of a global pandemic.

What’s more, the turbulent financial fallout of COVID-19 and a significant overhaul in consumer spending, has meant there has been a rise in a more financially savvy, discerning retail customer.

This new wave of astute consumers is turning to the power of investing to help take control of their financial future.

The rise of the digital retail investor

Historically, investing may have been perceived as something out of reach, a privilege for the wealthier pockets of society who could afford brokers and advisers to help manage their wealth.

In recent years, investing has become more accessible online, with a new era of self-directed investors rising from the ashes. Empowered by intuitive technology in the form of a range of investment apps, all tailored to suit specific market segments, consumers benefit from a now very inclusive customer journey for making and managing their own investments.

Whether you’re a student with very minimal disposable income, or an experienced investor looking for a more instant, more mobile way to manage your portfolio, these new technologies allow you to receive tailored portfolio suggestions and oversee your performance instantly from a mobile device.

COVID-19 has aided the acceleration of today’s armchair investors, as consumers found time to research and gen-up on digital investment strategies, meaning there has been an unprecedented rise in the number of self-directed investors across the globe during the past year.

In January 2021, the investment app Robinhood reported more than 3 million app downloads, with similar apps such as Cash App and Webull seeing download numbers reach 1.3 million and 800,000, respectively.

Made up of younger, digital-native consumers with low disposable income and more experienced shareholders taking to digital channels, the new population of digital retail investors has sparked a wealth management revolution during the final months of lockdown restrictions.  
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Set to become a new social norm, this rise in financial curiosity opens up a huge opportunity for the financial services industry.

Disruption, digitisation, and why it’s time to act now

Digitisation has been on the agenda for banks and financial institutions for a few years now, but none could have foreseen the speed with which the industry could evolve.

Low-income banking customers and dormant savers have been somewhat forsaken when it comes to their revenue potential. Rising disengagement with the traditional bank model is potentially damaging the future of the financial services industry. With tighter margins, low interest rates and fee scrutiny widening the gap between banking customers and their profitability, now is the time to re-engage and attract a new generation of tech-savvy digital retail investors. With a reported 78% of retail customers interested in receiving investment guidance from their bank, the opportunity for financial firms could be ground-breaking.

Dormant accounts, lack of communication and the inaccessibility of financial advice have led swathes of banking customers to seize the opportunity that technology affords, taking wealth matters into their own hands. Digital investment platforms allow consumers to bridge the advice gap, as the technologies provide tailored portfolio suggestions, allowing investors to make their own guided decisions without speaking with an adviser or forking out for the associated fees. Likewise, the emerging popularity of engagement channels such as self-trading and hybrid robo advisory services mean that there is an outlet suitable, and accessible to everyone. 

Industry challenges such as the advice gap, in tandem with emerging Fintech challengers and technologies, means there are vast numbers of tech-savvy banking customers that could become disengaged at best. At worst, these traditional banking customers are at risk of jumping ship as the likes of more agile banking solutions such as Revolut or Starling Bank continue to gain traction.

Examining the response to low account balance, unengaged clients, we conducted analysis of the top 30 banks across Europe. This showed that 25 out of 30 banks offer savings goals whilst only 8 out of 30 offer a seamless journey from saving into investing for their customers. 

Without a seamless, guided journey from saving to investing, it’s fair to say many of these lower account balance clients would not invest at all. This presents a vast, wasted opportunity for Europe’s top banks.

Restarting like a startup

Digitisation projects allow financial institutions, with legacy systems and processes, the chance to revamp and hone in on the opportunity to convert savers into investors. The key is not to focus on adopting new technologies to ‘tick the box’ but to start with a new customer-centric strategy that works from the ground up.

Focusing first on primary consumer needs, wealth management leaders must find ways to give customers the guidance and advice they yearn for while delivering it in a way that offers the utmost convenience. Client-centric propositions delivered to consumers via the channels and from the players they already know could help institutions shape the future of their customer engagement and retention beyond the pandemic and well into the future of finance.

For more information, visit our latest research which analyses the current landscape of saving and investing capabilities and what key areas of innovation banks can focus on to engage, retain and attract new customers.