// . //  Insights //  Revisiting The Customer Value Gap

In some ways, the financial services sector of today is almost unrecognizable from its pre-pandemic state. The turmoil of the past two years has created new customer problems and highlighted the areas where companies could deliver greater value across the financial landscape, from payments to cryptocurrencies.

No one could have predicted the pace of the changes brought on by COVID-19, but Oliver Wyman had a strong sense of how the industry’s inevitable transformation might play out. Back in 2018, in our annual State of Financial Services report, we argued that there was a significant customer value gap that incumbent banks, insurers, and new entrants had the opportunity to close, and that fintech disruptors would continue to make inroads because they focused not on creating products but rather on solving problems for customers and meeting their needs holistically.

Fast forward to today: much of this is unfolding rapidly, right before our eyes. Fintechs are commanding market valuations that hearken back to the 1990s tech boom, while incumbents are embracing the new era by rolling out new services or buying companies that offer them. Technology — and the customer first, growth-oriented mindset that drives it — is influencing the financial services landscape like never before.

This wave of innovation is still in its infancy. The more it takes hold, the more we realize that there is still plenty of opportunity for incumbents and new entrants alike.

Yet this wave of innovation is still in its infancy. The more it takes hold, the more we realize that there is still plenty of opportunity for incumbents and new entrants alike.

How did we get here?

In 2018, we introduced the hexagon of financial needs as an organizing principle for financial services to embrace. There are six components: People need to grow their savings, safeguard against undesired events, transfer funds from one place to another, spend wisely, earn as much as they can, and borrow at the lowest cost. We envisioned that incumbents would need to take a page from the playbook of big tech to succeed, by developing “active solutions” that weave across all six categories and deliver a continuous, engaging, and trust-enhancing experience. This could take the form of what we called a LifeMap (State of Financial Services page 24), inspired by Google Maps, that could guide a user through their personal financial journey. We identified advantages big tech and fintechs might have in blending modern methods and tools with a relentless focus on solving customer problems and providing compelling propositions to top talent. We also asserted then — and reaffirm now — that incumbents could be formidable competitors in the emerging battle for attention around the LifeMap and the hexagon. 

Oliver Wyman Financial Needs Hexagon


In the past four years, incumbents and emerging players have begun to bridge the value gap by expanding across the full hexagon of financial needs. The incumbents have created digital experiences around their core offerings and begun to develop their own version of a LifeMap. Large banks have launched apps that seek not only to digitize formerly analog experiences like transferring money but also to improve customers’ financial well-being — identifying stressors and introducing solutions. Meanwhile, fintechs that had built a beachhead in one area have begun to expand across the hexagon to serve their customers more holistically. Companies that built a wedge in, say, student loan refinancing have expanded to investing, credit cards, checking accounts, and even insurance products. Retailers have entered the financial wellness space, enabled by component suppliers of banking-as-a-service, which effectively allowed them to plug financial services into their value proposition. Other merchants have used embedded finance to deepen relationships with their customers. As a result of these advances, the barriers to entry for financial services are far lower than they were even five years ago.

Just as these solutions have solved a broader range of functional needs, they have also delivered greater experiential value to customers. Some 60% of Americans in a recent study said they felt anxious when thinking about their personal finances. Given the inextricable links between financial, physical, and mental well-being, improving financial outcomes for consumers requires more than just providing functional solutions such as lower-cost checking accounts.

We define financial wellness broadly as all the areas of a person’s physical and emotional life in which money is a factor. Not only is it an area of pressing need for people — it’s also a springboard for growth and innovation for startups and incumbents. Disruptors backed by deep-pocketed investors have poured into this space. Several neobanks, for example, are focusing on serving groups of users with shared needs and experiences — from the Black community to the LGBTQ+ community and even the freelancing community. Personal financial management apps, and even some general wellness apps, are helping users become more mindful about their money and acknowledge the connection between finances and emotion. Other apps are offering rewards and incentives for users to build better financial habits.

Where are we headed?

As exciting as the past few years have been, the strategies that have propelled firms up until now can only take them so far. The incumbents and new entrants that are seeking to expand in similar directions across the hexagon all have access to many of the same capabilities, thanks to the composability of components and APIs. Banking-as-a-service, brokerage-as-a-service, and fintech-as-a-service enable any company to build their version of a LifeMap.

Already, competition is increasing for customer acquisition of a fixed population. It is common for millennials to have more than one checking account, for example, and many have three or four across traditional banks and fintechs. As a result, it is getting increasingly difficult for any single provider to attract customers’ engagement.

At the same time, many of the tailwinds that supported the darlings of the pandemic are likely to weaken. As the world continues to reopen, consumers will have more ways to spend their time and money, which could negatively impact companies that have built their businesses around “fintertainment” activities such as active trading. And regulators are beginning to scrutinize engagement practices such as gamification and financial products like cryptocurrencies that could pose risks to consumers.

But there are still plenty of ways to drive innovation across the LifeMap. The best opportunities in this next stage of the journey can be found not in creating copycat offerings, but rather by solving even-more-challenging unmet customer needs. We see three broad ways firms can do this.

Break down siloes. While companies have expanded their set of solutions across the hexagon, they haven’t yet connected all of them in a way that holistically addresses customer needs. What could such a silo-busting offering look like? Consider a reimagined benefits-enrollment product. Medical bills are the leading cause of personal bankruptcy in America, so choosing the right benefits plan is a critical decision for families and individuals. But the options are so complex that the task can become overwhelming. Why not connect the checking account, health savings accounts and flexible spending accounts (FSAs), and the annual employee-benefits enrollment process? Why must they be so siloed? The data from one product can inform decision-making in the others. By holistically integrating these financial needs, companies could provide personalized guidance to households that would generate real value across parties.

Increase coverage of components. Innovation in financial wellness has continued to focus on the borrow, grow, and safeguard components of the hexagon at the expense of the others, which have the potential to deliver much more financial impact to consumers. Imagine an active spending-management program. Most of the existing solutions in the market focus on rewards programs that ultimately drive additional spending, creating both fee and interest income for card issuers. There is an opportunity to create a comprehensive spending-management platform for consumers that analyzes spending patterns to suggest lower-cost alternatives, identify discounts, and renegotiate bills. One fintech in the B2B space has built its entire business model around this thesis and has had significant early traction in the market.

Elevate experiential value. Companies can make financial services more emotionally accessible to customers by designing solutions that are personally fulfilling. Imagine a hyper-personalized financial management offering. Many consumers have become increasingly conscious of their impact on the world and want their financial activity to reflect their values. Consider someone who cares deeply about the environment, racial justice, and supporting local businesses. The app could help guide their spending and investing activity by offering rewards for shopping at local businesses, measuring the carbon footprint of a particular purchase, or creating tailored investment portfolios through direct indexing to favor companies that promote racial justice.

Key takeaways

As the rapid transformation of financial services continues, the future is bright for innovation in financial wellness. The industry has grown by leaps and bounds over the past five years as incumbents and new entrants have started to turn the LifeMap into a reality. Sure, many of the most difficult customer problems remain unaddressed, and the LifeMap is still very much under construction. But the LifeMap of the future will feature freshly paved roads, faster highways, and a more personalized navigation system to help users reach their destinations.