Why big doesn’t always equal brave

Elisabeth Dick Oak and Andrew Miller
To take on the innovative, digitally-native competition, big financial brands will need to use their size to their advantage, taking bold bets in how they go to market, and *be willing to reinvent* themselves through unexpected partnerships.

2018 marks the 10th anniversary of the financial crisis, when the sub-prime bubble burst, the markets crashed, and once storied behemoths such as Bear Stearns and Lehman Brothers closed their doors for good and rocked the financial sector to its core.

Experts might have expected a decade of playing it safe, and the steady average annual grwth rate is 6.6% from 2012-2018 in brand value across the sector supports that story. That being said, while those that were “too big to fail” did take a step back, fintech and insurtech start-ups stepped up to aggressively challenge the status quo. Now that the Betterments and the Oscars are more mainstream, however, it’s time for the financial services version of The Empire Strikes Back.

Over the last decade, the big players have gotten even bigger, with the U.S.’s top five banks controlling 47% of banking assets. And this trend is global—the five biggest banks in the world are now based in China and Japan (S&P Global Market Intelligence). But big doesn’t always equal brave. To take on their leaner, meaner, digitally-native competition, these brands will need to use their size to their advantage, take risks in how they go to market, and be open to unexpected partnerships.

Brave operations

As start-ups like Acorns and Stash continue to gain traction, more established brands need to make their size matter. Morgan Stanley is one example of a brand that’s owning its establishment status and using size to its advantage. By making a substantial investment in big data, Morgan Stanley is using predictive analytics and machine learning to help its 16,000 financial advisors better serve its clients. The technology scans research reports, client databases, market data, etc. and pulls out what’s relevant for each advisor. Specifically, advisors might receive an email each morning with recommendations vis a vis the markets, a client’s portfolio, or an event in a client’s life.The thinking is that by supporting its people, Morgan Stanley can deliver at scale what the start-ups can’t.

Brave go to market strategies

Brands are competing to help people save more, manage their spending, and invest in the markets. It’s about people + banks instead of people vs. banks.

Start-ups like Digit and Qapital focus on helping people save more without thinking about it. While Digit touts an algorithm that analyzes when it’s best to move money into savings and when to hold off, Qapital invites people to set the rules for when they want to save. Chime, Moven, and Simple include similar features, but tend to position themselves as mobile banks. And, as all of them are either backed by a bank or partnering with one, they’re looking to expand their services beyond apps, checking accounts and debit cards.

In the face of so many options, you’d think that the bigger institutions would be at a loss. Not so with the mobile bank Finn, from JP Morgan Chase. Finn is geared toward young adults who want to do all their transactions on their phones, don’t want or need to go to a bank branch, and do want help saving money. “What we heard [from prospective customers] was ‘I want to feel more in control of my money,’ and money is really emotional for these customers,” said Matt Gromada, managing director of digital product strategy and product development at JPMorgan Chase. “[Money] makes them feel scared, embarrassed, stressed, and happy—and we thought, ‘How do we increase the happy?” Finn stands out by encouraging customers to share their feelings about their purchases. Is it a want or a need? Does it make them feel happy, sad, or meh? Much like Venmo, Finn gives people a different lens through which to view their financial lives. An invitation to get intimate with a bank may seem risky, but when targeting the oversharing generation, it’s a smart move.

Marcus by Goldman Sachs is also taking notes from the start-up world. Fresh off its 2016 debut as a personal loans mecca, Marcus is now making high yield online savings accounts available to its customers—all the better to fund those loans. And, in its bid to create the leading financial platform for consumers to save and borrow, it has also acquired the app Clarity Money, which will eventually be branded Marcus by Goldman Sachs.

Brave partnerships

Goldman is also kicking off its first adventure with plastic by partnering with Apple on a new credit card. The appeal of bringing together two of the world’s most powerful brands is undeniable and, given Apple’s recent status as a trillion dollar company, it would introduce Goldman to throngs of devoted Apple enthusiasts. Although both companies have remained relatively tight-lipped about their plans, an Apple Pay credit card issued by Goldman Sachs would drive consumer lending profits at Goldman and increase Apply Pay usage. Although this move pits the new card against credit card veterans like JP Morgan Chase and Citibank, it looks like it could be the beginning of a beautiful friendship.

PayPal is finding growth by partnering with major players, from competitors like Visa and Mastercard to big tech brands like Google and Facebook. “The collaboration over competition approach, along with the growing ease and popularity of online payments, has sent its stock up 126% since the company’s 2015 spinoff”. As the financial services world gets smaller, one-time enemies will need to find common ground.

As the bigs adapt to the new normal, it’s clear that strengths like authenticity, relevance, and responsiveness will play an outsize role in determining who continues to win with their audiences and who closes their doors forever.

Senior Director, Verbal Identity
Senior Director, Strategy