Society has changed fundamentally. In days gone by, a job for life came with a final salary pension. Today, you are only as good as your last gig. More and more people are hopping from one short term contract to another in temporary engagements not only with employers, but with with retailers, utilities and financial brands, in a gig economy that has become a gig nation.
£119bn and counting
There are several societal reasons for such disloyalty. The first is a dramatic rise in the number of freelance and solo traders whose growth is overshadowing that of SMEs, and whose temporary engagement with employers is rapidly becoming the norm. From all walks of life, from dog walkers to carers, sparkies to IT specialists, such professionals no longer rely on a single employer. Instead, they work as contractors, part timers or on short term contracts, but always for themselves. IPSE, a trade body representing the self employed, reports freelancers contributing a whopping £119 bn to the UK economy, a rise of £10 billion from the previous year, as the solo freelance worker redefines the rules of employment.
The second is our constant on line connectivity. Exposed to 5000 marketing messages a day, we constantly re-evaluate our decisions. Millennials are the products of tech and take it for granted with little nostalgia for providers that don’t understand fast our moving human dynamics, or create products and services that cater for the new reality. From comparative and switching sites, to hail riding, to flat sharing, financial and job finding apps, many of these freelancers rely on emerging tech to enable their working lives.
The third reason is perhaps a reaction to change and a demand for it. It is the opening up of a financial sector that traditionally concentrated on mainstream audiences, often to the exclusion of smaller, specific population segments. As society individualises, rapidly emerging customer groups, so far hidden in the wider SME segment – require and demand bespoke new services and products that call for entirely new business models. The financial sector has stepped up to the plate to enable them.
Customer centricity is King
This has resulted in an entirely new spirit of partnership between banks and smaller, tech driven startups is transforming the market, as fintech innovation and leaner costs make it easier for the big banks to maintain their traditional focus, while gaining competitive advantage, speed to market and valuable lessons in customer centricity from emerging start ups.
As the old meets the new, the traditional the cutting edge, banks provide the regulation, distribution and backing as well as the ability to segment their services for distinct customer groups, while fintech start ups give banks a strong understanding of societal trends and the means with which to react.
Our own app, Albert, is a case in point. In common with other new age apps, we stand or fall by the positivity and feedback we attract on the App store, the high st of the modern economy. We have attracted 3000 testimonials from people not given to praising financial services. We have partnered with a challenger bank and a mobile operator to create working examples of how an innovative partnership can seed and grow into an offering that people understand, like and actually want to pay for.
Small is beautiful, especially when it scales
Change in the finance sector is also apparent in reports from BACS that demonstrate people’s propensity to switch bank accounts. Driven mostly by savings and interest rates, this also shows how people equate not just with price but with innovation, a new value. With accounts for SMEs, market places for partner fintechs and new forms of payment, Challenger Banks are competing hard with the mainstream and have endeared themselves to the mobile generation, prompting big banks to work more closely with the fintechs, to find new ways to compete and customer groups to impress. In 2016, a large European survey by Fujitsu suggested that more than a third of European consumers would move bank or insurer if they did not offer up-to-date technology.
Regulation also has its part to play, and since the beginning of this year, Open Banking has come into force, encouraging big banks to enable the transfer of account information to their customers to the customer, enabling them securely to share transaction data with other banks and third parties. This rather technical move will nonetheless enable the introduction of hundreds of new financial specialist innovations, each providing customers old and new with unprecedented flexibility.
Finance leads the field
Not every sector is adapting as fast as it needs to meet the needs of new segments of society. In retail, we see a shake out that leaves mainstream House of Fraser, Maplins and others laid waste with nothing to take their place on the high street. In the energy sector, a record 222,036 customers switched to small and mid-tier suppliers in June, the highest number ever recorded by Energy UK. The winners were the smaller providers, whose customer service eclipsed those of the Big Six as 49 per cent of consumers switching electricity in June 2018 moved to a small firm.
In financial services however, the change is dramatic, and the biggest beneficiaries are going to be the existing and emerging micro businesses that contribute to our modern economy and define an entirely new, revolutionary UK industrial strategy.
Ivo Weevers is the CEO and Co Founder of Albert, the bookkeeping app for the solo self-employed.