We’ve all heard the joke about the tortoise who goes into the police station to report that he’s been mugged by a gang of snails. “Calm down and tell me everything,” says the policeman and the tortoise replies, “I’m sorry – it all happened so fast!”

So it appeared with HMV recently. Once a stalwart of the high street, HMV was the Saturday shopping destination of choice for millions of music lovers. HMV bit the corporate dust as we knew it earlier this year, a dinosaur in a retail industry that had moved with the times.Napster – the free file sharing service that was legally shut down in 2001 – changed the face of the music industry forever, paving the way for the likes of iTunes and Spotify. The internet has irrevocably changed the way we listen to and purchase music, not to mention the form in which we buy it.

There is a lesson in this for the financial services industry. The traditional banking model has been transformed with advancements in how we use the internet and mobile technology. By 2016, it has been estimated the average banking customer will use internet banking around 250 times a year – the same visitor will visit their branch one to two times a year.

The customer experience and customer service model has been turned completely on its head. Banks and insurance companies have made huge advances in providing online and digital services, but the financial crisis has inevitably put downward pressure on IT budgets. This is obviously a risk. For banks and insurers to survive and retain their competitive edge, in an environment where consumers are open to the idea of switching their provider, it is critical for them to innovate and keep in step with their customers.

Payments are also being similarly revolutionised. Companies such as Paypal have offered alternative payment vehicles to both banking customers and the un-banked. Terms like “digital wallet” are now something we are all comfortable referencing , but what do these developments mean for the banks and moreover, their customers?

No doubt, customers will be very clear about what they demand from payments technology, but it’s highly likely that the smart phone’s role in making payments will become increasingly prevalent.

Another change that the internet has wrought is that customers are now able to extensively research the mortgage, credit card, loan or home insurance policy they might purchase. Comparison websites and personal finance forums have created a nation of armchair financial experts. This offers a risk and reward model opportunity for banks and insurers – if you develop competitive and innovative products, then customers are likely to have a working knowledge of those products before they even speak to front line staff and much of the ground work to sell that product will have been done.

So what are the key lessons that the financial services industry should take from the retail market?

-    Listen to your customers and be prepared for a journey of continuous innovation in every aspect of the business
-    Focus your strategy on what your customers want, not what the industry has always done. Customers couldn’t care less about the constraints of legacy systems or concerns of compliance departments.
-    Branches and call centres are still a critical piece of the jigsaw, but it is more important than ever to ensure your staff are well trained on your products and those of your competitors – remember that they have done their research.
-    Ensure your customer channels are fully integrated – follow your customers through more than a single transaction or engagement. Think of their needs on a continual basis and make sure you maximise the relationship for mutual benefit, providing them with the right customer experience that will encourage them to explore your portfolio of products.

Ten years from now, we will be able to look back and identify those banks and insurers whose innovation was a product of their courage, conviction and commitment. How will we know who they are? They’ll be leading the market.