The 20-page report, Digital Disruption Hits Retail Financial Services, pointed out that retail financial services are a target for innovators, because dozens of digital disruptors are giving consumers cheaper, better or new ways to manage their finances.
According to Forrester’s 2014 digital business online survey, eight out of 10 executives in banking and financial services believe their business will be disrupted by digital technologies in the next 12 months.
Fewer than half, however, believe that digital is a major driver of their firm’s strategy.
The report summarised how digital disruptors are hitting financial services from every corner, and found that most consumers these days get imperfect financial advice or none at all.
But by leveraging technology, it argued that digital disruptors can deliver high-quality advice at lower prices.
For example, digital financial advice platforms such as SigFig deliver actionable recommendations based on an understanding of the consumer’s financial position, and digital investment managers such as Nutmeg offer diversified portfolios customised to individual investors.
Comparison websites and apps such as Bankrate aggregate product information in every category of personal finance, enabling consumers to specify their requirements to find the right products for them.
Oliwia Berdak, an analyst for Forrester Research, said: “Digital executives at incumbent financial services firms should act now. The appearance of multiple startups keen on disrupting financial services is just the start.
“In the next five years, digital disruption will accelerate. While the speed and impact of this transition will vary across countries, the industry as a whole will inevitably change.”
The research signalled that banks, insurers and wealth management firms are besieged by a wave of startups, and that regulation is no longer a barrier to entry as digital disruptors adopt new business models that let them bypass regulatory hurdles.
Ms Berdak added: “Governments and regulators look favourably at innovation in financial services as a way to bring more competition and efficiency to a sector tarred by the financial crisis of 2007-08 and mis-selling scandals.
“Many disruptors, such as social lending platform or digital money managers, are enablers: They don’t hold capital, but connect people with money to invest with those in need of funds, or use existing transaction data from banks to offer customers help with budgeting.
“Without capital requirement, these businesses are quick to set up, cost-efficient and more agile.”