The product management function in any given industry has both similarities and differences. In all cases, product managers drive the development of products and are ultimately responsible for the success of those products. With company leadership, product management sets the strategic direction for the product(s). Moreover, they communicate the product vision to the organization. Beyond those high-level commonalities, the actual work of product management can vary widely depending on the industry, especially for those in product management for financial services.
Moreover, product type, company, and organizational models can impact roles and responsibilities. The day-to-day work and skillset required of those managing a consumer packaged goods product sold in grocery stores are vastly different from those required to manage an aircraft engine or social media app. The responsibilities are similar at the core, but the differences make the jobs very different.
Financial Services
Even within a single industry, like financial services, the role of product management varies based on a few factors. For example, the type of product they manage. The term “financial services” encompasses a wide range of products:
- Mortgage and real estate financing
- Lending and underwriting
- Person-to-person money transfer
- Personal finance, banking, and credit
- Billing and payments processing
- Insurance, including data analytics for re-insurers
- Sales, trading, and analysis of capital markets for institutions and individuals
- Wealth management
- Blockchain and crypto
- Audit, risk, and regulatory compliance
Organizational Structure
Another distinguishing factor is whether the team is managing a financial product itself. If not a digital product, they may manage the digital platform through which a financial product is delivered. For instance, the delivery of mobile consumer banking services involves multiple product managers or product management teams. However, this is dependent on how the company is structured:
- The deposit accounts product manager
- The personal lending product manager
- The residential mortgages product manager
- The online banking product manager
- The mobile banking product manager
A further potential complicating factor is whether all of these individuals are employees of the same company. In situations where a financial institution is using a 3rd-party baking platform, the manager(s) of the financial products and the manager(s) of the digital platforms are members of different organizations.
Regulatory challenges with financial services products
Product management in financial services may be unique in the extent to which regulatory and compliance concerns impact the product offering, with healthcare a close second. Government regulations impact nearly every aspect of financial products, including:
- How can they be marketed and sold
- The workflow process and terminology a user experiences in creating a new account
- The logging and record-keeping associated with the use of the product
- How and when a product is handled at the end of its lifecycle
Financial Regulations
To make matters worse, there is no common global regulatory framework, so these rules vary when crossing international borders. Sometimes regulations even vary state-by-state in the U.S., as in the insurance business. Product managers must keep regulatory concerns top-of-mind in a world where it is comparatively easy to offer a digital product across geographic borders. Those who proceed without working closely with their legal and compliance teams do so at their own risk and the risk of the companies they serve. Consequences for violating financial service regulations can be severe.
For this reason, it is wise to bring these stakeholders into the product planning and design process as early as possible, not just because the turnaround time on legal reviews by these teams can introduce unexpected delays. A basic understanding of the regulations impacting a product can prevent re-work and delays.
Another reason to consult compliance teams early is to allow time for knowledge transfer that may be necessary to help legal experts who may not have a significant technical background to understand the controls and safeguards in place. For example, digital logs and security measures can create required audit trails simpler than paper-based processes that do the same thing with more complex user flows. A compliance officer without this understanding may unnecessarily push for an online workflow that more exactly mirrors the physical experience at the cost of an optimized digital UX.
Evolving technologies in financial services
As in many industries, technological change in financial services is rapid. The guts of the global financial system have been digital for decades, with large mainframe computers handling the worldwide flow of assets, loans, and exchanges. For many years, however, customer-facing innovation lagged behind other industries.
Thanks to improving security and upstart disrupters who have introduced alternatives to brick-and-mortar traditional banking and new, digital-first financial offerings, laggards in the industry have had to get on board to survive. Many financial institutions faced a steep learning curve once they embraced a digital client experience. Online and mobile banking users have come to expect a level of ease of use and app performance based on their experience with apps in other industries.
In financial services, the basic in-person and ATM-based experience hadn’t changed for many, many years. Execution of a successful digital strategy required firms to re-think how they were delivering financial services. A replication of the in-person experience in a mobile app isn’t what people were looking for.
Beyond the ABCs of a digital offering which are understood at most organizations now, financial services firms have to come to grips with additional transformative technologies: peer-to-peer lending, artificial intelligence, and blockchain-based cryptocurrencies.
Peer-to-Peer lending
Peer-to-peer (P2P) lending grew out of the widespread availability of P2P payments. Standalone apps like Paypal and Venmo allow individuals to transfer cash assets digitally.
Then came the phenomenon of crowdfunding, in which individual entrepreneurs and others can seek start-up funds in smaller amounts from thousands of people to get a new idea off the ground using sites like Kickstarter, Indiegogo, and GoFundMe. Those who offer funding in these marketplaces typically benefit from either early access to a new product at a discounted rate or some other perk besides shares in the company or interest payments.
On the other hand, peer-to-peer lending works by creating a multisided marketplace in which individual investors put up the money that is provided to borrowers. When it first appeared on the scene, P2P lending offered a way for those who didn’t fit the credit profile of a traditional lender to obtain financing to consolidate student loans. It has since evolved into opportunities to pay off credit card debt as well as to obtain home, auto, and healthcare financing.
With the availability of these new lending products and the risk of them siphoning off a portion of the loan income market, product management teams at traditional financial services firms must understand and address this competitive threat. On the other hand, those at organizations ready to adopt this new technology need to know how to grow their base of lenders and borrowers so that the exchange is beneficial to both sides of their marketplace.
Artificial Intelligence
When most people think of artificial intelligence (AI), thanks to Hollywood, they think of talking computers and robots like HAL from 2001: A Space Odyssey and the killing machines trying to take over the world in Terminator. Or is that just me?
Anyway, AI-powered tools and services are more and more the keys to competitive advantage in financial services. Team use AI in various ways, including:
- Loan eligibility scoring
- Automated risk assessment
- Fraud protection
- Reducing the time spent processing loan applications
- Portfolio management
Product management teams in financial services need to understand how to apply AI. Teams can utilize AI to ease up the workload.
Cryptocurrencies and Blockchain
Cryptocurrencies (crypto) refer to digital assets created using cryptographic techniques that can be bought, sold, and traded securely. They operate on a highly distributed computer network (the blockchain) meant to secure them by replicating copies of the ledger globally, preventing it from being manipulated by someone gaining access to a central record. Their value comes not from a sponsoring government but solely from their cost on an open market.
Although awareness of crypto has grown thanks a lot of news coverage and both buying and selling frenzies, adoption and acceptance of crypto and its underlying blockchain technology at traditional financial services firms has been limited so far. While many are experimenting and studying how to use these technologies, particularly in the prevention of fraud using a technology called smart contracts, adoption is still in the early stages.
By developing a solid understanding of the applications enabled by and the associated risks of peer-to-peer lending, artificial intelligence, cryptocurrencies, and blockchain technology, product management teams in financial services can help company leaders make smart decisions. Successful adoption of these and other technologies within a product portfolio requires a solid understanding of market needs, technical and financial risk, and operational viability. Focusing on these fundamentals, product management teams in financial services can do what they do best: drive the development of products and their success in the marketplace.
