David Poole, Head of Financial Services at digital consultancy Publicis Sapient
Prognosticators have been pointing to 2020 as a touchstone for change. What can we expect?
For the better part of the decade, business prognosticdigitaators focused on predicting the state of play for their industries in 2020, even naming the exercise a “20/20 vision.”
Now, as we are at the beginning of that new decade, many of those predictions remain unrealised as banks face unexpected shifts and new competition. Only hindsight is 20/20.
A great banking experience no longer means having a great, well-staffed branch. In fact, customers may never visit the branch, as they have an increasing choice of digital banking solutions. The banks that will thrive in this new decade and beyond, will win on digital experience – less how it looks than how it feels.
The recipe in 2020 for a successful banking experience is LEAD – Make it Light and Ethical, including simpler, transparent pricing and fewer payment options, and more Accessible with a combination of voice and touch. Make it Dataful, using customer data for insightful experiences anticipating behaviour and built around customer life goals.
Here is more on each of these trends:
Unlike a Netflix bill or the simplicity of Amazon Prime, most consumers struggle to say what they’re charged for a checking account, ATM withdrawal, loans, advice, trades, and portfolio management. The costs are spread across multiple providers, and fees are confusing and constantly changing. In 2020, banks will experiment with simpler pricing and product bundles, determining how much customers will pay, for what, and how to make it easy to understand.
Simpler payment options
The rapid pace of payment innovation has resulted in a proliferation of new ways to pay– making the point-of-sale cluttered with logos that confuse customers. Fortunately, we’re going to see things start to get simpler. We’ve seen the first instances of a combined click-to-pay button with the EMV SRC logo, live now on a few sites with more to come in 2020, replacing Masterpass and Visa Checkout. Expect fewer buttons, fewer steps in the process with increased adoption of stored payment within the browser, and fewer separate apps, replaced with effective one-stop services.
An example of a light experience will be paying with PayPal, where they’ll build in the couponing service; the frustrating task of finding a valid coupon is now built into checkout. Expect more mergers and acquisitions – like PayPal acquiring Honey – to offer one-stop convenience. These lighter, accessible experiences will ensure payments are relegated to the background, and the emphasis can shift instead to using customer data to add value before and after the transaction, adapting the experience to the way the customer wants it and is most comfortable with.
Graphical voice assistance
This year, banks will get voice lessons. Alexa skills from banks have yet to reach farther than novelty and niche, with voice-only interfaces remaining inherently limited for finances. When you add a touchscreen to view and interact with, the more complex tasks – like paying a bill or managing your portfolio, become possible.
Scenarios and the accompanying financial data can be visualized, cutting through long voice menus, while decisions can be simply articulated using voice. The sensitivity to hearing and conversing about private finances is replaced with sensitive data on the screen, while uncontroversial commands can be voiced. Voice-enabled screens like Amazon Echo can support these combinatory skills, yet so can smartphones. 2020 will be the year when mobile banking apps better combine touch with voice.
Anticipatory Banking i.e. Life Goals
A decade ago, omnichannel banking was a hot trend, applying what worked in retail to make it seamless to bank across channels and shift from pushing product to addressing needs.
Ten years later, banks are still working to deliver omnichannel, and it represents a moving target since there are now more channels, and customer expect more complex needs to be met. This started as a translation exercise. You say “car”—we say “car loan.” You say “new home”—we say “30-year fixed rate mortgage.” This new taxonomy suggested a customer-first approach, yet in reality was thinly disguised product marketing.
Now, the trend will de-emphasize point solutions in favour of life events and customer goals. When a customer’s goal is “I want to get married,” the financial services required are less defined and prompt individual consultation and advice. In an April 2019 announcement of Bank of America Life Plan, the bank promised a fall release to use these sorts of goals to orchestrate services across the lines of business through Erica and the app. Recent beta tests reveal basic goal creation, and similar to the two-year lag with Erica between the PR and release, banks are finding these shifts take longer than anticipated to get right.
What will set 2020 apart is the maturation of voice, chat and AI to tie the loose ends together and serve them up through improved apps and virtual assistants like Erica.
HOW IDENTITY IS SECURELY UNLOCKING THE SME BANKING MARKET
By Mike Kiser, senior identity strategist at SailPoint
Have an identification card in your wallet? With a selfie and a few short minutes, you could have access to a business bank account.
Small and medium enterprises (SMEs) have long been the fuel that drives the global economy, representing around 90% of businesses and more than 50% of employment worldwide. Over the last few years, a range of financial services and platforms have arisen over the last few years to support the banking needs of these organisations. They are often digital natives and are innovating to meet the needs of their clientele.
This innovation provides great ease-of-use and rapid access to credit but also demands a careful consideration of their assumed security approach. The aforementioned scanning of an identity and a quick photo to establish a bank account demonstrates the rising importance of identity in both the consumer and enterprise arenas.
The blurring of the lines between personal and corporate identities (in this case, an individual acting on behalf of a small business) is still in its infancy. Combined with the ubiquity of mobile devices, individuals will tire of maintaining different accounts, different personas, different lives for each activity. Usability will demand that identity be reusable, portable, and secure.
This has massive implications for enterprises and the financial institutions that serve them if they seek to prevent cyber-attacks; thankfully, the same element that presents the security challenge also offers the solution: identity.
A New Vantagepoint
Just as individuals desire a single identity to unify their interaction with disparate parts of the world, organisations can use identity to grant them a single, holistic view of an individual (attributes, access, and behaviour) rather than seeing only a fragment at a time. This is particularly important for these new financial institutions—much of their technology stack is cloud-based, which often leads to splintered security approaches. An identity-based approach must be cloud-aware, and able to distil these complex environments into simple and easily governed infrastructure.
This collectivisation also allows security to use identities in the aggregate: to see what groups of similar individuals exist, what access these groups have, and what their usage of this access typically is. All of this contributes to the establishment of what normal is, whether it’s attributes, access, or behaviour. Once the “normal” is established, then the outliers—the potential threats—may be quickly triaged.
Adaptability: The New Imperative
The recent wave of change has demonstrated that financial institutions and organisations must be ready to adapt quickly to shifts in the environment. Portions of IT staff and services have been furloughed, and adjustments to new realities are essential. An identity approach that learns from the evolution of changes in the previously established areas of normality can grant enterprises the ability to see what is coming next and invest appropriately. Much like a view from an elevated position grants the ability to see beyond the normal horizon, basing a security strategy on identity makes it inherently adaptable.
Identity: Innovation and Security Intertwined
Identity, then, is a foundational consideration for financial institutions seeking to provide services for the perennially important small and medium enterprise sector. By eradicating barriers to entry that have historically kept financial organisations and enterprises apart, it is driving rapid adoption and a growing market for innovative banking. At the same time, it shows the path forward to securing those new services in a pre-emptive, adaptable way.
Now if you’ll pardon me, I must go open a bank account for my next start-up—from my mobile.
OPEN BANKING: ARE CONSUMERS KEEPING AN OPEN MIND?
Last September, the European Union’s regulatory requirement for banks to open up their payment accounts via application programming interfaces (APIs) came into effect. Since then, open banking has taken centre stage within European retail banking and payments. In this blog, Elina Mattila, Executive Director at Mobey Forum, shares insight into how emerging consumer attitudes may impact open banking services in the coming months.
It has been over six months since the revised Payment Services Directive (PSD2) came into full effect and with it, required banks to allow third party providers to access payment initiation and account information. While the regulation was designed to facilitate open banking, the market demand was uncertain. Would we, as consumers, choose to embrace the new services enabled by open banking? And if so, under which conditions?
To understand consumer attitudes, Mobey Forum and Aite Group partnered on a pan-European study to determine the appetite for open banking services amongst 1000 consumers in Finland, France, Germany, Spain, and the United Kingdom. The study, launched in November 2019, revealed many important consumer trends and attitudes, including key priorities and potential barriers for adoption.
Consumer appetite for change
The consumer benefits of open banking are largely perceived to be compelling, yet this counts for little if the providers of those services are not deemed trustworthy. This is an observation reflected in the study, which highlighted consumer confidence in service providers as critical to open banking adoption. People want clear visibility of who is managing their finances, and the overwhelming majority (88%) would prefer their primary source of open banking services to be their main bank, as opposed to other banks or third-party providers (TPPs).
Consumers also indicated high levels of trust in their current bank of choice, reflected by 77% preferring to use a financial product comparison service offered by their main bank. By enabling customers to compare the pricing and conditions of a range of financial products on the market, they feel more comfortable that banks have their best interests at heart. This is a welcome trend, and one which should be celebrated in the aftermath of the 2008 financial crisis. For the banking industry to have rebuilt trust levels in this way bodes well for consumer adoption of future innovations.
With a trusted provider, one third of consumers were then either ‘very interested’ or ‘extremely interested’ in integrating open banking services into their financial routine. This applied to specific use cases: account information services (32%), pay by bank (33%), purchase financing (25%), product comparison (35%) and identity check services (35%). Unsurprisingly, consumer willingness to adopt these services relies heavily on providers continuing to prove that they can be trustworthy stewards of personal data.
For those unwilling to adopt open banking, concerns largely focused on reservations around security and privacy. As open banking becomes more sophisticated, it will be interesting to analyse the nuances around how consumers engage with third parties. Established brands are perhaps more likely to be trusted by consumers than lesser-known online retailers. For this reason, consumers may hesitate to engage newer companies than brands they are already familiar with. In an industry as varied as finance, this creates additional intrigue in the ongoing battle for market share between the newer ‘challenger’ banks and the older, more established European banks.
Consumers might, however, be willing to deprioritise trust and, instead, favour convenience and usability. When questioned over their willingness to adopt a new payment method, for example, 91% of respondents indicated that they could be tempted to switch either by financial incentives or the promise of greater convenience.
The path forward
While open banking is still in the relatively early stages of development, it has made significant progress in a very short period of time. Not only is it allowing consumers to share financial data with authorised providers as they wish, but it is set to spark more competition and innovation within the market.
From a business perspective, open banking is expected to create lucrative new revenue streams, particularly for companies which are able to innovate quickly and react to consumer demand. It is prompting consumers to reconsider how they manage their finances and – most excitingly – it’s not even close to reaching its full potential. It should bring a whole new era of service partnerships between banks and TPPs, which will enable a new generation of innovative financial services.
For the industry to truly fulfil its potential, it is vital that stakeholders are able to explore new business models, innovations and changing customer expectations for open banking in a commercially neutral environment. Mobey Forum’s open banking expert group provides exactly this, and we look forward to supporting our members as they shape the future of digital financial services.
Where to find out more
The opportunity for open banking is explored in more detail in a report by Mobey Forum and Aite Group, entitled Open Banking: Open Minds? Consumer Appetites for New Banking Services. It provides banks and other financial services stakeholders with a market view on consumer appetites toward new open banking services and explores the possible roadblocks to consumer adoption. It is also discussed in a podcast featuring key representatives from Interac, Erste Group Bank and Strands Finance.
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