Sarah Maber, Managing Consultant at World Wide Technology
Regulators around the world are starting to see the potential that Open Banking can bring to customers. Europe is currently leading the way, but other countries are starting to follow suit Australia will launch its initiative in February 2020, while Canada has been making positive noises (but little concrete progress). Other countries such as India, Japan, Singapore, and South Korea may not yet have any formal process, but local policy makers are making steps to open up the sharing of data.
The direction of travel is clear, and it’s towards open collaboration.
However, regulatory pressure, keen law makers and public demand are not enough. At this point open banking is more a potentiality than a reality. Incumbents and challengers will need to alter their approaches if they are to really grasp the opportunity. If Open Banking is to provide the true sea-change it is capable of, it needs to deliver more than the level of innovation we have witnessed so far.
Doing the minimum
While Europe and the UK may be seen as leading the way, if you look more closely at the results of the UK’s Open Banking Standard you may be underwhelmed. The new world hasn’t yet materialised, and regulation is nothing without a real buy-n from the banks themselves. Culture change is hard – but for Open Banking to be a real success all parties need to do more than the bare minimum of meeting regulatory standards.
The core of the problem is limited APIs. By adopting a ‘bare minimum’ approach in the creation of these APIs banks are denying us of the foundation for more transformative change.
Most technical compliance is undertaken as quickly as simply as possible, as institutions juggle these demands with a need to keep the lights on and business functioning. However, if they continue in this manner, the open opportunity will be missed. Viewing compliance as a cost-limiting exercise may be enough to beat the regulator but it will deprive consumers of proper breakthroughs. Changing to a more open culture and viewing developing a real API as an opportunity would be truly transformative.
Other countries have taken a different, more proactive approach to opening up APIs. For example, Singapore has published an API playbook to support data exchange between banks and fintechs. And in Japan, there’s strong promotion of collaboration through Open API regulation. Around the world, legislators are creating an environment for creativity. It’s now up to the institutions themselves to grasp it.
Should they reciprocate?
Banks have been critical of the lack of reciprocity in Open Banking regulations. Third parties and technology firms are under no obligation to return the favour and open up their data to the banks, this they would argue puts them at a competitive disadvantage.
But reciprocity can be powerful, and could help to kickstart innovation. In Australia, the concept of reciprocity is baked into its Consumer Data Right Act (CDR) as both data holders and data recipients would have to share data more openly. The rest of the world will be looking on to see how this is implemented and how successful it is. As Australia’s regulation is built around data rather than finance, there are plans to roll the initiative out to other industries such as utilities and telecommunications, encouraging the formation of ecosystems.
Meeting customer expectation
Underneath all the consternation about regulation and APIs is a simple aim – to serve customers better. Before pivoting to streaming, Netflix was a struggling DVD postal company. It spotted technology- riven opportunity to reach more customers and transformed itself to deliver on it. Open Banking has the potential to create its own version of
Netflix. Underpinned by proper APIs and cohesive working between banks and fintechs, it will serve customers and remove pain points in genuinely new ways – delivering something they didn’t necessarily know they wanted, but now can’t live without.
People used to base their banking choice on a measurable return: interest rates. This was a key point of differentiation. In the digital age, it’s the reality of modern finance that customers now look for different reasons to bank with a company. They are increasingly driven by ease of use and customer experience.
Lip-service collaboration is not just depriving consumers of proper breakthroughs – it also deprives the banks themselves of opportunities to deliver these new experiences. By doing the bare minimum they leave fintechs alone to build brand loyalty with a youthful, digitally native, mobile audience. If they engaged in true collaboration absorbed expertise from multiple sources, they would position themselves to deliver products that capture the wants and needs of modern consumers.
The roll out of Open Banking should create a new opportunity for partnerships. Companies need to recognise that customers now expect more from their data, and delivering on this will be a commercial benefit – not just a regulatory imperative
THE FUTURE OF CUSTOMER EXPERIENCE IN DIGITAL BANKING
By Richard Billington, Chief Technology Officer, Netcall
Over the past five years, the digital banking revolution has had a seismic impact on the relationship between customers and the institutions that handle their money. Since digital banking established itself as the new norm for consumers, there is now a growing expectation for enhanced levels of convenience and security. Recent proof of the evolution has come from Lloyds Banking Group, which recently announced the closure of 56 branches, as an increasing number of customers ditched branch-based banking in favour of online platforms.
Banks are trying to adapt to rapidly changing behaviours by integrating their services seamlessly into their customers’ daily lives. However, whilst offering new opportunities for banks to reach and respond to customer needs, the digital realm also presents an increasingly competitive playing field, with challenger banks constantly entering the market. We are continually hearing of new banking brands offering cash incentives to encourage customers to switch banks. This tug of war is putting increased pressure on banks to outdo one another, in order to retain customers and foster long-term loyalty.
Short-term cash incentives, however, will be spent in vain if a company’s long-term digital experience is not up to scratch. Lost customers mean lost revenue, a negative impact on brand reputation, and market share attrition. In order to gain and maintain a competitive edge, banks must understand what consumers expect online, and then meet those expectations.
Getting ready to compete with the Amazon Effect
Whilst it is clear that ‘digital’ is the direction in which the industry is heading, traditional bank brands have a long way to go to satisfy consumers who want to manage their money on their phones and tablets. Today, the so-called ‘Amazon Effect’ is impacting more and more areas of our lives, and digital banking is no exception. Modern customers require instant gratification. They want to see where their package is at any stage of their delivery and, in the same vein, become frustrated if they can’t see how things are progressing with their finances in real-time.
Customers want to stay up to date with changes on their bank accounts. They want to apply for an ISA, mortgage or credit card without hassle. They want to be able to understand where they are in the process. And, most importantly, they want an experience that is unique, personalised, and available at a time convenient to them. Today the onus is on banks to deliver these experiences – ensuring interactions and processes are quick, convenient and streamlined. Those who don’t live up to these expectations risk failure in a highly competitive marketplace.
Failing to connect the dots
Despite the changing customer needs and demands when banking online, all too often customers are faced with a series of disjointed communications, leaving them dissatisfied, confused and frustrated. To solve this, many banks invest in customer-facing departments – marketing, sales and service – but the reality is their customer experience doesn’t just depend on the people dealing with customers every day. It is heavily influenced by processes and technology, the people behind the scenes – the IT team.
For many banks, there’s a huge gap between customer facing departments and IT – what we refer to as the ‘customer experience disconnect’. This means that when someone in the contact centre flags a broken process that only technology can fix, their request often gets ignored. That’s not because IT doesn’t care; it’s because they have a thousand and one other things to do. Realistically, they can’t drop everything to solve one small problem.
But when it comes to customer experience, small problems add up. If a customer can’t apply for a mortgage because an app is broken, that’s annoying. When they can’t get through to customer services because the lines are busy, that’s infuriating. And when they don’t receive a response via email, that’s… well, that may very well be the end of the relationship.
Enhancing customer engagement online
Digital transformation in financial services goes beyond just providing an online or mobile account-opening solution. Banks should build a process that connects with the customer before an account is even opened and continues throughout the entire online journey. This includes enabling tailored communication at optimal times on preferred device(s). Every customer touch point should collect insights that the bank can leverage for future communications, to foster brand loyalty and make it harder for businesses to be undermined by competitors.
Done well, digital engagement should not just represent a great communications process, but also reflect changes in the back office that simplify all stages of engagement. Most importantly, these stages should connect seamlessly across communication channels, eliminating the need to visit a branch and enabling consumers to switch between channels, such as telephone, email, social media and in-branch banking, when desired.
As the UK continues to move further towards a cashless society, which is now expected by 2030, getting digital banking right is only going to become more important in order for banks to remain competitive. And to ease the transition to digital banking while maintaining customer loyalty in the digital realm, banks must overcome customer experience disconnects and enhance digital engagement.
Creating an effective digital banking experience
At the moment, departments within banks are operating in silos. This needs to stop if businesses want to create a successful digital banking experience. In order to build trust, long-term relationships and help solve any digital experience problems, it’s important that banks start by bringing customer-facing and IT teams together.
Low-code software solutions can prove invaluable in this instance, helping to accelerate digital customer experiences whilst also enhancing efficiencies within the business. Due to their simplistic nature, these offerings can be integrated across departments and be used by non-experts and developers alike. Well-established banks with bigger IT teams can also benefit, as low-code software solutions work alongside existing systems, significantly helping to improve customer experience quickly and without the need to replace existing infrastructure at a high cost.
In our rapidly expanding digital world, businesses face more pressure than ever to pivot in response to market changes and customer expectations. Therefore, having access to tools that are easy to use whilst enabling innovation will be key to building a better digital customer experience. In addition, analytics tools can also help track performance and offer insights for process improvements and adaptations. Implementing these tools will help empower businesses to remain competitive in today’s rapidly changing banking industry.
TRANSFORMING BANKING: WHY COVID-19 IS UNFREEZING CONSUMER HABITS
Raj Chakraborty, Senior Managing Director, Publicis Sapient
There is much debate about the impact of COVID-19 on the economy. A lot of it is estimation and conjecture based on imperfect data. The discussion is dominated by whether we will have a U-shaped recovery, or if it will look more like an L over the next few years – and what policy decisions will drive the outcomes.
However, regardless of policy or recovery timeline, it is clear that consumer and small business behaviours will change dramatically during and after this crisis. Without an alternative, consumers get on with their lives, bank in the way they always have and business continues to get done, however given a compelling reason, in this case physical restriction to “normal” ways of doing things, people will begin to unfreeze old habits and move to digital channels and remote ways of engaging.
In response, banks have to act now – before new customer habits refreeze in a way that is detrimental to their business. They must:
- help customers by supporting them when, where and how they need, enabling personalized experiences and offering advice that they can access digitally
- provide employees the tools and resources required to successfully serve customers remotely, and with flexible schedules that can meet demand
A significant moment – unfreezing of habits
This is a significant moment for banks. In a time where consumer and business habits have suddenly unfrozen, banks have the opportunity to step up and become more engaged with their customers, guiding them through these uncertain times. The critical elements in these interactions will be personalized experiences – enabled by digital and data, with a helpful person exactly when needed. Those that act and adapt in real time will be rewarded with greater loyalty, new customers, and better performance when behaviours refreeze in a new mold.
Along with opportunity, the unfreezing of habits also presents a tremendous threat. Consumers and small businesses will question the value that a bank brings to them. More than half of consumers already say that they would be willing to bank with non-traditional players like Google or Amazon if they provided the service. And over 60 percent of the emerging affluent say they would consider switching their primary bank. Those that don’t engage with their customers in an effective, personalized way now will be forced to play catch-up later, hoping they’re not too late.
Help customers by supporting them how they need, enabling personalized experiences and advice that they can access digitally
The COVID-19 crisis has pushed us to an extreme end of the spectrum in understanding what consumers and businesses are willing (and have capability) to do remotely. Prior to this, many financial institutions would have said that people doing 30-50 percent of their transactions using digital was very good. In the past month, that view has changed dramatically as customers are doing more transactions using digital. Today, this behaviour is driven by the fact that they can’t go to a branch, and contact centers are currently overwhelmed with long wait times. Tomorrow, it will be driven by a more personalized journey – before, during, and after the transaction – that gives consumers more confidence in the engagement and makes it more convenient. Think back to something as simple as depositing a cheque at an ATM. In the early days, printing an image of the cheque on an ATM deposit receipt dramatically increased adoption of ATMs over tellers for cheque deposits; it gave people confidence that the cheque had actually gone through.
The modern version of this is a bit more sophisticated. Banks must build an understanding of the customer, ethically weaving together internal and external data with a layer of Artificial Intelligence that can help detect patterns of what individuals actually want. They must engage those individuals using the right messaging and channels – and then deliver a seamless and lightweight experience for the transaction that puts the customer at the center. When needed, a remote advisor should also be available – someone who has the context of the customer’s experience thus far and can assist going forward.
We’re seeing leading banks rolling out pilots of these concepts right now.
Provide employees the ability to serve customers while they work remotely, and with flexible schedules that can meet the demand
The crisis has also shown us how unprepared the financial services industry is to work remotely. On the retail banking side, many firms have had to cut call center staffing dramatically due to the close proximity of the representatives’ desks. This, coupled with the tremendous increase in call volumes, has resulted in long wait times and poor service interactions. However, many leaders in the space have, quite literally, been able to flip a switch and bring up significant work-at-home service teams and managed to keep up with demand. They have matched their capacity more closely to the demand and are getting real kudos from customers.
In wealth management, some firms have literally had movers come box up equipment and phones from the office and deliver them to advisors’ homes because of regulatory and compliance requirements on the equipment and infrastructure. Others however, had the cloud-based technology infrastructure already in place so advisors could conduct fully-compliant video conferences and phone calls, securely access customer accounts and conduct transactions, and serve clients in this greatest time of need without putting themselves in harm’s way.
Ironically, the new cloud-based and flexible infrastructure that enables the new ways of working are actually easier to manage, maintain, and scale up in times of need.
Whilst it’s true that old habits die hard, the unprecedented events of the past few months have forced consumers and small businesses to ‘unfreeze’ their traditional habits. Depending on how it’s addressed, banks have a tremendous opportunity or significant threat on their doorstep. Customer habits will be in flux for a short period as they understand and work through what’s available, and then those habits will ultimately, freeze again.
During this period, banks must move quickly to become valuable to their customers through personalized experiences that are digitally-driven, but enabled through actual people when needed. They must also build supporting capabilities and cloud-based infrastructure for their people so they can work remotely and in flexible hours to meet customer demand. These technologies are all available and we are putting them to use today – all indications are that this crisis and the opportunity and threats it presents has the potential to transform our industry.
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