By Rahul Singh, President of Financial Services, HCL Technologies
While it’s difficult to overlook the importance of data in today’s financial services landscape, many banks are still grappling with the question of how to mine, evaluate and use it. Banks have historically struggled to get value from data, seeing themselves purely in the role of trustees of customer information, and never looking to put it to work.
That picture is now starting to change though, with banks finally spurred into action by regulator changes, including Open Banking and PSD2. Making it possible to harness the power of data, Open Banking puts intelligence into the hands of banks, and could bring about real change in the industry.
A new kind of bank?
In turn, banks will evolve in a number of different ways. Some are embracing PSD2 just to remain compliant; others are offering simple services such as aggregating customer accounts across multiple banks and offering them on a single dashboard. But the true power of Open Banking was laid bare in 2019 when Uber partnered with global bank BBVA in Mexico to place a banking product inside its app. Using the Uber application, Uber’s unbanked driver partner community and their families can now instantly open a digital bank account, get their earnings credit in seconds, apply for loans and access discounts and deals that Uber strikes for them. While the Uber-BBVA example shines a light on the innovative possibilities that Open Banking has unleashed, there are even more ambitious goals that other banks are reaching for, working with partners to own the entire customer journey.
The signals are clear: Open Banking is going to shake off inertia in the industry. And while Gartner says that we will see 80 per cent of today’s financial firms go out of business or become irrelevant at the hands of new competition by 2030, Open Banking is throwing them a lifeline. It will provide banks the opportunity to become agile while continuing with their branch networks to provide the familiar human touch.
Owning the customer journey
The real winners in the coming years will emerge from the group of banks that are jockeying to own the entire customer journey. They will reap the rewards of time and effort invested into creating partnerships that deliver much more than banking, catering to to all customer’s financial needs via a wider portal. As an example, think of a customer who wants to buy a home: currently, the customer has to negotiate with a variety of providers, each with a different service level and back-end system. Instead, a bank could allow the customer to examine properties online, compare them, choose the property they want, complete the legal paperwork, pay for the property, and even rent the furniture. This is the type of complete ecosystem play that banks will strive for. It will focus on creating customer experience while making banking invisible.
This means intelligently and securely accessing customer data, allowing everyone, from end users and developers to the traditional banks and financial institutions, to exploit it and harness its best possible use. The range of possibilities that this allows for is infinite and ultimately will help in putting power back in the hands of the user.
Shaking up the global financial system
With such sweeping changes on the way, how will the new breed of banks shape the future of the global financial ecosystem? To begin with, the volume of international bi-lateral and multi-lateral trade is growing. Also, with the demise of cash and cheque-based payments in favour of digital payments, we are seeing an explosion in banking transaction volumes and data availability. Furthermore, the rise of mobile devices has the potential to offer unprecedented outreach to the underbanked and thereby the democratisation of financial services.
It is foolhardy to predict which banks will survive and which currency will take centre stage. Although of course countries and regulations will continue to exist, we cannot ignore the fact that the current status quo is going to be challenged. The big battle that lies ahead for banks is to own the customer, along with the complete customer journey. At the moment, that battle is being lost to aggregators like Amazon who are building customer loyalty and who own the customer more than a bank does. Banks must place a firm focus on changing that equation, or their very existence could be under serious threat. It is time to rethink and reinvent finance for the mobile era.