BANKING
Dixit Patel, VP of Technology at SapientRazorfish
As we move towards a globally connected, ‘always on’ world, many traditional banking and financial services business models are facing significant disruption by smaller start-up banks that provide personalised banking experiences for customers as well as other intermediaries that are positioning and offering engaging experiences that capture the customer relationship.
Consumers’data and trust
ThePSD2 directive in Europe has started the conversation about open banking, as banks are now forced to share their customer data and to execute payments initiated by third parties on behalf of their customers – encouraging small businesses, as well as start-ups, to use that data for innovation and breaking decade old ways of working within banks that now need to respond in unfamiliar ways.
As the directive creeps closer, debate surrounding what it means for banks and consumers is ramping up – with some commentary suggesting that consumers may not be ready to share with organisations such as retailers, outside of the financial services industry.
Meanwhile, the 2016 Edelman trust barometer suggested that, by and large, consumers do trust financial services organisations with their personal information.For the time being, it seems that mainstream banks have an advantage, retaining – in large – the trust of consumers with their personal data. But this doesn’t mean they don’t have to keep up with the services offered by outside competitors and disruptors.
What are we seeing from disruptors and innovators?
Digital is undoubtedly changing customer expectations and behaviours. Customers are offered ever more choices through personalised interactions. Today, most customers expect to complete an electronic, personalised banking transaction anywhere at any time.
What’s more, the rate of innovation is moving at a rapid pace. Monzo, once a cash card app, now has the ambition of becoming a banking platform provider – removing its original use entirely to facilitate this. Start-ups that aim to disrupt traditional business models now have previously unparalleled access to customers and data. In fact, every company can see the potential benefit of the massive increase in data generated from smart phones and smart devices, but not every business is taking advantage.
How will this disruption impact traditional banks?
Traditional banks need to ensure their existing business models continue to operate smoothly while also focussing on transforming their businesses to innovate and keep up with the changing needs, behaviours and expectations of customers.
This means re-orienting from a traditional ‘bank first’ to a ‘life first’ mind-set and model that is able to offer financial experiences that embed traditional products and services to meet a customer’s life stage requirement (for example, selling a mortgage becomes helping a customer find and purchase a home, and then protect that home).Also, they need to move from a historical product and business line operating model to a more customer value model that mirrors the customer journeys.
An ecosystem that allows customer data to be shared with both external and internal parties to ultimately facilitate the best customer experience and engagement is critical. From here, banks can design predictive services for the needs of both customer and employee. This will involve planning for significant increases in customer interaction and engagement – whether through existing channels or entirely new ones.
It’s also imperative for large banks to self-disrupt. They can do this by partnering with third parties to accelerate the pace of innovation and change that will be required in order to sustain competitiveness.Identifying and on-boarding relevant partners requires careful thought to ensure successful outcomes.Or, create an incubator or innovation lab that is able to test, learn and roll out new ideas to the business which will challenge often stagnant departmental silos.
Banks must provide the right product or service to the right customer at the right moment. All banks can benefit from the opening of data, and both the external and internal sharing of this data, with banks being able to utilise their own and their partners’ customer data to bring to light those unmet, or even just under-served, customer needs.
If banks are to compete in the open banking revolution world, they need to plan for the future while upgrading their existing technology capabilities to ensure strategic needs of the bank are kept in mind. The evolution of a traditionally lagging product and service business model to a proactive customer centred service model that is dynamic and near real time is crucial.
The future of banking will be determined by those banks that start early, and ones that are willing to disrupt traditional business models to push the boundaries of customer experience, making use of data and insights along with expanding operating models that work within an eco-system of third party partners. Undoubtedly, this is a big challenge for traditional banks with inherited structures; it’s uncomfortable, but it’s absolutely necessary to compete in today’s market.
