Financial institutions of all sizes must use data to create a customer-centric, digital-first experience to take advantage of Open Banking and PSD2, writes Miljan Stamenkovic, regional VP at digital banking platform builder Kony
Most banks are treating Open Banking, PSD2 and GDPR as a technology problem or regulatory issue.
This is wrong. These present an opportunity to create a richer user experience (UX), fuelled by data, to win over more customers.
Open Banking means more competition for banks in Europe. It has levelled the playing field and equalised growth opportunities from the very largest to mid-size regional operators, savings banks and building societies. At the same time, big tech and fintech are also reshaping the sector. Digital challengers and neo-banks, nimble startups and technology giants are all encroaching on banks, chipping away at different areas and delivering innovative new services.
Forward-looking banks that recognise the opportunity to create a better UX are the ones that will win. They are the ones that respond to customer needs, collaborating with technology vendors to take advantage of open APIs to develop new business models and connected experiences. They will win on UX not by out-spending the competition, but by securing the best partnerships.
Only 20% of banks have already invested in Open Banking-related initiatives, with 77% saying they will do so by 2019. This gives banks an opportunity to get ahead of their traditional competition – not to mention fintechs and big tech. But beating the competition means nothing if no one is using digital services. The key lies in the UX: fail, and customers will leave. How a bank benchmarks digital platforms or apps is just as crucial as how they approach Open Banking.
Think about how the consumer accesses services. Just under half of all consumers, 46%, only use digital channels today; just five years ago, it was 27% – an amazing increase in a few short years. Among younger generations, banking is almost entirely mobile, with 82% of 18-24-year-olds using mobile banking.
Consumers are now tech-savvy and digital-native. They get information from Google and talk through Facebook. They order food via Deliveroo, stream music on Spotify – limited human interaction and instant results. They want their financial provider to follow suit, and access all information and services from one place. Any banking UX must follow this reasoning. But they should not benchmark themselves just against the traditional competition: they should look at what other consumer applications are doing and look to replicate those experiences.
Banks have been focusing ‘inside out’ on their own products and services. They look at what they offer rather than why. They need to switch their thinking to the ‘outside in’ to retain and win customers. This means supporting customers to meet long-term financial goals and offering value-added services and advice along the journey.
Be customer – not product – focused. Make it easy to use and aesthetically pleasing. A bank’s digital presence must be an extension of the bricks-and-mortar brand. Personalise it: give the customer control over how they use the platform, and use open APIs to combine information into one arena. This is how banks can take advantage of Open Banking and PSD2 with digital.
There must be a sense of urgency for banks. New entrants already have the advantage. Their UX is designed from the ground up, using modern, cloud-based technology stacks. The result is more attractive, user-friendly and flexible platforms that resonate with digitally savvy customers more used to Netflix than financial planning tools.
Incumbents need to catch up. Just to compete on a level playing field they must first navigate legacy systems and hard-coded applications that can increase the complexity involved in handling change. Smaller banks that cannot afford in-house development need to find a way to deliver great UX more cost-effectively. They do not know where to begin as they simply do not have the resources.
The recipe for success lies in partnering with a technology and customer experience firm that can offer a flexible solution tailored to the needs of the bank, its brand and its customers. Out-of-the-box platforms are too rigid, leading to an unintuitive UX. Flexibility is key to creating a compelling UX that fits around the individual’s needs.
Any platform should be able to provide account-aggregation services to give customers a single view of their finances in one place to fully take advantage of PSD2. It should be engaging, potentially supporting a gamified experience that offers rewards for meeting financial goals to keep customers interested.
Banks must give customers the same type of experience they get online when engaging with other mobile apps. Take Uber: it will remember locations from which a user most frequently orders a taxi; this helps it to repeat the process quickly and effectively. Vendors like Amazon will make suggestions or share offers based on what a customer likes. It is about offering a value-add to the customer to keep them engaged. Banks should follow suit. Look at payments: does a customer typically make a payment at a specific time of month? Do they usually make payments from a certain location? Any digital offering should remember this information, and use it to make the customer’s life easier.
Making suggestions in customers’ best interests, based on account and payment history, will help them feel more valued. Technology is on hand to enable this, so customers benefit from a truly personalised experience focused to an audience of one.
Great UX demands continual evolution. Banks of all sizes cannot afford to stand still in the face of new and ever-changing customer requirements. It is not about out-spending the competition, but being smart and out-partnering them to deliver the best possible customer experience.