Yes, the business of managing money is on the brink of unprecedented change. As laws like the General Data Protection Regulation (GDPR) and PSD2 come into force, financial services providers will not only need to open up their APIs to second and third parties, to share and deliver on the customer’s expanding economic universe - but they will also need to nurture, secure and protect the data and the trust of their customers.
Will this paradox create a collaborative utopia for the industry, or serve as a catalyst for chaos? What will this world look like; and more specifically, can this be a world where both the traditional retail bank, and the fintech disruptor, plays their respective part?
Who will lose out in the rat race towards delivering complex spheres of value to customers?
Here, we’ll focus on a few critical discussion points raised during the Future of Digital Banking 2017 conference, to illustrate how the banking landscape is taking shape. A shift from functional to outcome-based banking.
Twenty years ago, banking was about finding a solution to store money. A decade later, this shifted to a focus on finding a solution to store money securely. Now, customers want more from their lifestyle applications - and recent research attests to a shift in mindset; from basic function (storing money) to delivering on lifestyle outcomes. On shifting parameters of value, such as loyalty (71% of customers craved rewards in return for their brand allegiance), and an appetite for convenience (through effective product comparison), Relay42’s Head of Industry (Finance) Julius Abensur explains the crucial role of banks in creating seamless journeys for customers.
The elephant in the room, he reminds us, is the unification and smart orchestration of all data sources, for precision accurate customer context. And in incorporating not only legacy architecture into this story, to get started fast, but also in adopting an approach which is flexible by design - supercharging rather than dismantling best-of-breed technologies - and with a transparent, proactive roadmap for the future.
The arrival of GDPR: shifting from reactive to proactive
Will banks become less about the business of finance, and more about the business of data management? This looks increasingly likely. The General Data Protection Regulation (GDPR) - a series of stringent updates in the way businesses need to store, process and safeguard customer data by law - was rarely tackled as a topic in itself, despite the fact that industry leaders discussed many of the themes and challenges arising from it.Regulation and governance offers financial services an opportunity to remain relevant, and hence competitive - by way of driving them to change.
Atom Bank CEO, Mark Mullen, underscored a need for banks to proactively address what customers are telling them: in the case of the GDPR, they are asking brands to adopt a more dialogic approach to marketing. Banks can use the updates to data protection laws as an opportunity to differentiate, by offering proactive communication on how, where and why data is being used. And in this, instigating a nuanced way to organise for consent and compliance, strengthening customer relationships built around trust.When you peel away the language around regulation and data management, what banks really need is the flexibility to enhance their existing ecosystems and respond to change, whilst it still counts.
If it’s all about friction-less transitions, then the real threat banks create is in building walls around their own gardens of data with technology, without considering the real implications of vendor ‘lock-in’ to their strategy in delivering broader services based on value and transparency.
The dawn of PSD2: if it’s not open, don’t fix it
Why? Because speed is critical to survival, says Santander’s Stephen Dury. As the PSD2 (a revised Payment Service Directive) comes into play, businesses and consumers will be able to use third-party providers to manage their finances. As pressure mounts for financial services to redefine a role for themselves in a technology landscape of open APIs, banks must move towards becoming a step in a broader customer journey - rather than trying to sit at both the coalface, and the core, of transactions and accounts management.
This simultaneously opens up the market for more nimble fintech applications to take their slice of the financial pie; but what retail banks have on their side is quality data, and lots of it. The carefully constructed architecture of a bank should not be underestimated: as CYBG’s Helen Page emphasises, "customers want seamless experiences, not simply digital experiences," and bridging quality data online and offline is an integral part of this.
If it’s all about frictionless transitions, then the real threat banks create is in building walls around their own gardens of data with technology, without considering the real implications of vendor ‘lock-in’ to their strategy in delivering broader services based on value and transparency.
The trust economy, and its bionic arm
But what would a world of close collaboration in financial services - and lifestyle solutions, look like, based on value? This exchange of goods and services can be difficult to imagine in detail, with the overarching concepts difficult to transpose onto a canvas of the day-to-day.
Imagine you’re booking a holiday. What do you need? Flight; check. Hotel; check. Insurance? Currency exchange? Yes. Because your credit card provider partners with preferred flight meta-searchers and Online Travel Agents to offer you a frictionless travel experience; this means customers can control, and create their own world of services. Here, the bank is no longer a utility, but an orchestrator and an extension of an individual along their series of transactions, which add up to a greater outcome - in this case, a trip to New York.
You return from New York to an extortionate electricity bill. What about sealing the customer experience by sending a price comparison of trusted utilities providers, at more competitive rates?
Whilst people don’t necessarily ‘like’ their bank - they do implicitly trust them. And this trust is the key ingredient which will connect the bank of the future with its valuable account-holders. The new currency? Data, of course. But not without the right technology to reach across the echelons: after all, this is a world where a mix-and-match of service-providers, data sources, platforms and channels will marry to create a consistent journey which works, for every customer.
Right now, there’s a window of opportunity for banks: choose an industry-wide marketing solution which facilitates flexibility, enables contextual control, and goes beyond a limited suite of service - or be locked outside of a shifting sphere of collaboration.
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