How can banks succeed in this new digital age?
Barley Laing, UK managing director at Melissa Global Intelligence | 17:05 Friday 29th March 2019 | 0
Looking back over the first year of Open Banking, it’s only fairly recently that we have started to see the first signs of the innovation it promised in terms of improved services for customers in the digital age.
For example, Barclays working with other banks to offer customers access to all their account information from rival banks within its core banking app, as it seeks to improve the user experience.
To date, it’s mainly been the challenger fintech companies that have been shaking up the industry with online banks such as Monzo, Starling Bank and Revolut leading the way, along with financial service providers such as iwoca and Funding Options on the lending side.
However, the recent announcement by Apple of the launch of Apple Card brings a new level of functionality to the credit card marketplace, highlighting that the digital and technology behemoths have the banking sector firmly in their sights. It’s on the back of online retailers and media companies such as Rakuten in Japan offering internet banking products and services.
With Apple making this move, it can only be a matter of time before the likes of the other big players such as Google and Amazon look to expand into mainstream financial services as they look to be the all-in-one hub for our increasingly digital lives. These huge businesses have already demonstrated their service credentials, built trust with customers in how they use their data and also have ‘accounts’ with customers, such as Amazon with Amazon Prime. They have, by and large, proved that they can effectively handle and analyse big data, are experts in artificial intelligence (AI) and cloud computing. They can also provide a strong customer experience and engender trust in the digital space — all areas that many banks have traditionally struggled in.
The threat is clear for incumbent banking service providers. Once an industry is opened up to wider competition, it's almost always the established players that take a hit. For example, according a recent report by Ofgem, the big six energy providers are continuing to lose market share to new energy suppliers and seeing their profits fall as a result.
But it doesn’t have to be this way. The answer for banks is to ensure that their service provision is simple, accurate and reliable, particularly online, so there is no reason for customers to go elsewhere for bank services. To help deliver this, banks must hold clean, up-to-date data on their customers that supports them in achieving a 360-degree customer view, and in providing a strong personalised experience. This will help banks to become the source of trusted identity that their customers use for all of their digital banking activities; vital if you want to grow and prosper in the Open Banking age and successfully compete with the new entrants, be they big or small.
Furthermore, it’s critical that banks continue to innovate and find ways to adopt new digital service capabilities and integrate them into their systems more quickly. This can either be by themselves or with technology partners. They should also consider acquisitions of those in the fintech space who are doing a great job of delivering innovation while building a large customer base.
Open Banking provides a great opportunity for banks, and is something they need to embrace more rapidly. Otherwise the banks we know today could be left holding the bulk of low-margin, high-cost customer accounts, while the more profitable business is stripped by savvier digital and tech mega-corporation challengers such as Apple, or the agile, smaller ones.
SIGN UP TO OUR NEWSLETTER TO RECEIVE MORE NEWS LIKE THIS STORY
NAB appoints new group CEO and MD
National Australia Bank (NAB) has named Ross McEwan (pictured above) as its new group chief executive officer and managing director...
The Co-operative Bank extends free SME banking offer
The Co-operative Bank has extended its free banking introductory offer for new SME customers by a year...
Cloud migration: Key considerations for financial services
More than ever, it is imperative for financial services organisations to migrate to the cloud...
Maria Harris set to leave Atom bank
Atom bank has revealed that its director of retail mortgages Maria Harris (pictured above) is set to leave to become an independent consultant in the mortgage market...
Handelsbanken reports 6% surge in UK lending
Handelsbanken has reported a 6% increase in UK lending to £21.4bn in Q2 2019, compared with Q2 2018...
Tandem reveals development of new mortgage product
Tandem Bank has revealed that it’s developing a new mortgage product which will be suitable for first-time buyers...
Goldman Sachs invests €25m in Raisin
Goldman Sachs has provided €25m of funding to Raisin...
The power of partnerships
Since our launch in September 2015, we have proven our ability to innovate in the UK savings market, which has been recognised with various savings awards...
N26 rebrands premium account
Mobile bank N26 has launched a premium accounts product named N26 You...
Sesame adds Investec Private Bank to panel
Investec Private Bank has been added to Sesame’s panel...
84% would change financial services provider due to poor complaints experience
More than eight out of 10 customers (84%) claim that they would change financial services provider due to a poor complaints experience, according to the latest research...