With the dust beginning to settle on the CMA’s proposed banking revolution announcement, now is the perfect time to take a step back and reflect on whether the Open Banking initiative will do enough to encourage competition in banking and unsettle the big four titans of banking.
Open banking is essentially the sharing of banking data with third party providers, enabling customers to obtain more information on the best possible deals, promotions and banking incentives tailored to their requirements. A simple enough concept, but will it work in practice?
It’s well documented that only three percent of customers switch banks every year. With this in mind, it seems unlikely that many customers will be overcome with a strong desire to switch banks immediately just because of a new app. Coupled with the fact that financial institutions are known for being notoriously secretive about sensitive financial information – industry players are already rallying together against the notion, calling it weak and disappointing.
Whilst clearly not everybody is convinced the report will radically change the way in which the retail banking industry is run – will it truly give more power to the challenger banks? Will it actually help customers control their overdraft charges? Nevertheless, it’s in everybody’s interest to make the best out of the report as much as they can.
In order for the banking landscape to become truly competitive, banks need to get inside the mindset of the modern consumer. What do they want from their bank? How can banks tap into that through the Open Banking app revolution? By 2019, there will be an estimated 17 million millennials in the UK, and this is the generation that Open Banking is targeting. According to the BBA, customers are using mobile banking apps more than 7,610 times a minute, if that’s the figure today, just imagine how many will be using them in 2019.
Millennials desire convenience, pace and ease. Living in a constantly connected world they want to be able to access everything with the swipe of their finger. With banking it’s no different. In order to be a considered an attractive proposition, banks need to act like a well-schooled waiter, one that is always on hand to make wine and food recommendations but, at the same time, doesn’t linger too long and upset the ambiance.
This is where mobile technologies and data intelligence come in. By leveraging the latest innovations in technology as Open Banking is enforced, banks just might give themselves a better chance of creating an identity that sets them apart from the other players in the industry.
Onboarding is key. For customers who want to switch accounts, mortgages, and loans, the process has to be smooth and efficient, both in terms of front and back office operations. This is where technologies such as mobile self-service, process management, personalisation and process automation are vital to streamlining the experience for the customer. It’s imperative that banks make onboarding simple, easy and smart.
Value add services are also important for banks to demonstrate a competitive advantage. In a day and age increasingly dominated by millennials who desire convenience, and where sometimes the only way to tell retail banks apart is from the colours of their logo, the importance of providing value-add services cannot be underestimated. Once again, mobile can add value through services such as ID Capture, Bill Pay, Remote Cheque Deposit and Trailing Document Capture.
The case for the sharing of data can be brought back to having intelligence provided to customers on spending patterns and how to improve money management. This is what will help lead to reduced bank fees and increase switching rates, as data intelligence companies will be able to recommend alternative financial value-add services and products.
Whether the financial world is happy or not, the CMA has made their recommendations and instead of debating what might have been, banks need to instead switch onto what’s coming. The reforms give banks a starting point and if implemented correctly, will be promising for the future. But in order for this to happen, banks must first get the basics right to improve the banking experience for each and every customer. Furthermore, the Open Banking initiative presents a unique opportunity for banks and Fintech companies to work together towards the common goal of accelerating technological change in the UK retail banking sector.
It’s not down to the individual industry players, everybody’s been invited to the party, but when the competition gets going, it’ll be interesting to see which banks come out on top. The giants of UK banking cannot afford to get complacent and rest on their laurels. Refusing to move forward and instead remain static in the hopes that the reforms are just a passing breeze is not an option, especially when there is a danger that customers might suddenly swipe left.