Open banking is a different twist to everything that has happened since institutionalized banking was invented centuries ago. The new European PSD2 and XS2A regulations put the portability and security of banking customer data at the absolute forefront. This change brings new possibilities to create an ecosystem centered on the consumer.
Customized customer service
When the customer is placed in the center and given complete control of their finances, everything changes. With this new ability to move their deposits, accounts and investments between financial institutions and services from one moment to another, new opportunities appear that until now had very high barriers to be able to compete with traditional banks.
With the application of PSD2 in Europe and similar legislation in the rest of the world, it is precisely sought that money can flow toward more attractive products, increasing the efficiency offered. Users can go to service aggregators or tools that analyze their financial data and make real-time recommendations.
The best and most comfortable interface for the user will be the one that ends up winning
This immediacy of operations will create a base of fully digital intelligent virtual assistants capable of telling us the nearest ATM, the best way to exchange currency or even in which securities or deposits to invest. Controlling our finances with natural conversations, voice or written, will add more convenience to customers as the leap to online banking. The best interface—or combination of interfaces—for the user will be the one that ends up winning in many cases.
Financial service catalogs
Source: Fidor Market.
One of the improvements for customers that open banking brings under its arm is the creation of online financial services and insurance catalogs operated by various banks and financial operators. Being able to manage our finances in an open manner and moving our information, data and reservations quickly between different offers will allow customers to always choose the best option with complete transparency.
We will find several “App Store” financial services that offer traditional insurance, credit or deposit services along with innovative peer-to-peer (P2P) payments, exchange of cryptocurrencies, exchange of international currencies, mass financing and cross-border deliveries. In other words, for the customer, everything has been entrusted to the same bank and they can move their money according to their interests and change the conditions.
Cryptocurrencies, beyond traditional products
Although the new open banking regulations do not specifically mention cryptocurrencies in the current version, they form a subset of the financial industry that has adopted large characteristics of the open bank itself: instantaneous movements, transparency and forward thinking are its main pillars.
“Blockchain start-ups will get access to customer data and may offer banking services” — G. Trilikauskis (ORCA)
Open banking will enable an online banking system that is fully compatible with the crypto world. The APIs that promote open banking can be extended with the algorithms that manage the different blockchains. They make it possible to manage transfers between fiat currencies and virtual currencies. This translates into improvements for consumers such as being able to take the money instantly to the asset they want and, in practice, avoid collapses in the valuation of their deposits. Several online exchangers are updated instantly through Currency Cross Triangulation and are reflected in the various public and distributed records (blockchain).
Re-think the strategy of physical branches
Metro Bank branches in the metropolitan area of London. Source: Metro Bank.
Metro Bank arrived in the streets of the United Kingdom less than a decade ago with new ideas aligned to the customer experience and a branch strategy based on online experience, and not the other way around. “During recent decades, the search to cut expenses has meant service has deteriorated”, according to Paul Riseborough, commercial director of Metro Bank.
“”During recent decades, the search to cut expenses has meant service has deteriorated” — Paul Riseborough (Metro Bank)
Its branches remain open 7 days a week, like its website and its app, but beyond appropriateness of opening hours, the procedures have been rethought from scratch. Employees can enter the new branch, open an online account and a debit card in a matter of minutes. Without previous appointments. “It’s a matter of fitting into the busy lives of our customers,” says Riseborough. “Our bank managers have to be part of the local community.”
Employees versus algorithms
Traditional banking institutions have a weapon in their arsenal that can be key to maintaining a better customer experience. Beyond robotic or automated shopping chats recommended by algorithm, banks can make use of the data available in the customer record and present a specific offer at the right time.
Personal attention by a human, face to face, that offers solutions to complex problems is a differentiating asset
Human employees will be indispensable in this new era, offering solutions to complex problems and personalized advice that can serve customers who demand a higher level of involvement from their bank. Personal attention by a human, face to face, which allows the customer to decide at all times what to do with their money can be a source of loyalty, as well as an asset differentiating with respect to purely digital fintechs.