Challengers must seize Open Banking opportunity

Open banking has brought about the biggest shake-up the UK’s banking sector has ever seen. But with change comes opportunity and the Competition and Market Authority’s (CMA) drive to increase competition offers exciting new ways for challenger banks to re-shape the customer experience and, crucially, build trust. By Steven Bisoffi, senior consultant, payments, Huntswood

7 September 2018

The open banking world has been greeted with mixed reactions, with enthusiasts pointing to better improved customer propositions and sceptics concerned about security. But few could disagree that the new measures place the customer in a solid position of power. With the CMA ranking banks on the quality of their service and banks required to share information on their products and services via new technologies, such as APIs, customers are now more able to make an educated choice about who they bank with and who will have access to their data.

Competitive pressures are driving financial institutions of all sizes to innovate, transform digitally, increase efficiency and, crucially, build trust. In light of these trends, there is an opportunity for challenger banks to seize on and harness the raft of data now available to them, using it to deliver highly specific, customer-centric services and products that will come out on top.

When Open Banking went live at the start of the year, Ian Major, operations director at FinTech expert Runpath and Third-Party Representative at the OBIE was emphatic it would herald in a new culture of “trust and security” in the sector. It goes without saying that trust is a core issue in banking – customers need to know that their bank is highly secure and is always acting in their best interests. While incumbent banks have long-standing relationships with their customers, newer entrants have more work to do when it comes to building confidence in this area. The key is to know and understand the customer thoroughly to enable product development, service and communications to be tailored for the individual.    

The CMA’s emphasis on digital solutions will undoubtedly deliver significant benefits for customers and financial institutions alike, and we are already seeing established players become more digitally focused, with some reducing branch numbers as they shift away from more traditional platforms. But when it comes to making important decisions, people value the trust and reassurance that they get from interacting with other humans. A survey by Altus revealed that while 85% of millennials were comfortable managing their personal finances online, they also wanted their bank to provide access to a person via webchat or phone.

This raises a specific opportunity for challenger banks versus incumbent high street banks. Able to work from one back office platform, without unwieldly legacy IT systems to update and integrate, and without historic branch networks, challengers are likely to have lower overheads. As a result, they are better able to focus on harnessing the technology associated with digital banking, while combining it with the appropriate levels of human interaction desired by customers.

In addition, customers are expecting more from their bank: they are far more focused on the price of financial services than ever before, they expect higher levels of customer service, and there is an added expectation around increased levels of accessibility. To attract and retain customers, challenger banks must ensure they do not focus solely on delivering digital services, but also provide a personal ‘human’ presence, when required. Those who favour digital at the expense of traditional services may risk alienating customers. Enabling customers to speak to a trained expert when they have a query or complaint helps increase trust and brand loyalty, while also managing expectations.

However, to ensure that customers continue to have easy, quick and convenient access via their preferred communications route, challenger banks in particular will need to ensure that they have the appropriate resource in place. The need to grow customer service capacity quickly should not come at the expense of undertrained and unexperienced staff.

Trust will only be gained if customers have access to expertise they can rely on. Improving operational capacity must always be aligned to the key driver of excellent customer service to ensure that trust among customers is protected, allowing banks to remain focused on their core activities and overall business growth.

From our work with clients, we know that improving the customer experience through an omni-channel offering is a key goal for many challenger banks. In pursuit of this goal, it is important that they are empowering customers to make the best decisions for them, while providing support via a wide range of services, competitive pricing, and a proactive and open communications approach that builds that all important relationship of trust.

Digital banking and the era of Open Banking will undoubtedly be accompanied by the challenges that arise when the customer wishes to raise a query, dispute or complaint with their account holding institution. The opportunity this presents is the ability to manage this unwelcomed customer journey with a customer first attitude. Too often we hear horror stories of a person’s information or account being compromised, and it is on these occasions that trust is built, identifying with your customer and assuring them that your proposition and process for handling all customer service issues puts them first.

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