Regulations dent EU banks’ account opening processes

North American and Australian institutions have pulled ahead of European banks due to regulatory constraints

By Alex Hamilton | 3 April 2019

Europe’s regulators have held the continent’s banks back in recent years, allowing US counterparts to pull ahead in terms of advancing account opening processes, according to Don Bergal, senior vice president at Avoka, the banking transformation firm.

“European banks have fallen behind in the past few years,” said Bergal, speaking on the sidelines of a community forum in the Hague. “They were distracted by GDPR, Open Banking and Brexit in the UK. There are also a few banks out there that have been pulling the rest of Europe down, from our analysis.” Bergal’s team analysed the account opening processes of tier 1 banks in Europe, North America and Australia,  sometimes simply applying for an account online to see how far they could get.

“The top ten to 12 banks in the US started investing five years ago or more, putting big money into creating these digital channels. It took a long time for something to come to fruition and it’s only been in the last year where we’ve seen an acceleration,” said Bergal.

“A very large pool of developers has been given a large budget in investment and a long cycle of development. Finally, something comes to fruition then. To their credit, they’ve done a nice job, but it has not been an agile approach.”

Whilst American and European banks have had to tackle legacy technology, Bergal said that Australian customer account processes have been leading the way for some time. The fact the country’s banks have relied on off-the-shelf commercial banking software has helped, he argued.

Legacy systems have always been a hinderance to customer account processing. “[Banks are] tied to infrastructure that was put in place in the 90s, and they’re still having to deal with the issues around that.”

According to Bergal, a gap is emerging in the mid-market, which is being squeezed from both sides. “The big banks can throw money at a project and get it done in four, five years. Smaller banks have a simple product line and can buy products off the shelf from the start to get themselves going. Then you have mid-sized banks, those with something like $75bn to $100bn in assets. These guys are in trouble. They’re too big to use an off-the-shelf solution and they can’t make the massive investment which the big banks make.

 “The people who really care are the chief digital officers. They’re the people with ‘digital’ in their titles so they see stars and say, ‘here is where we want to be in terms of personalisation, and how fast we can make offers to customers’. The reality usually hits when it comes down to the IT department, who will come back with a thousand reasons why you can’t do those things. There’s a tension there,” said Bergal.

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