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Technology is set to be the key differentiator for UK banks in 2018 

With Open Banking set to shake-up retail banking in early 2018, challenger banks are being advised to take advantage of Open Banking.

This insight comes from leading end-to-end quality specialist SQS and follows research[1], which showcases the importance of challenger banks focusing on building a strong bond with consumers by positioning themselves at the forefront of digital transformation. This is highlighted by 76 per cent of consumers looking to their banking provider to pick up the pieces if something goes wrong, while more than a third see technology failures as a trust turn-off.

The Open Banking era is set to deliver greater insight into banking behaviour and offers challenger banks the opportunity to tailor their services to the changing needs of the modern consumer. Currently, only 26 per cent of consumers see Open Banking as a reason to switch banking provider, highlighting the work which remains to be done by banks outside the ‘big five’ whilst the figure grows to 38 per cent when looking solely at the 18-34 market, compared to just 13 per cent of the 65+ market showcasing a clear generational divide.

Challenger banks that target younger customers by embracing the latest technologies – such as chatbots and AI – may see the number of brand advocates skyrocket in 2018. There is a significant business growth opportunity for the more agile challenger banks who are not restricted by legacy IT systems and extensive infrastructures which plague the industry leaders. Richard Lowe, Business Unit Lead – UK BFSI at SQS, says, “While it is unclear whether we can expect a mass exodus of consumers from one provider to another, the competitive market will make way for challenger banks with innovative offerings that play directly into the consumer’s interests and needs. 2018 will see consumers put firmly in the position of power.

“In almost every sector, disruptive innovation has seen start-ups transform entire industries and consumer expectations, yet the banking industry remains potentially over reliant on the traditional in comparison. To change the status quo, challenger banks must look at how to create brand advocates out of the market most willing to change provider – the tech savvy younger generations.

“The market leans towards best of breed and often the best mobile platform providers prove most successful. Customers have historically opened a current account with one bank and will then use the same provider for everything from their mortgage to their insurance. The introduction of Open Banking is likely to cause customers to pause for thought and shop around for the provider offering the best deals for specific products. It is those challenger organisations that will create a niche, or answer a demand which the traditional banks can’t fulfil.  This raises the question of who will make up the ‘big five’ in years to come?

“2018 is the year when Open Banking becomes the digital disruptor for retail banking. If any providers are going to disrupt the market and truly challenge the ‘big five’ now is the time to step up and be counted. Failing to do so could be the difference between making or braking the next big banking brand. By working with a quality specialist, placing quality and customer journey first, banking providers can ensure their digital customer experience is flawless and truly challenge the ‘big five’ in 2018.”