By Parth Desai, Founder and CEO, Pelican
The global pandemic has obviously had a fundamental impact on all areas of our personal and business lives. Some of these changes will be short lived, while others will have a far longer lasting impact, with a permanent legacy and imprint. Despite this upheaval, innovation in the Open Banking and PSD2 environment has proven to be remarkably resilient, with a succession of new services and solutions continuing to be unveiled over the past few months.
The range of new Open Banking products and services has been extraordinarily wide. Consider, for example, the Italian bank ‘illimity’, which has combined urban scooter-sharing services with Fitbit tracking benefits on its Open Banking platform; or new bank account aggregation services in Ireland, that enable consumers to seamlessly integrate account data from AIB, Permanent TSB, Ulster Bank, and Bank of Ireland into a single customer-centric dashboard; or another recent product from Worldpay, with a new merchant payment tool that simplifies the online purchase experience for consumers, removing a need to enter card payment details to complete a transaction.
In June, the UK’s Open Banking Implementation Entity (OBIE) opened its own app store to provide consumers with a gateway to this rapidly growing range of new Open Banking services and applications. While the range of services provided in this Open Banking ecosystem is incredibly diverse, and comes from both new fintech entrants as well as more established financial institutions, there is one common denominator among them that defines what we at Pelican have long seen as a fundamental inflection point for the banking industry – a new customer-centricity, and one that both challenges existing services provided by banks, as well as creating powerful new opportunities for market and revenue growth.
To truly serve your customer as a specific individual or business, you need to understand them – not as a ‘type’ or ‘demographic representative’; but in all their specificity. For this you need data – or more accurately, the ability to reason-over and understand customer data – in order to obtain what we call ‘customer cognisance’.
The Data Challenge – Customer Cognisance
Open Banking provides organisations with potentially unprecedented access to account, transaction, and purchase data. These authoritative records of everything spent, lent or borrowed, when, where and to whom – data which banks have historically done relatively little to understand – will be available to innovative and dynamic third parties to utilise and reason over. Existing business lines will be vulnerable to the new products and services that are able to leverage and aggregate a cross-domain exchange of data.
Banks should not underestimate the value – and volume – of data they currently hold. For banks to thrive in this era of change, they need to view Open Banking as an opportunity to truly understand the needs of their clients – personal and corporate – through access to disparate data sets that can provide a hugely valuable insight into customers’ financial habits, interests and needs to truly know your customer.
So the first significant challenge for banks is how to obtain this Customer Cognisance? How can they effectively reason over this data? Both the existing customer data that is largely unexplored, siloed and passive, and the potentially sizable volume of data that is given with consent from outside the bank? If current systems fail to adequately reason over existing data repositories, how can they understand exponentially greater volumes of often unstructured and unformatted data?
It is only by utilising the Artificial Intelligence (AI) disciplines of Machine Learning (ML) and Natural Language Processing (NLP), that these extensive customer data sets can be transformed into actionable business insight and intelligence. With AI, banks can obtain real customer awareness, or cognisance: the ability to analyse data and to truly understand the needs of customers.
Customer Centricity & Engagement
With this insight, banks can then develop the truly customer-centric services that are rapidly becoming the norm. The challenge then is ‘how can you truly serve your customer?’ The ability to translate customer data into meaningful, enhancing and hyper personalised services and benefits to your customers will be the true differentiator between businesses that thrive and those that struggle. For banks, transforming insight into beneficial services and products must become a primary focus.
How banks engage in new ways with their customers is perhaps a further challenge. They need to adopt the capabilities required to engage with customers across the wide range of intelligent platforms and ambient devices consumers and businesses increasingly rely on, utilising voice and other emerging interfaces. Again, it will be through the deployment of AI disciplines that these highly customer centric, truly engaging service capabilities can be deployed and communicated to customers. Such systems involve voice recognition, natural language processing, context management, machine learning, rule-based heuristic processing, all combined and working in sync.
In today’s hugely transformative environment, a business-as-usual approach is simply not a viable option if banks wish to remain relevant and to prosper.
So perhaps a fourth challenge is how can banks develop these highly technical and domain specific capabilities?
While there will be many different approaches and innovations, leveraging AI disciplines will be the essential business enabler. To make sense of the data you have and understand your customers will require AI. To design new personalised services that engage your customers across the full range of touch points and channels will require AI. How banks develop and deploy such capabilities is a strategic question and one that will almost certainly involve collaborating with proven fintech partners – ones that have both the technology and payments domain pedigree.
Whatever the partnership strategy, leveraging the powerful capabilities of AI-based technologies will be at the heart of successful Open Banking strategies and services.