By Julius Abensur, Industry Director — Finance, Relay42
Technology has infiltrated and changed the course of evolution across all sorts of different industries, but the effects are significant within banking and financial services. While the likes of online banking and contactless payments have revolutionised how we pay for goods and manage our own money, ‘challenger’ banks like Monzo and Atom are redefining the very concept of the banking experience.
All of this we are witnessing today could barely have been imaginable just a decade ago, when many of us wouldn’t have thought twice about sticking with the same bank and using the same accounts for the rest of our lives. But times are changing, and so banks now work harder to keep their account holders from splintering their services and loyalty.
However, it is becoming more difficult for banks to offer traditional customer rewards, particularly with the current Bank of England base interest rate of just 0.5%, meaning that customers have little interest in putting their savings into banks. This means banks are having to think more creatively when it comes to delivering value and generating loyalty among their customers.
The other side of the coin
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With all of this in mind, there is no doubt that PSD2 is set to transform the European financial sector. This is set to be introduced in 2018 and has been created to ensure safer payments, all while better protecting customers that purchase goods online by making cross-border European payment services more secure. It’s also designed to promote the development and use of innovative online and mobile payments. The result of all this will be a more effective and transparent payment ecosystem that delivers a far enhanced customer experience.
Despite this, the general reaction to the introduction of PSD2 has been a rather negative one. However, perhaps banks should take a look at the other side of the coin and think about how this could signal a potential for positive change. As Jonathan Hill, the Commissioner responsible for the Financial Stability, Financial Services and Capital Markets Union said: “This legislation is a step towards a digital single market; [that] will benefit customers and businesses, and help the economy grow.”
Keeping up with the times
With many of the traditional banks having to deal with a combination of technologies, some of which are old, but are still mission-critical solutions, it could be that technology itself is to blame for the less-than-favourable reaction to PSD2. These difficult-to-manage infrastructures have led to the same banks taking a siloed approach to managing their data, and this has stopped them from delivering the seamless customer journey that the consumer of today is expecting.
What many don’t realise, however, is that they don’t require a complete technological overhaul in order to achieve compliance with PSD2. Instead, they need something that sits as an extra layer on their existing infrastructure and makes it simpler to orchestrate relevant marketing outreach based on this unified landscape.
While the technical solution is simpler than many envisage, banks may require specialist guidance when it comes to best utilising their data and applications to provide a truly optimised customer journey. This is particularly important as customers become increasingly savvy to the way businesses use their data. Ultimately they are happy for organisations to hold and use their data for marketing purposes, but only if they are receiving tangible benefits — whether this comes in the form of highly personalised content or relevant promotions and offers.
This is where PSD2 can help. It will reassure customers that their banks will always play by the rules, and, by complying, the banks themselves will have an opportunity to realise tremendous value in terms of how they engage with their customers.
Loyalty through personalisation
If a consumer chooses to provide consent for a bank to use their data, there needs to be a clear benefit in them doing so. The effective use of spend data to provide offers on purchases that consumers are actually interested in, for example, can give banks the upper hand in the race for loyalty. For several years, supermarkets such as Tesco and Waitrose have used this technique successfully through their loyalty card schemes.
American Express is an example of a business that has realised the value of personalisation derived from the use of customer data. Its card-linked offers for dining, entertainment, shopping or travel can be directly applied when a customer makes a qualifying purchase without the need for printing codes. This robust method of leveraging customer spending patterns ensures that American Express customers receive card-linked offers centred around the goods and services they actually want to spend their money on. In turn, this builds deeper customer relationships that are differentiated by relevance, personalisation and lifestyle appeal.
Catalyst and enabler
If banks want to succeed in their attempts to adopt a more customer-centric approach to marketing, while also remaining agile and relevant to shifting consumer demands, they must see PSD2 as the catalyst and technology as the enabler. Only a few months ago we heard the news that card payments fees are set to vanish in much the same way that mobile phone roaming charges have, and this is forcing banks to change their business models quickly.
As the needs of customers continue to evolve and the world we live in becomes more focused around outcomes, banks will need to continue innovating and offering services that are in-line with this new environment. This may differ for each bank: one might offer their customers exclusive concert tickets at discounted prices, while others might devise personalised banking offers based on the certain needs of individuals.
PSD2 is a much-needed breath of fresh air within the banking industry — one that will rebuild trust between banks and their consumers while steering banks towards a more customer-centric future. A large part of complying with PSD2 will involve utilising orchestration technology to connect the dots and deliver innovative, personalised customer journeys across multiple channels. This will in turn bring fresh engagement opportunities and potentials for new revenue streams.