By Ed Whitehead, MD EMEA, Signifyd
In an ideal world, ‘2020’ is when open banking flourishes in Europe. The dream is that consumers can effortlessly manage all personal finances via one app, 100 percent confident their data is protected and in their control. Sadly, we do not live in ‘banking utopia’. The reality is that achieving the open banking dream is going to take an immense amount of effort and work to get right.
That is not to say that 2020 won’t be noteworthy for open banking’s future, because it will. Additionally, with PSD2 and its related SCA firmly in place, European consumers are naturally going to become more familiar with the new frontier of banking as we know it.
Consumers will benefit but so will the value chain
For consumers the compelling prospect of being able to easily access their full financial profile in one place, to compare terms, fees and interest earned on multiple accounts, loans and investments is within reach and very exciting. Being able to easily budget and accurately examine every expenditure will be right there in front of them.
What makes this possible is the fact that various regulations and rules allow data to be shared among banks, third-party service providers and businesses. This includes retailers and other parties selling services. This makes a whole new kind of commerce possible too.
New technology, alliances and incentives
This new open banking model is complex though. It needs the financial sector to not only construct the right technology to facilitate the ‘dream’, but it also requires effective alliances and incentives. For now, unfortunately, the truth is that banks are ill prepared to offer all that is needed to seamlessly provide this new form of commerce. Equally, consumers are not ready either.
This mismatch between open banking’s potential and the readiness to be able to use, or benefit from it, means there will inevitably be problems. Within this landscape, user experience will become a crucial differentiator. It will differ from bank to bank and by each third-party provider. The differences will be largely driven by what consumers demand and need.
Bringing the unbanked with us
Another conceptual challenge that comes with open banking is that it has largely been designed to support the ‘haves’— meaning people who have enough money to benefit from apps that track and manage their finances. These are usually people with access to smartphones, connectivity and a natural familiarity with using technology and apps that deliver the value provided by third-party applications. In contrast, the idea of open banking is somewhat of a non sequitur and a non-starter for the unbanked. So, this aspect needs to be further considered during the year too.
IT and cyber security challenges
As open banking starts to take off, the convenience that comes with sharing data will be accompanied by new cyber security risks, as criminals strive to attack the framework.
Additionally, open banking will put pressure on IT teams. Their expertise will be needed because, while some financial accounts integrate seamlessly through banks with third-party providers, others will fall short and result in consumers not truly benefitting from the so-called benefits of open banking.
Consequently, rather than 2020 being the year when open banking truly flourishes, 2020 is the year that banks, fintech and regulators need to sell consumers on a new model of conducting commerce more effectively — a model that more than likely will get off to a shaky start.
Educating and listening to customers is crucial
Aside from dealing with the various IT challenges, banks will need to develop sophisticated communication campaigns that explain how open banking works and benefits customers. These communication campaigns must involve two-way dialogue between banks and customers too. Banks need to listen to, and ask, what their customers’ experiences with open banking are? What works? What doesn’t? What new services and possibilities would make banking more valuable? As they do this, banks – and the wider fintech community – will need to practice humility, compassion and customer obsession, because they have some catching up to do.
The relationship between PSD2 and open banking
Alongside open banking sits PSD2. Both aim to provide better security, experiences and more choice to consumers. However, regulators and open banking architects moved ahead without consulting the end-users of their model.
Now consider open banking’s vision of building meaningful online portfolios for consumers through sharing data across banks, businesses and institutions. Sharing data requires consumer consent, which is good and necessary. But public opinion polls reveal that consumers are reluctant to allow their banks to share data. To emphasize this point, Accenture Research found in late 2017 that 69% of consumers in the UK said that they would not share data with third-party service providers. And 53% said they’d would never make use of open banking options, instead sticking with the way they’ve always banked.
Consumer perception needs to change
Over time the public perception and receptiveness towards open banking will naturally change. Already some businesses are making progress toward demonstrating the added convenience open banking can bring. HSBC enables consumers to access all their accounts, including competitors, through an app that they developed. Chip allows people to work out how much they can save each month and automatically deposits savings into an account. Credit Kudos analyses a user’s finances and establishes creditworthiness for financial services. Equally, some firms in the mortgage market generate spending reports, automate loyalty programs and more.
As more companies build convenience into their business models, people who were closed to the idea of open banking at first might decide to give it a try. Although, at the moment, the idea is hardly being rapidly adopted. The Financial Times recently reported only 25% of people polled by the banking technology firm, Splendid Unlimited, had heard of open banking; and only 20 percent of those said they actually knew what open banking meant.
As you can see, the inevitable bumps in the road during the early part of the open banking journey will increase consumer skepticism. People require education and convincing. It’s hard for consumers to trust banks and other parties with their data – especially personal financial information they hold dear – when organizations can’t even manage everyday digital transactions.
So, the fintech sector has a big task ahead. It not only needs to keep up with the technological and regulatory changes required to successfully deliver open banking. But, it needs to bring consumers along with it by evangelizing the benefits that open banking provides; and target the early adopters, who have the potential to become advocates. The potential rewards for those who can lead the pack in 2020 are there to be taken.
New digital first bank – Monument – announces its key technology providers
- Monument selects Mambu, Salesforce, Amazon Web Services, Persistent Systems and Accenture as key providers for its technology build
- Monument is the first challenger bank in the UK to service the unmet demands of more than 3.5 million mass affluent clients: professionals, property investors and entrepreneurs
- It is building a modern, unique, lego-like technology platform which takes best of breed SaaS providers and integrates them in a cloud based microservices architecture
- This will deliver an exceptional client experience and enable Monument to innovate and to introduce new components on a frequent basis
- Monument today announces that Mambu will be the central core banking engine in the platform alongside Salesforce for CRM, and AWS for cloud services
- Monument has also engaged Persistent Systems and Accenture Interactive to support the platform build
Following receipt of its banking licence with restriction on 6 October 2020, Monument has now signed agreements with a number of key technology providers to enable the build of its bespoke technology platform.
Monument wants to deliver exceptional client experiences by using technology solutions that are modern, flexible, easy to integrate and ultimately, if necessary, able to be replaced should the need arise. The design of its lego-like technology platform is Monument’s solution to the huge challenges faced by the legacy systems of established banks. Having assessed the market over many months, Monument concluded that no appropriate single solution existed in the market for the products and services that Monument will launch in 2021.
In addition, Monument only wishes to develop its own technology where it can deliver significant competitive advantage, for example in the mobile and web services to be used by clients. Much of the technology platform is therefore based on best of breed solutions from modern, cloud-based providers.
Mambu has developed the leading cloud banking engine which is an excellent fit for the platform that Monument is building. Similarly, Salesforce provides an industry leading CRM (customer relationship management) solution which can easily be integrated with Mambu and other solutions. AWS, as a leading provider of cloud-based infrastructure, provides a range of components to ensure the platform is reliable, scalable, secure and flexible.
To support Monument in building and integrating a platform with more than 18 different components/providers, Monument has chosen to work with Persistent Systems, a leading global solutions provider specializing in digital with extensive experience in software as a service (SaaS) solutions. To support Monument in rapidly building its mobile app and web-based channels, Monument has chosen to work with Accenture Interactive, which has significant expertise in building innovative digital experiences in both the financial and non-financial sectors.
Steve Britain, Monument’s Chief Operating Officer said:
“We have been working closely with our chosen providers for some months now, to lay the foundations for the build of our platform. We are delighted at how much we have already achieved, particularly as much of the work has been done by a highly distributed team because of COVID-19. We are now focused on completing the work to build a unique configuration of best in class software components that will make us highly flexible for the future and deliver market leading client service.”
More announcements will be made shortly as other key components of the architecture are confirmed.
Sudip Dasgupta, Monument’s Chief Technology Officer added:
“It was essential to me that we selected the strongest providers available. Those that offer us modern technology solutions with the best degree of integration that we need, together with flexibility for the future and proven operational reliability. In Mambu, Salesforce and AWS we have certainly achieved that objective and we are excited about our future engagement with them. Equally, as we rapidly build our platform for launching with clients in early 2021, we wanted support from providers who have been on this journey before and in Persistent and Accenture Interactive, I am delighted to say we have found that.”
Monument will be the only bank to offer its clients an entirely digital journey for buy-to-let and property investment lending of up to £2million. It will offer market leading, top quartile savings rates and its model is designed to reward loyalty. So, if a saver deposits money for a subsequent fixed term, they will get a better rate than a new customer. And a borrower who renews their loan will also be offered a favourable rate.
UKRSIBBANK, part of BNP Paribas Group, announces a strategic partnership with financial wellbeing startup Dreams, to enhance the digital user experience of its 2 million customers in Ukraine
- The technology powering popular consumer app, Dreams – which has helped 460,000 users save over 440M EUR – will be made available to UKRSIBBANK’s users in Ukraine.
- Through the integration of the Dreams platform within UKRSIBBANK’s own digital tools, customers of the bank can set and achieve money-saving goals, track and improve their financial lives.
Dreams (https://www.getdreams.com/en/b2b/), the Stockholm-born fintech empowering millennials to save and feel better about their money, today announces a strategic partnership with Ukrainian commercial bank UKRSIBBANK, a subsidiary of French international bank BNP Paribas Group.
This partnership follows the announcement earlier this year of Dreams’ first enterprise partnership with banking software provider Silverlake Symmetri, and the recent unveiling of a new department in Stockholm dedicated to the development of Dreams’ B2B partnerships. The announcement marks an expansion of the company’s business model as it consolidates its B2B offering and evolves its services as a provider of white label solutions for financial institutions.
Through the integration within UKRSIBBANK’s own digital tools of the Dreams Platform – which is rooted in scientific principles – customers can set and achieve money-saving goals through clever, automated saving features, in addition to nudges and saving hacks.
The Dreams Platform will be included as part of UKRSIBBANK’s digital banking offering for its 2 million+ customers, and is set to grant millions of potential consumers across Ukraine access to products which will help keep their finances on track and improve their financial lives.
The rise in digital self-help tools has long been anticipated by Dreams and forward-thinking financial institutions. The current global economic uncertainty brought about by the COVID-19 pandemic has also placed significant strains on people’s finances, and the demand for better personal finance tools has only accelerated. The partnership with Dreams is welcomed by UKRSIBBANK which is currently striving to equip its customers with the best possible banking solutions whilst helping them achieve a more sustainable lifestyle.
Dreams is firmly established as an authority in its industry, having launched its consumer-facing app in its native Sweden in 2016 and Norway in 2018 – where it has already achieved a 16% market share of all 20-39 year olds.
Henrik Rosvall, CEO and founder of Dreams, comments: “It’s a true honour to be partnering with UKRSIBBANK and BNP Paribas Group, and we’re incredibly excited to be introducing the Dreams solution to UKRSIBBANK’s customers and the wider Ukrainian market.
“Dreams and UKRSIBBANK can now lead the charge, with BNP Paribas Group’s corporate strategy having shifted in recent years to focus on guiding customers towards responsible consumption and sustainable personal finance management. I’m confident that our mission of helping millennials save more and feel better about their money makes us the ideal partners.
“Our financial wellbeing platform – which is built upon behavioural science and personal finance management principles – will provide the perfect tool for UKRSIBBANK to help its customers make better financial choices and become more sustainable in the way they handle their finances. This partnership will also help UKRSIBBANK safeguard the loyalty of its customers and futureproof its digital banking offering against a growing number of challenger banks and fintechs.”
Konstantin Lezhnin, Head of Retail at UKRSIBBANK BNP Paribas Group, comments: “I believe that banks have a role to improve their customers’ lives. Planning and saving for important life events improves our quality of life by reducing stress levels, and we wish to make our customers feel more confident and in-control of their lives.
“UKRSIBBANK has always applied innovative ways to assist our customers in financial planning, so we are very happy to now be working with Dreams, the best European player in behavioural savings. They have an extremely solid track record in Sweden and Norway based on scientific research, so we are confident that this partnership will work positively for our customers in Ukraine. This also demonstrates our strategy to cooperate with startups and innovative companies that seek ways to expand their operations.”
Three times as many SMEs are satisfied than dissatisfied with COVID-19 support from their bank or building society
- More SMEs are satisfied (38%) than dissatisfied (13%) with their COVID-19 banking support
- Decline in SMEs using personal current accounts for business banking as more seek access to the Government-backed lending scheme
- Fewer SMEs believe nearby branches are important when choosing a bank or building society
- 15% of SMEs use mobile or online banking more often than before the COVID-19 pandemic
- When SMEs do look to switch, low or no charges for business banking remains the most important factor (47%) in selecting a new account
Three times as many SMEs have been satisfied than dissatisfied with the COVID-19 support available from their bank or building society, according to YouGov research commissioned by the Current Account Switch Service.
Overall, four in ten SMEs (38%) were satisfied with the support they received from their business current account provider since the pandemic began. This contrasts with one in ten SMEs (13%) who were dissatisfied. In general, more than half of SMEs (55%) are satisfied with their current business bank account, compared to 8% who are dissatisfied. However, inertia remains a problem as half of SMEs (50%) said they would not look to switch business accounts even if they were dissatisfied with their current bank or building society.
When SMEs do look to switch, low or no charges for business banking remains the most important factor (47%) in selecting a new account. Advanced digital features (35%), good interest rates (34%), and a personal connection through a relationship manager (33%) also mattered.
The SME banking research was conducted both in February and in September 2020. It also reveals that since the start of the pandemic, the proportion of SMEs using business current accounts has increased from 69% in February to 74% in September as firms are required to have a business account to receive access to the Government-backed lending schemes.
However, one in five SMEs (20%) still use a personal current account for their business banking needs, despite the risk that tax liabilities get confused, and calculations are made incorrectly. These businesses are also missing out on a range of business-only banking benefits such as integrated accounting software or invoicing tools offered by different providers.
In addition, the research shows the importance of branches to SMEs has declined over the seven months. When asked in February, more than a fifth of SMEs (22%) said the availability of nearby bank branches was important when selecting their bank or building society, compared to 17% in September. However, the Post Office could be fulfilling the role of branches in some areas.
The declining importance of nearby branches was most noticeable in the North East region where 35% of SMEs believed branches were important in February, falling to 18% in September. The importance of nearby branches also varies between industries. One in ten IT companies (11%) said nearby branches were an important factor compared to nearly three in ten (29%) leisure and hospitality businesses.
While branches are less important, digital banking use has increased for some SMEs. Several firms have started to use online banking for the first time as 15% of SMEs say they use mobile or online banking more often than before the social distancing measures were introduced.
Maha El Dimachki, Chief Payments Officer of Pay.UK, owner and operator of the Current Account Switch Service, said: “Across the country, banks and building societies have been working hard in difficult circumstances to meet customer needs. Thanks to that work, small and medium-sized enterprises are more likely to say they are satisfied than dissatisfied with the support they received from their business account provider since the pandemic started. But lockdown has changed small business behaviour dramatically, in a way that points to significant changes to their banking needs both now and in future.
“It’s encouraging to see many small businesses are generally satisfied with their business bank accounts. However, even when businesses are unhappy with their bank, some don’t consider switching as an option, despite the many benefits available. We’ll continue to raise awareness of the benefits of switching among small businesses to help them get the most from their bank account.”
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