Chris de Bruin, President, Digital Platforms, Zafin
At the heart of conversation and predictions around PSD2, open banking, and API proposals lies one key truth for banks: the competition is now only one click away.
The advent of PSD2 will change the business of banking as we know it, taking away the banks’ monopoly on customer account information and payment services. This directive will pave the way for increased competition, and improved customer choice and experience. Importantly, it also means that banks will no longer only be competing with banks, but against any third party offering financial services.
Banks are already under constant pressure to manage operating costs, while simultaneously re-designing the customer experience. PSD2 is just one more lever that will force them to re-think and re-build their value proposition and revenue streams. Data is top of the agenda and a key weapon in their arsenal to help them achieve this. The latest Digital Banking Report reveals that 50% of financial institutions name “enhancing data analytics to identify customer needs” as a top strategic priority for 2017.
This finding is interesting for two reasons. First, banks are awake to the fact that they must capitalize on their vast stores of customer data to deliver the right level of customer experience. And second, “customer need” is a more important focus than ever before. Data provides the basis for the insight that enables precise commercial decisions to drive happy and profitable customer relationships. It is this insight that will allow banks to become customer-centric rather than product-centric, with the agility to create sophisticated, tailored client propositions in real-time.
But how can banks move from this mass of data, to the nirvana of actionable insight to drive customer value? One of the adages about becoming a digital company is that you must also become a data company. To do this, you must be able to take all your client insight and start assembling it.
There are three broad categories of data to think about.
The first is data that characterizes clients – their demographic, their behavioural patterns, and their needs. This category generally gets a lot of attention, and rightly so, as it helps banks better understand their customers and market products and services that are highly relevant to them.
However, there are two other important pieces that should not be overlooked: understanding your client’s usage patterns, including who they are, how they behave, and the impact that this information has on the banks’ infrastructure. When do they come to the bank? How often do they come to the bank? Banks would be wise to develop a real understanding of how clients use the products and services they offer, making sure to take every interaction as an opportunity to learn about their behaviour, and make constant improvements.
Finally, banks should be ready to incorporate performance tracking data into everything that they build. Clients expect things to happen fast, and for services to be ready when they want to consume them. This is familiar territory in big enterprise systems, and is increasingly relevant on an end-to-end basis across systems in a digital organization. How long is it taking? How are your systems responding to requests coming from clients? This isn’t getting a lot of attention in the digital banking world, but you only have to look at the consumer banking companies to see their obsession with knowing the response time that’s going to lead to the client outcome that they want.
Not everything needs to be real time, but an appropriate level of performance is key. If my expectation as a client is that I will get an answer when I click the button on the screen, I should get an answer when I click the button on the screen. Banks have to deliver what is expected or they will see themselves out of business.