Open banking is forcing banks to think twice. It’s making them consider how agile they are, how they interact with customers and whether they have the right culture to support a rapidly changing environment.
Just about every company at the moment is in a race to put their customers first. Some are doing this by launching new apps or personalized advertising campaigns. Others are pre-engaging with customers as soon as they walk through the door – sending them beacon-driven signals to wearable devices about the latest clothes, grocery or travel deals. The aim is to drive engagement, loyalty, and ultimately to encourage sales.
The key to success is to make interactions with customers relevant. Don’t send me deals for spa breaks or treatments (I’m unlikely to buy them!) but information about my next travel destination? Yes please.
With other sectors starting to reap the benefits of doing this so well, where does banking fit into the race towards personalized services?
New innovations are something the financial services industry has been seeing from young and emerging fintechs – like app-based bank Starling, and other personal financial management tools like Bud or Moneyhub. What defines these innovations? Well, they have been introduced by companies that are inherently agile in their approach and their culture. But since the announcement of Open Banking, traditional banks too have been redoubling their efforts.
Under Open Banking changes, traditional banks will be subject to even more competition from challenger or online banks, with flexible third parties having access to customer bank account information. This will include transaction history and other personal information (as long as customers give their consent), which challenger banks can use to improve and develop their services at pace – especially if they have an internal culture suited to change.
So, with Open Banking comes even more reason for traditional financial institutions to get their tech innovations right, before these new fintechs beat them to it.
A culture of change is needed if banks are to make the most of the new opportunities presented by Open Banking, introduce new technologies, and work in an agile way.
Many banks are already working on incubator schemes to develop, test and deploy new innovations into their complex systems quickly. Others are also realizing that they have the resources and the money behind them to make change a success, as long as they can get the internal culture right.
Those banks that can make this change and become more responsive now, have a huge opportunity to play a starring role in the Open Banking revolution, building on the trust and loyalty they maintain within the market. Within five years the banks that have got it right will be the ones offering you personalized app interfaces, text messages to warn you of over-spending, or tools that let you see your current accounts next to your pension providers.
The clock is ticking.
This article originally appeared on Finextra.com.
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