Staying competitive in the era of ‘open banking’

If government proposals come to fruition, financial institutions in the UK will soon be operating in an ‘open banking‘ environment.

The Competition and Markets Authority (CMA) has put forward a package of measures designed to ensure that banks are making the most of the latest technology and have to work hard to win and retain business. Some of the reforms are still a couple of years away, but could have a transformative effect on the retail banking industry as we know it.

One of the potential positive consequences of this is banks benefiting from greater loyalty when they go the extra mile for their customers.

What is ‘open banking’?

One of the conclusions of the CMA’s retail banking market investigation was that older, larger banks are not having to compete hard enough for customers’ business and new, smaller banks are struggling to grow. As a result, people are paying more than they should and not benefiting from the new services available from smaller providers and challenger banks.

Open banking is one of the measures proposed to improve the situation. With a potential implementation date of early 2018, the system would enable personal customers to share data securely with other banks and third parties, allowing management of accounts with multiple providers through a single app. It is hoped this would make it easier for customers to manage their money and compare products.

Other proposals would require banks to:

  • Publish objective information on service quality online and in-branch.
  • Send out ‘prompts’ notifying customers of developments such as branch closures or increases in charges.
  • Send alerts to customers when they go into an unarranged overdraft and inform them of a ‘grace period’ to avoid charges.

Alasdair Smith, chair of the retail banking investigation, said the proposed reforms will shake up the industry “for years to come”.

“We are breaking down the barriers which have made it too easy for established banks to hold on to their customers,” he added. “Our reforms will increase innovation and competition in a sector whose performance is crucial for the UK economy.”

Staying competitive

With an intensifying focus on competition and innovation in the retail banking industry, financial institutions of all sizes will be looking for ways to differentiate themselves from their rivals and deliver a genuinely valuable, relevant service for customers.

Taking their Branch proposition truly ‘omni channel’ will become a key weapon. Globally consumers still exhibit strong demand for person to person interaction, whether for low value, day to day banking products, or to discuss the high value complex solution packages they need from their bank, but crucially now expect that interaction to be available anywhere, on any channel and benefit from the seamless process management and personalised data exchange that they encounter in other industry verticals.

Designing the omni-channel experience around the expansion of their branch proposition, will lead FI’s to make greater use of Remote and In-person assisted service, whether that be for delivering advanced Teller service across expanded hours and locations, or complex investment and mortgage discussions, where the customers’ own mobile device is the interview interface. Efficiently replicating the branch experience wherever, whenever the customer is ready to engage will reinvent the standards of Return on investment per staff member, removing the fixation with Bricks and Mortar as the notion of what Branch banking needs to be – and in doing so, break down those barriers that consumers feel exist today.

Written by Martin Shires

Martin Shires is a global evangelist for branch transformation strategy, based out of NCR’s R&D center in Dundee, UK. Martin has held a number of senior regional management roles in European retail banking.

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