3. Supporting Integrated Multichannel Delivery
Most consumers continue to use multiple channels to conduct their banking based on transaction type and individual behavior patterns. To migrate more transactions to digital channels, financial institutions must move their sole focus away from cost reduction, and instead focus on improving the integrated multichannel experience.
Part of the reason physical branches remain open is because of the preference of consumers to continue to use branches for activities such as opening an account, cashing or depositing checks and seeking financial advice. As has been noted in previous reports, the reliance on branches should be taken with a grain of salt since many institutions have made the process of opening accounts digitally exceedingly difficult, and/or have not done an adequate job of educating consumers on services such as mobile deposit capture.
As mentioned above, these numbers can be a bit misleading, however. In the 75-page Digital Banking Report, ‘State of the Digital Customer Journey,’ there is strong evidence that banks and credit unions of all sizes are not making every stage of the customer journey easy, seamless and contextual. This includes the entire account opening process, early new account onboarding and even subsequent engagement around the building of a stronger digital relationship once an account is opened (cross-selling).
For any organization, the priorities should be to improve the digital deliverables that include making basic transactions (balance inquiry, funds transfer and bill payments) more simple and intuitive, while also making the next stages of engagement (account opening and check deposit) more easy to complete with an online and mobile device.
“We’ll find a lot of banks revisiting their branch portfolio and there will definitely be some consolidations and closures. The trend will be towards greater self-service cash transaction and digital integration in physical units. Research data and market analytics will also enable data-driven decision making, with branch design based on the type of distribution model appropriate for each market area.”
“The banking business is going liquid, expanding the relationship towards the digital places where customers fulfill their everyday needs. Purchasing any kind of financial product will be built within a highly-contextualized proposition … remember when insurance was sold at ATMs in the US airports in the 50’s? Now imagine a world where open APIs bring banking everywhere.”
– Ambrogio Terrizzano, Interactive Financial Services Lead for Europe at Accenture
“Some institutions will get serious about experiential design and build internal teams staffed with senior designers from out of category (e.g. Retail) to build elegant and integrated omnichannel experiences. They will be the winners in the future.”
– Tom Wennerberg, EVP Marketing Director at Key Bank
“Leading banks will start converging mobile and online banking into new digital banking applications composed of widgets built on an agile microservices architecture. The new digital banking applications will offer many cross-channel services, such as text with contact center, video with relationship banker, cardless withdrawal at ATMs, appointment making, and transaction pre-staging prior to a branch visit.”
“There will be continued digitization of banking and the redefinition of ‘place’. This should, hopefully, prompt more financial institutions to invest more aggressively in digital channels, rethink their strategic planning processes, and consider ‘place’ as a customer mindset more than a geographic location.”– Joe Sullivan, CEO of Market Insights
“In 2017, AI will help retail banks profile the collective financial lives of their customers. This will aid in multichannel distribution, by identifying the real-time what, where and when and how opportunities to deliver complimentary products and services.”
– April Rudin, Founder and CEO of The Rudin Group
“The Chinese are ‘Always on’! It’s much more than just O2O (online-to-offline and offline-to-online). Today, the Chinese people are ‘always online’, creating a need for banks to understand how to communicate and when to interrupt and influence. In China, social and ecommerce platforms are driving connections with retail brands, purchases and relationships with money.”
4. Testing Open Banking APIs
APIs were not even listed as a 2016 trend, but was #4 in 2017. The use of open APIs provides the opportunity for combinations of products and services beyond traditional banking. As mentioned by Ron Shevlin in last year’s trends report, traditional financial services firms can leverage their existing customer relationships to create the foundation of platformification™ with traditional organizations at the center of the relationship
According to Ron van Wezel, Senior Analyst, Retail Banking and Payments at Aite Group, “Technology is a strong driving force in the trend to open banking. APIs enable banks to redesign their IT architecture and work with fintech start-ups to develop innovative solutions for their clients.” Competition from peers and new entrants urges incumbent banks to develop a digital strategy. In Europe, regulations have accelerated the trend to open banking and enforces an end date for banks to provide open APIs.
Many US banks have limited or even shut off access to financial data rather than exploring ways to make sure that such access, once granted, is safe and secure. The largest banks, in particular, appear to want to control what outside organizations can use their data for the benefit of the consumer.
This has not gone over well with the US Consumer Financial Protection Bureau (CFPB). The CFPB recently issued a veiled warning to banks suggesting they may soon be forced to give up their troves of customer data if they don’t do it voluntarily. The CFPB believes consumers should have control over their own data and the ability to instruct banks to share it with third parties if they wish.
There are many open banking models as shown by the chart from Aite below.
Bottom line, open banking APIs enable incumbent banks to build and launch products more quickly, and probably more easily, than they historically could. Banks will also likely find it attractive that open APIs require minimal connection effort on their part and offer access to multiple third parties. Fintechs, on the other hand, will benefit by gaining access to incumbent institutions’ large customer bases.
“The enablement of customers to share their data stored in bank systems with any 3rd party accredited organization, will foster the emergence of data-driven business models and new commercial exploitation, providing new services and experiences for customers.”
“The maturation of APIs will accelerate the open banking movement. Banks and other ecosystem participants will get used to working with APIs and more will become available, propagating a virtuous cycle.”
– Dan Latimore, SVP of Banking at Celent
“Players have to prepare for the implementation of PSD2 in the UK and similar regulation potential in the US. With the creation of open banking platforms, there will be opportunities for fintech firms to partner with banks, creating more exciting customer experiences.”
– Oliver Bussmann, Founder and Managing Partner at Bussmann Advisory
“2015 was all about blockchain. 2016 saw an explosion of interest in machine learning and artificial intelligence. 2017 will be the year of open marketplaces and platforms. Platforms support the rapid cycle deployment of microservices into a financial marketplace. Those microservices are apps, APIs and analytics that transform the back, middle and front office respectively. As the financial world is rapidly moving to open, loosely coupled marketplaces, any bank with old legacy technology will start to look like a dinosaur.”
“As banks become more comfortable with APIs, partnering with fintech start-ups, and coming to the realization that not all products need to be created internally, we will see more Banking-as-a-Service (BaaS) or Banking-as-a-Platform infrastructures being created.”
– Bryan Yurcan, Senior Writer for the American Banker
“APIs and Open Banking will start to shift the banking landscape with more traction in Europe and Asia, but we’re likely to start seeing the gap between leaders and laggards widen.”
– William Sullivan, Head of Global Financial Services Intelligence for CapGemini
“Frequency and depth of bank integration into the digital platforms most entrenched in our customers’ lives (e.g., Google Now, Facebook, Alexa) will increase – reinforcing the long-term value of an open API architecture. On the flip side, banks will work to take advantage of the open API model to seamlessly integrate “best of breed” partners into their experience – beginning the ‘platformification’ of banking.”
– Niti Badarinath, Head of NA Channels for BMO Financial Group
“We will begin to see a variety of API business models emerge, but 2017 will be too soon to tell which will succeed and which will falter in this new API economy.”
– Paul Loberman, Global Head of Retail Business Banking Digital at HSBC
“The most significant change in financial services next year will be open banking APIs, as banks will start focusing on how to expand their reach and shift from the brand to the back end. Bank APIs allows businesses to build and scale more quickly, opening opportunities to bring services to market faster. For this to be successful at scale in the US, the core banking vendors and the government needs to get involved.”
“Platforms and ecosystems will continue to take shape as various banks further build their API strategies, their marketplace strategies, or even their Bank-as-a-Service strategies. I expect the beginning of standardization in a similar vein to the movement we have seen in the DLT/blockchain space.”
– Pascal Bouvier, Venture Partner at Santander Innoventures
“The hype around banking APIs will increase, even overtaking cryptocurrencies. Major banks will launch public API platforms. In Europe, a fight will break out between proponents of OAuth and ISO 20022 as the technical standard for PSD2 APIs.”
– Shamir Karkal, Head of Open APIs at BBVA
“2017 could be a year where we see several countries follow the UK lead regarding API regulations. Fintech capabilities and partnerships at challenger banks will grow as big, legacy banks put their integration skills on display.”
– Aden Davies, Director of Portfolio Management at 11:FS
“APIs are arguably one of the biggest topics in the industry. In Europe, they’re now a regulation discussion that’s becoming real. The business model for profiting as a platform is key here, and many are still struggling with it.”
– Simon Taylor, Co-Founder of 11:FS