The complexities of the European digital banking market have only increased in 2018, with open banking and PSD2 developments, continued rise of FinTechs and BigTechs, digital-only banks launching left-right-and-centre, a ton of payment outages and data security issues, as well as the ever-increasing customer demand for excellent digital experiences. At the Global Digital Banking Conference in London last month, a group of experienced and inspirational leaders gathered to try and dissect the state the of the market and outline best practice and best opportunities for the industry.
Customer experience is data
Customer experience is proclaimed as central to the ethos of most financial institutions today, and it was clear from the conference that now, this is entirely lead by data. With intelligent analysis of data, banking can move from being a utility and chore, to actually adding value. As David Judic, Head of Customer Innovation for CYBG put it, “it shouldn’t be a full-time job to be a customer”.
‘’Customers need to know “I can switch now” rather than “you could have saved this amount if you had switched.’’
Through use of machine learning scouting trends in transaction data and AI then acting on those trends, banks can deliver actionable advice to their customers, and help them become “financially fit”, in the words of Judic. This was the conclusion of a panel of experts on the day, and echoed by Daniel Kjellen, CEO and Cofounder of Swedish-based Tink, when he said:“Customers need to know “I can switch now” rather than “you could have saved this amount if you had switched.”
The potential of delightful experiences in payment apps was also discussed. Through a demo that involved ordering a pizza on-stage through the Pay-byBank app, George Charalambous, Head of Digital Product, HSBC and Jonathan Wood, SVP – Consumer Applications, MasterCard showcased the benefits of a more data rich payment service. George highlighted the key thing missing from mobile payment apps is the lack of balance information and “helping people to budget”. Security measures come into question here for consumers as well, in which the Pay-by-Bank app has incredible biometric features, but Maha El Dimachki, Head of Payments for the Financial Conduct Authority went on further to say that “AI tools should be used to validate transactions”. As customers see their payment provider coming to them with unusual activity before they notice, this will in turn grow trust for consumers.
These heightened customer expectations are more prevalent amongst the millennial population, and this was heavily discussed on the day. Suvo Sarkar, SEVP, Retail Banking for Emirates NBD provided a unique case study from the UAE, in which they launched their own digital-only bank, Liv., which targets this sector.
‘’We have really been focused on human-centred design, understanding what drives customer needs and values and being able to approach them with empathy.’’
As Suvo explained: “Millennials is a large and growing segment that is very different from predecessors; 82% of our consumers are millennials, and 84% of those are new to Emirates NBD.” The case-study comes at a time where in the UK, more traditional banks are looking specifically at digital-only propositions to target this audience and grow their customer base.
The role of trust is growing
‘’Comfortability with digital-only providers has fallen over the last 12 months from 78% to 56%’’
Charles Green, CEO, RFi Group shared insights from the latest Global Digital Banking Council and opened the day by talking about the integral role of trust in customer’s minds today. In the context of increasing numbers of data breaches, brand integrity and protections of personal information, and it seems digitalonly propositions have taken the brunt. As Charles highlighted: “Comfortability with digital-only providers has fallen over the last 12 months from 78% to 56%.” When consumers think about trust, “keeping money safe” and “protecting personal and financial information” are articulated as the key elements, and in this, banks are winning”. However, “Amazon are the closest threat to banks”, as the 18-24 year old market actually see this BigTech as more trust worthy than their main bank for the first time in the UK. Alex Weber, Head of International Markets for N26 addressed this and admitted their main focus is “solving problems to build trust. We aim to be the Spotify of banking, a complete digital experience, with security.” Continuing on the theme, Pascal Nizri, CEO, Chekk explored digital identity measures as the route to solving these issues, especially in a more open data world.
Open banking/PSD2 – still a lot to do
Unsurprisingly, open banking and PSD2 dominated the discussions on the day, as the afternoon saw a 360-degree view on the opportunities and the challenges still to address. Alan Lockhart, Head of Applied Technologies, RBS said “PSD2 is more than regulatory compliance, it is an opportunity to provide new & innovative services for customers… API’s allows customer to change banking services without changing bank.” The larger banks in the UK seem to be embracing the changes, but how will customers respond?
‘’ Fewer than 1 in 3 consumers claim to share personal information/data with apps in the UK. In fact, 7 in 10 consumers are using apps that require sharing of personal information/data.’’
The first hurdle is to overcome the disparity in consumer understanding of shared data. As Victoria Bateman, Managing Director – EMEA for RFi Group showcased, “Fewer than 1 in 3 consumers claim to share personal information/data with apps in the UK. In fact, 7 in 10 consumers are using apps that require sharing of personal information/data.”
Banking models are changing
In the context of open banking, and a more competitive landscape, the room discussed what are the banking models of the future. Tracy Chang, VP, Head of Product Management & Innovation, Fidor Bank believe they are leading the way for a new world; “marketplace is the new black”. Their marketplace solution aims to be the same as Airbnb within financial services, bringing together all players to improve the customer experience. With PSD2, the need for a banking platform becomes wearier, as new provider’s allow access to financial services.
‘’Banks should be more concerned by BigTech than FinTech’’
With that in mind, Michelle Kent, Head of Digital, Santander suggests that the “banks should be more concerned by BigTech than FinTech”, which resonates with the customer sentiment Bateman addressed around millennials shift in perceptions of trust.
Culture of innovation
The day opened and closed with rousing sessions focused on how to actually instil a culture of innovation within banking. Ruchir Rodrigues, Managing Director - Digital, Barclays discussed 3 key pillars; “a change of mindset, reexamining the execution model, and delivering breakthrough moments.” Barclays have a number of ways in which they encourage innovation, through their LaunchPad service, where they co-create with customers, through Eagle Labs, there they obtain real-time feedback on their services, and through their Rise accelerator programmes, building a community of experts in start-ups to drive their customer focus forward.
‘’ Innovation for me has nothing to do with technology, innovation for me is solving the problem in an elegant way’’
Neal Cross, CIO, DBS Singapore is an awardwinning banker due to his incredible leadership. Explaining innovative culture through the medium of his building project of the Oragutan Hotel in the Samantam Jungle, he said “Innovation for me has nothing to do with technology, innovation for me is solving the problem in an elegant way.” DBS have done a lot of work in Hackathons and accelerator programs as well, and as Neal puts it: “60% of the time, uneducated students beat the bankers at their own problems.” So perhaps it is not robots looking to steal people’s jobs, just the next generation”.
In summary, digital banking has come along way in Europe, but still has a long way to go. The big question remains – who will be the winner?