By Dom O’Brien, design director at Fjord, Design and Innovation from Accenture Interactive
We’re at the start of one of the biggest changes to hit the banking sector in modern times. Banking and financial industries have long ridden the coat-tails of their heritage, relying on their DNA of stability, security and adversity to risk to keep afloat. In an increasingly digitised and automated world, finance stalwarts will have to become more agile and truly put people at the heart. The new EU directive – PSD2 – which opens up banking APIs to third parties will help with this.
With change comes opportunity
Let’s face it – the banking industry as we know it is tired. While this new directive might seem daunting at first, it marks the chance for banks to get back in the competitive game and satisfy consumers’ constantly changing needs and their expectation that they’ll get the digital servicing that they’re getting from other more progressive industry sectors – something we at Fjord call liquid expectations. In the last five years we’ve witnessed a variety of new digitally based services disrupt whole industries. Think Uber and Airbnb. It’s time for the banking sector to reinvent itself and enhance customer experience across any commerce interaction.
Over the last tech-heavy decade, we’ve seen the emergence of a digital service that’s completely transformed how we pay for things online. It is of course PayPal. It has simplified the process of purchasing services and products, making this process safe and secure – plus your goods are automatically insured. This shows that there’s consumer appetite for services that offer simplicity and seamlessness. It’s about taking things off the thinking list and adding value to what can be otherwise mundane tasks.
Collaboration trumps competitiveness
Any industry on the cusp of change will naturally harbour concerns – also reflected across the financial and banking sectors. There’s a general industry perception that this new EU directive will enable disintermediation and allow competitors to poach customers via their own APIs, resulting in major revenue losses and reduced customer contact.
Banks need to quickly move beyond focusing on compliance into understanding how they can exploit open banking to invent new experiences and business models. There’s an opportunity to seize this golden opportunity to grow beyond the microcosm of banking itself. The new regulation will facilitate a whole new world, where banks atomise their services across the entire commerce ecosystem to create new data-driven, real-time and fully personalised services across any commerce interaction. In creating atomised services that enhance the retail experience, banks’ will escalate their brand visibility and give themselves the opportunity to promote core products which will lead to increased revenues.
This increase in brand visibility will be achieved as PSD2 dictates people choose and login to their bank when accessing these new services – this sounds alien but it’s an interaction people are already used to doing when accessing PayPal.
There’s no doubt that the rise in open APIs across the banking industry will be hugely beneficial for consumers, completely transforming retail experiences and how we purchase goods. Open systems will allow customers the flexibility and control to make decisions that are in their best interest – or give intelligent real-time API driven services the option to help with those decisions.
For example, picture a cash-poor consumer in need of credit to make an unforeseen, yet essential, purchase. Open APIs will allow a group of services to gather two years’ worth of transaction data to calculate this consumer’s credit score, then take this to a digital market place where banks can bid to supply the loan. Then it’s back to the consumer who will pick the best bank rate and make their purchase – all done in a matter of seconds.
The open banking directive will force the rather old-fashioned sector to shift into the realm of software if they are going to exploit the future world of new intelligent customer experiences that are powered by banking data and services. While unnerving for an industry that’s rooted in the tradition of fairly static product sets, risk aversion and stability – open banking and APIs will actually serve to stimulate competition and innovation across this somewhat insular world – and that’s surely an ecosystem worth building.