Putting clients first to stay competitive in a world of changing expectations
The concept of openness triggers varying reactions within the financial industry. Some associate it with transparency and collaboration, while others see it as a dangerous lack of security or oversight.
Open banking — a disruptive trend in every sense of the word — leaves industry members wondering what open really means.
“Sometimes people think that open banking is open data and the loss of control of their banking data. That’s not the case,” explained Romain Bignon, CEO, Budget Insight. “The purpose is for the bank to be open in order to allow customers to take control of their own data and use it with other services, but only with the customer’s consent.”
Budget Insight, based at lux future lab, focuses on banking data aggregation, harnessing its APIs to give customers a global view of their accounts in a digital and simple way. A leader in the French market, with over 80 clients ranging from insurers to software companies, the startup has turned its attention to Luxembourg.
“Financial services doesn’t deliver positive emotional responses. They’re generally negative.”
At lux future lab’s sixth FinTechMeets — a lunchtime conference focused on relevant fintech trends — Bignon and Nasir Zubairi, CEO, Luxembourg House of Financial Technology (LHoFT) examined open banking’s positive impact on the customer experience.
“Twenty-five percent of e-commerce shoppers use Amazon. We choose it because we get a great experience, in many ways a delightful experience,” said Zubairi. “Financial services doesn’t deliver positive emotional responses. They’re generally negative.”
The conference’s takeaway was clear: open banking provides an undeniably better experience for the customer. Bank’s who buck the trend will have a hard time competing with Česká spořitelna, FinTS, BBVA and players with varying levels of open banking layers. The UK has gone a step further by making it compulsory for banks to open their systems and expand consumer choice.
“A bank needs to be very good at partnering and procuring technology. It needs to be good at working with third parties because I think that’s where the layer of competitive advantage is going to come from in the future.”
Zubairi, who founded open bank Solaris Bank, believes this model will be successful because it puts clients first: “We don’t always have to have our brand in front of the customer to make them happy…Allow yourself to be the backend,” he said. “A bank needs to be very good at partnering and procuring technology. It needs to be good at working with third parties because I think that’s where the layer of competitive advantage is going to come from in the future.”
Between a bank with a select number of in-house offers, or one that helps clients tap the best options on the market, the winner is obvious. PSD II provides banks with an opportune time to make the shift to open banking. Without the same regulatory pressure, the US lags behind Europe in this regard.
During the FinTechMeets, attendees experienced a live demo of Budget Insight’s application Budgea, which consolidates all of a user’s accounts from various banks and countries into one clean, digital environment.
In a world of instant service and endless options, customer expectations have changed. The same public that embraced Uber with open arms will eventually no longer tolerate the inconvenience of physically visiting banking branches to access services. Budget Insight and similar startups grew from the immediacy of smart phones and omnipresent internet.
“Currently, banks have a monopoly. The customer is the property of the bank, but in the new world, the customer must have the choice.”
This personal finance solution brings together services that were never connected before for the client’s maximum benefit. Budget Insight’s goal is not only to offer a user-friendly open banking interface, but to use its APIs to aggregate financial data that will lead to the creation of entirely new financial services.
“Currently, banks have a monopoly. The customer is the property of the bank, but in the new world, the customer must have the choice,” Bignon said. “Banks have to change their mindsets to accept this. Instead of preventing the opening of their systems, they have to anticipate it and transform it into an opportunity.”
A fast-moving bank can take advantage of open systems by being first to leverage the data of competitors and create new services. Once consumers get a taste of products, such as Budgea, there is little likelihood that they will opt to stay with a traditional bank that refuses to offer them the market’s best options.
Bignon asserts that the future holds two kinds of banks: (1) banks that provide backend services to resellers, focusing on their core competence of money management; (2) and banks that want to keep their customer relationships and provide API solutions, most likely through third parties.
“The world really is changing and banks don’t have a choice. They can transform constraints into opportunities, and we are here to help them do that,” he concluded.