Banking

The future of banking: Two themes that will make the customer the winner

Personalisation and implementing a customer-centric strategy are the key themes in banking today. You won’t be surprised to know that this is not a new phenomenon; customer centricity has underpinned financial services institutions for the past 50 years. Personalisation was the key driver during branch banking, telephone banking and mobile banking, but the tools and technology used to execute it have now changed. Customer centric strategies are now being transformed through open banking.

Two key
themes driving digital transformation in banking now are the marketplace model and the banking ecosystem developed through third-party
partnerships.

  1. The marketplace model

    The industry hypothesis is that the ‘marketplace’ will soon become the domain for banking. In January 2018 the UK Government published its Open Banking Standards Framework to provide better services and cheaper products for consumers, whilst driving competition in the industry for new entrants. Ironically, the UK will be the EU’s guinea pig with this model, making us the first to truly understand the impact of open banking. The unvarnished truth in financial services is that customers want the most disposable income, but at the same time still want the most financial security. In other words, we want the house, but not the mortgage. A financial services marketplace seems to be the best route to achieve this type of outcome for customers.

    So what is a marketplace? It’s just like Amazon and eBay – customers can browse products and services and purchase them at the best value. For financial services, it is an aggregator of products presented to the customer as a set of competing offers. This approach offers transparency, choice and better pricing. Starling Bank, a leading digital banking platform, has already established a financial services marketplace which provides customers with access to third-party financial services and now has 11 partners. You can bank on the fact that there will be many more joining in the future.

  2. The banking ecosystem

    Open banking fundamentally transforms the business model of a banking institution. The traditional model of a bank is to manufacture and distribute products and services to their customers based on how they feel they will perceive and consume them. Open banking allows banks to use third-party providers to either offer services directly to the customer, or to help the bank to make the offer themselves. This will allow banks to bring new products to market much quicker through trustworthy third-party Fintech partnerships.

    Trusting third-parties to deliver services to their customers will be a huge change in any bank’s culture, but it is something they must embrace to ensure they are meeting their ever-increasing customer needs.

    Amidst all this uncertainty, one thing is a given: the customer will be the winner in the future of banking.