Only CX can save banks from the rise of the fintechs
Every bank is aware of the rapid growth of the Fintechs (Financial Technology companies). These innovative startups have been carving out slices of...
A recent research report on the need for banks to offer a much more personalised service raises some interesting questions around what it means to offer a personalised financial service today. Personal service in a branch might mean that a friendly assistant brings you a coffee, but bank customers now expect far more.
This research suggests that customers actually have an expectation on their bank to understand their lifestyle, major life events, and personal financial goals. Instead of just offering an account where money can be deposited, customers are expecting banks to know their financial targets and to actively help.
Naturally, this means that customers will need to share far more data with their bank, but if the service can be personalised and useful then customers will trade their data. Just 30% of customers in the research say that they feel like their bank knows them and their financial needs well enough to offer a personal service. Almost as bad, 28% of customers say that their bank will put the interest of the company ahead of offering a great service to the customer.
Fewer than 20% of the banks believe that they have any real expertise in personalising service for individual customers. A worrying prospect for the big banks is fintechs snapping at their heels and designing many new financial services around the specific needs of customers.
I think the observations in this research are very interesting in the light of a European Union open banking directive called PSD2. If you are not closely following the banking industry, then it might be a new acronym, but it’s one worth reading about.
PSD2 is an open banking directive that will force all European banks to open their information systems to each other – and to other companies that want to access their data. If all the information inside your bank is open to other banks and other financial service providers, then there is an opportunity to create personal financial advice far more easily.
A major hurdle with bank personalisation is that most customers don’t manage all their finances in one place. You might have a current account with one bank, savings in a building society, and a mortgage with another bank. That’s three different financial products across three organisations with no connection to each other – except what you can manage at home on a spreadsheet or sheet of paper.
When all the banks open their data in 2018 with the PSD2 directive, it will be possible to use a third party app to monitor all three banks. Perhaps you can ask your mortgage provider to offset mortgage interest based on what you have in the building society savings account. It will be far easier to not only monitor your financial information across multiple providers, but to actually connect the services of different banks together.
The research on personalisation in banking is focused on the US market and therefore it doesn’t mention how PSD2 could transform and personalise banking in 2018. The extremely low figure of banks that are offering personalised services should be a wake-up call though – especially as customers start getting used to third-party apps that are more useful than anything the banks offer.
What do you think about the state of personalisation in banking today and how might PSD2 change this? Leave a comment below and let me know, or get in touch on LinkedIn.