From 2013 to 2017, just five per cent of retail bank customers in the UK switched from one bank to another. Inertia and a fear of bills being missed all conspire to create a situation in which the banks don’t need to worry much about customer loyalty because very few customers ever change their bank. But is this all about to change?
2018 looks like it could be a critical year because it’s when the PSD2 European Union directive will need to be applied across Europe – and this will still affect the UK as the earliest the UK can possibly leave the EU is 2019. The Brexit process does not impact directives that become law next year.
PSD2 is the second payment services directive. In short, it places a legal requirement on all financial companies to open their data to other companies, creating a digitally-enabled banking environment.
The immediate implications might be that it will be easier to keep control of your money regardless of where it is. You might have your current account with one bank, savings in a building society, and your mortgage with another provider. With PSD2 in place, it is likely that new apps will be launched allowing easy access to all your financial institutions so you can create a simple overall financial picture – and plan for the future more effectively.
But this openness also creates more opportunities for completely new financial service providers – the entire financial system across all of Europe will be open to new providers launching services on apps that rival those the banks are offering. But, more transparency and ease of access to information on accounts also makes it easier to switch. Banks in the UK have tried to make switching easier, but with the ability for a customer to connect a new bank directly into their existing bank, the switching process could (in theory) become immediate.
Just imagine that. Hassle-free instant switching from one bank to another? Suddenly, the customer experience and how to create customer loyalty is going to be a number one priority in the banking industry. But with such an important change coming soon, have you felt a sense of urgency in retail banking yet? In this paper, read how regulation and digital technology will reshape the retail banking customer experience. Let me know what you think by leaving a comment here or get in touch directly via LinkedIn.