• Martijn Hohmann, CEO at Five Degrees


• 23.10.2018 11:45 am
undisclosed

Brand loyalty: a thing of the past

Banks need to continually innovate in order to stay relevant to their customers. Brand loyalty is becoming less common among customers across the globe, and the emergence of nimble and flexible challenger offerings are having an impact on the ability for traditional banks to stay relevant.

As a way of keeping up with customer demands, traditional banks understand the importance of implementing new and updating existing digital technologies.  However, they are not making the transformation to digital fast enough. 

Big bank digital transformation lagging behind

Siloed data operations, complex process automation, and inflexible legacy systems are causing issues for banks across the world. Traditional banks are currently lagging behind with digital transformation which is impacting on their customer experience, making it easier for challenger competition to win business from them, and expand their footprint.  

The digital-lag, an issue that the finance industry is facing as a whole, is best illustrated with recent instances of IT outages. The Lloyds TSB and HSBC systems outages demonstrates the challenges associated with current IT infrastructure, and the need to bridge old and new systems.

How can big banks solve IT  issues and stay relevant?

Banks need to fully digitise their offerings and abandon traditional ways of thinking: a closed shop protected by very high walls if they are to retain and build their customer bases. 

It’s not as simple as adding more automation to manual processes and creating more channels of delivery to existing offerings. Neither is it adding processes to already overloaded legacy systems, or ripping them out completely. 

For banks to seize the opportunity that  new digital technologies bring, while significantly reducing the risk of future outages, they must embrace ‘Open Banking’ – the opening up their digital architecture to third party providers. 

‘Open Banking’ introduces a flexible ‘digital core’ on top of existing systems, in the mid and back layer of core banking processes, enabling banks to function effectively and provide customers with a seamless and enhanced experience. 

Opening up APIs to trusted third parties equips banks with the technology needed to transform their digital operations, and deliver a greater array of products to customers quickly and effectively through harnessing ‘2-speed IT.’  Currently, the majority of existing banking systems are incapable of delivering these capabilities.

Open Banking: a cultural change towards greater collaboration

‘Open Banking’ will go further than IT operations, reshaping the future of the financial services market and how solutions are provided to end-users. We will begin to see collaborations among banks, fintech companies, and professional service providers, such as lawyers and accountants, all made possible via technological innovation.

Customers will have greater flexibility when purchasing and accessing a variety of services via ‘Open Banking.’  For example, the integrating of mobile wallets, blockchain, video chat, and data analytics to complement existing banking offerings – all from different providers in one ecosystem. 

At the same time, ‘Open Banking’ allows banks to deliver improved functionality and flexibility to customers and reduce operational costs in the short-to medium-term.

Our customer, KNAB bank, is harnessing the power of ‘Open Banking’ and as a result of its highly personalised, flexible approach to business, has become the go-to SME bank of the Netherlands with over 175,000 customers.

For banks to be fit for the future, ‘Open Banking’ is the key to success.  Banks must now ‘adapt to the new normal’ to equip themselves with the capabilities to stay competitive and relevant.