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- 24.06.2015 01:00 am
The CMA’s Retail Banking Market Investigation is over 700 pages, with the summary clocking in at 52 pages. Before you dive in, here are the key takeaways from the report:
None of these findings are new or surprising
Nice of the CMA to spend £5 million on a market analysis and customer segmentation exercise for the banks and to tell them what APIs and mobile apps they need to deliver over the next 18 months.
This is a great result for the banks, especially the Top 5. The potential downside was considerable – unauthorised overdraft rates could have been capped. Thanks to significant lobbying, the CMA has left pricing alone and favoured a route of improved transparency and communication. This means that it can still be cheaper to borrow from Wonga than the high street, but one must be careful of the consequences of not repaying promptly.
The CMA also has not required banks to make principle account numbers portable. This would have been truly expensive, because most banks are still running core systems based on products rather than customers. This is a lost opportunity to confront banks with the need to modernise for the digital age.
Furthermore, there has already been lobbying for extending the timetable for delivery of the remedies, in particular the implementation of open APIs. Excuses made have been the implementation of UK Ring fenced banks, the implementation of PSD2, and the use of cheque imaging, to name a few. Frankly, this is not good enough.
It’s all about prioritising spending. Should it be on bonuses and dividends or on real IT investment to promote an active and competitive market? I know what I think the answer is and I’m sure I’m not alone.
What’s next? Re-imagining banking approachability
Let’s look at the customer. This is an instance where technology really can help and will have an increasingly user-friendly interface. Using mainstream techniques or APIs, long-time perfected and up-to-date with Facebook, Uber and the other Digital Lighthouses, customers will be able to research, try, select and commit to the best propositions for them.
Customers will be able to have confidence that their future banking partner will grant them an overdraft – one of the major reasons for not switching is uncertainty whether existing facilities will be offered by a new provider. They will be able to simulate costs based on historic and future data to give meaningful results. They will find familiar characters – meerkats and opera singers – offering comparisons for bank accounts just as they do for car insurance today. The process of switching accounts will become more “friendly” and the overall level of confidence in a hassle-free experience will grow.
Tablets and phones will become the norm for everyday banking. Bank branches will still be important, but the role of the staff inside them will concentrate more on education, advice, guidance and support in resolving problems or more complex financial transactions.
There will be an industry shakeup
Banking institutions, big and small, that move quickly and take risks to anticipate these changes will thrive. They will be sought out by customers, whatever their status or potential, who want more from their banks. Behaviour and experience will become the critical levers that define social and financial success on the financial high street.
Technology will enable banks to assess customers, their worth and risk, in new ways. Already some lending institutions are using social media and other technology-based factors as data points for assessing risk and potential. What happened in the past – “Credit History” – will stay relevant, but the data that is now more important is what helps predict future activity. Data and analytics will become the currency and measurement of success and desirability.
Customer experience will lead the way
So the future is bright for financial services providers – do we need to call them banks any more – who move fast and stay focused on their customers’ needs and desires. Bright for those who know how to manage their technology and the money they spend on it.
Not so bright for those who are still wrestling with a decade of “technology debt,” and for those who spend most of their budget on keeping the IT lights on, and for those who think life would be much simpler if they had fewer customers to worry about – that is certainly a self-fulfilling prophesy.
And the best role of all for banks? To be an IT services provider with real-end-to end capability to help the financial ecosystem survive and thrive with incumbents, start-ups, other technology firms, and consumer focused brands.