The arrival of Open Banking in the UK on the 13th of January 2018 has presented a great challenge to the established banks, forcing them to share their data via APIs.
At the core of this is the risk of losing high-value customers to third party providers like fintechs, aggregators and other competitors, 63 per cent of these customers have said they would look to take these new opportunities.
With customers looking to leverage this new convenience, banks ultimately face losing the profit pools represented by their customers as they take their accounts with them.
Salesforce has provided these insights in a recent report in collaboration with Bain & Company, also identifying how the established UK banks can remain relevant and fight back. The path to success could be found by enhancing customer experience.
Joaquin de Valenzuela, Head of Financial Services EMEA at Salesforce, said: “Regardless of whether you’re a traditional player or a disruptive newcomer, customer experience is key to success in an OpenBanking and PSD2 Era. By breaking down existing internal silos, and having these connected on one single platform, banks will be able to unlock their full power, develop new added value services, build loyalty and put the customer at the centre of every interaction.”
Banks have the advantage in terms of reputation, with the average customer still usually feeling safer in the hands of a well know, established bank than with a smaller, newer organisation.
The report said: “Incumbents have at least one clear advantage in open banking: They already have access to a sizeable pool of customers and an opportunity to understand those customers better than their competitors do. The big banks also have an edge when it comes to trust. When we asked customers if they are willing to share more data with a provider in order to get a better product offering, 78% said they are willing to share with their primary bank, while 63% said they would share with another bank and just 43% would share with a nonbank.”
Ultimately the report outlines several ways the banks can stay in the running; by deepening relationships with customers, preparing for aggregators and by being nimble. This final method requires banks to work on adapting quickly and removing silos that slow down the decision making process. Simplification, automation and the removal of legacy costs are also ways that UK banks can keep pace with their new agile opponents.