Imagine the following: a world where a pro-active virtual assistant will guide you as a consumer. Covering all banking services with real-time personalization and human-like conversational support, based on their intent. You can interact with a personal digital assistant, like Siri or Alexa, that proactively performs daily personal and financial tasks, informed by insights gathered from structured and unstructured data. The more a personal assistant knows about you as a consumer and your daily relevant life patterns, the better the platform can interact with millions of financial and non-financial options at any given moment. Within a few clicks this platform application allows you to order a new debit card, transfer money, open a new savings account, accept tailored retail offerings, and close a mortgage. Anything to make your life better and easier. Indeed, it’s the friend you always wanted to have.
How to Lead in Digitized Banking: A New Platform
Recent movements in the field of virtual banking have convinced banking consumers that they do not need to visit their banks anymore to consume financial services. Think about the introduction of the first ATM by Barclays Bank in London in 1969 or the start of online banking in the United Sates in the 1980s that has resulted in digital banking environments offered by every modern bank. Technology continues to transform the banking industry.
The next frontier is all about becoming an open platform that fosters a wider ecosystem of fintech and retail partners. This platform brings in new customer markets and enhancing loyalty with existing customers by offering them new digital products and services. Next to shaping customer expectations and behavior, regulatory changes are fueling the inevitability of the platformification of banking. Open platforms can spur the development of new applications built around a person’s (banking) data.
However, banks today are not reliant on their own capabilities to foster innovation. We see the possibility of ‘plug-n-play’ capabilities where banks are willing to explore partnerships with third parties for select propositions. A good example here is Transferwise partnership with N26 (N26 offers savings whereas Transferwise offers instant money transfer services). Key point from an AI perspective is to navigate across different platforms, decipher the data across these platforms and make the best decisions possible.
Imagine having your very own (financial) advisor at the palm of your hand. Consider a scenario where the robo-advisor applies big data analytics to analyze and predict your spending habits, based on prior transactions, geo locations, time and day, and provides specific recommendations to meet budget goals. For example, you treat yourself a Doubleshot Espresso at Starbucks every day. Let’s say that Starbucks is a participant of the banking ecosystem platform. For both Starbucks and the bank it could be interesting if – coupling this with health data gathered (e.g. from a wearable device) – the robo-advisor suggests a yoga club subscription and – subsequently – books and pays for it.
Now imagine you are on your way to the Apple Store to buy the newest iPhone. Just before you walk into the store, a notification was sent proactively to your phone – based on the geo location, analysis of your Facebook posts, internet search history and budget goals – to transfer money from your ABN AMRO account to your Rabobank account in order to pay the necessary money. Depending upon your purchase need, if your preferred account has insufficient balance, the robo-advisor initiates a payment out of another account to furnish the balance (thanks to PSD2). As you walk out the store you as an Apple fanatic receive a notification saying that you will get a 15% discount on Apple’s next gadget as part of their customer loyalty and engagement program. However, customers giving explicit consent is (the) key.
Banks Strive to Become One-Stop Shops
Robo-advice is no longer specific to the wealth management industry. The future of robo-advice will most likely include a ‘Mr/Mrs know-it-all’, providing personal and corporate banking services with a personalized and innovative experience. The benefits for banks are plain to see. Being able to give consumers whenever and wherever the information they need, increases their happiness and loyalty.
Instead of simply providing traditional banking products, such as account access and payment tools, this new platform will push the boundaries of personalization. By delivering tailor-made customer journeys based on real-time behavior, interests, geo-location, and preferences, this can be achieved. The all-round virtual banker should fulfill the changing consumer needs of transparency into financial possibilities, accessibility to financial advisory services, enhanced web-based experiences, and personalized portfolios. Subsequently, the platform should realize better performance in the areas of fulfilment of needs, privacy management, availability and efficiency by offering a new customer journey for financial advice. Banks have to take these changing consumer needs into account by offering a new journey, while keeping into account more rapid switching behavior and privacy sensitivity.
We have entered a new age — the Age of the Platform. Banks should adopt a platform-based business model to stay connected and relevant to their customers' lives. Think of Apple, Facebook, Uber and Alibaba: companies with market capitalization of billions of dollars. Each uses a platform strategy to power its business model. Apple's platform centers on personal digital content. Facebook's platform is all about connecting and sharing. Uber combined openly available GPS technologies with several open source software, APIs from Google to develop a mobile app that changed the model for personal transport. Alibaba’s platform has revolutionized retail in China. Other examples of disruptors include Airbnb for lodging, Spotify in music, Amazon for books, E-Bay for retail, and LinkedIn for recruiting. Banks can learn much about the innovative ways they have used to position themselves in their consumers’ lives. A concept Accenture refers to as the “Everyday Bank”:
In light of Everyday Bank, regulatory changes like PSD2 increasingly stimulate financial institutions towards innovation of their frontline services, using new technologies and new ways of financial service provision. 2018 is set to be a game-changing year for banking. As the PSD2 (Revised Payment Service Directive) becomes implemented in Europe, banks’ monopoly on their customer’s account information and payment services is about to disappear. PSD2 is all about developing an extended ecosystem to better serve consumers.
In short, PSD2 will allow ‘merchants’, businesses like Amazon, to retrieve your account data from your bank - with your permission. That means when you buy something, they can make a payment for you without having to redirect you to another service (like PayPal or Visa). This also means consumers will have a better experience when checking out of a shopping cart – merchants would be keen to implement payment services either from their platforms or in-app and this would offer consumers with a better choice of making payments.
Next, for consumers who hold more than one bank account, the changes would also allow businesses, known in the legislation as Account Information Service Providers (AISP’s), to display all their account information in one place for them and acquire insightful data about you. Obviously, AISP’s have a significant competitive advantage: massive data from consumers and existing partnerships that can serve as a springboard across an ecosystem for creating and exchanging value. Banking as a platform is the key theme that banks would want to invest in on the backdrop of PSD2. It’s time for banks to join in and welcome others.
Will the Future Bank Be Invisible?
Virtual banking has led to a real revolution in the use of banking services. Technology makes banks and banking invisible to consumers, hidden by Siri-like personal assistants that cull data from our connected lives to fulfil daily personal and financial obligations. Banks need to develop a solid platform strategy focused on business benefits and better experiences for consumers, employees and partners. Platform banking is a beginning step toward driving innovation to make banking, financial services, and payments much more fluid, faster, safer, and more in control of the consumers.
Digital advice platforms are becoming an increasingly valuable tool in the financial advisory world. Initially, robo-advice platforms were limited in scope to investment advice, but the winners will be those that are evolving into a fully-fledged and comprehensive platform. Winning platforms utilize their data, drive down costs, build effective partnerships with a broad range of third parties, and drive this new engagement with a robust cybersecurity infrastructure.