I am a modern-day consumer: I’m part of the fickle, tech-savvy, demanding demographic that has grown to expect instant gratification and constant stimulation. We want easy, instant and mobile options tailored to our needs and desires. Australia’s banking industry is aware of this, and their response will be increasingly shaped by customer demands, and the need to meet the heightened expectations of customers.
In the world of customer centricity, data is the game changer.
It’s not about shiny mobile banking apps, it’s not about a social media presence, it’s about effective use of customer data and the digital and operational systems that support it to enable a frictionless experience.
I am often asked, “What is a payment?” It’s a transaction, sure – a financial exchange of value and series of messages. But much more importantly – to banks, merchants and financial services companies— it’s a story of a particular moment in time, and a valuable insight into the customer. Think about what perusing home décor websites might indicate about my likelihood of applying for a home loan in the coming years. What increased use of my credit card in the days before my salary is credited says about my saving structures or what a McDonald’s purchase for Sunday brunch reveals about my Saturday night? Collectively, these are valuable data points that tell the story of who I am – my social behaviour, my likes and dislikes, my purchasing habits and my hopes and aspirations.
But herein lies the challenge. Banks tend to offer products and services to their customers. But today’s consumers don’t think in terms of products and services, they think in terms of need.
So in a world of new technology, digitisation and demanding customers, how do banks drive value?
What are the big disruptive trends, focused on and enabled through the accurate capture and implementation of data, facing Australia’s banking industry?
- A Payments Revolution
The New Payments Platform (NPP) is a major industry initiative to develop new infrastructure for Australian payments, and is on track to be rolled out to millions of Australian customers from early 2018. It will provide Australian consumers, businesses and government faster, simpler, smarter payments through a real-time, versatile, data-rich payments system. Near real-time speed, simplified addressing through a ‘PayID’ and 24/7 availability are exciting, innovative new features. However, the real value of the Platform lies in banks’ ability to combine this speed with extra data capabilities. Data capabilities are driven by increased characters in a customer’s description field, the ability to link documents to a payment, and leveraging the ISO 20022 messaging standard. Once implemented, banks will develop value-adding solutions that leverage these capabilities to tailor customer-centric offerings to satisfy their customers’ needs; translating real time into real benefits for the banks and their customers.
- Open Banking and APIs
The opening of bank data to third parties to create new experiences has the potential to shape the next century of banking. In a nutshell, open banking provides greater financial transparency to customers. At the instruction of the customer and through mechanisms such as APIs, it enables third parties to utilise banking data to build secure applications and customised, personalised products and services. Open access shifts more control to the customer who will be able to pick and choose products and services from different banks or fintech providers, far more easily and efficiently than now.
What exactly open banking looks like in Australia is yet to be seen, and what regulation will be drafted will influence the structure and implementation of open banking. The Government has commissioned an independent review to recommend the best approach, targeted for the end of 2017. However, if the experience overseas is anything to go by, this will inevitably result in a change from today’s product-centric model towards a solution geared towards the customer. While many in the sector see this as a threat, there are opportunities for increased collaboration, cost efficiencies and more efficient use of data. The knock-on effect is improved customer experience, and the real winners will be those who satisfy our tailored needs, rather than simply offering the best or newest product.
- Mobile Banking
Mobile banking has arguably been the biggest shift in the banking industry in recent decades. Consumers spend up to one third of their waking hours on their mobile phones, making mobile interactions one of the most enticing sources of consumer data.
In a mobile environment multiple financial products can all live under a single application, which means so much can be learned by looking beyond the financial service itself to understand how they engage with value-adding applications like loyalty cards, prepaid, remote transactions, targeted promotions and in-app purchases. This is where digital wallets and the data they glean become truly interesting and valuable.
At the moment, the mobile solutions offered by digital giants – Apple Pay and Samsung Pay – do not allow banks to access the software, and thus, all of the data. If banks want to stay connected to consumer data they need to maintain full ownership of the digital wallet, and integrate product offerings across applications.
So what does this mean for me and my bank?
As digitisation, integration and customer centricity increasingly become strategic priorities, customer experiences in ‘banking’ will start to extend well beyond the current confines of the bank.
Our user experience will become increasingly streamlined and more tailored to my needs rather than offered as individual products or services. As banks are able to integrate their traditional offerings across non-traditional platforms and non-traditional industries, we will see targeted promotions, integrated payment solutions and digitisation, all made possible by the data gleaned from mobile behaviour.
This evolution will see an increase in frictionless, in-app payments – think Uber as the prime example. Consumers can expect similar integrations to extend beyond payments into personal finance, investments, invoicing, accounting and much more.
Granted, all of this comes with greater risk and uncertainty, technology challenges, regulatory questions and operational overhauls to accounting, security and channels. Furthermore, the back office complexity behind such a shift should not be underestimated – major financial institutions are hamstrung by legacy systems and siloed infrastructure. So change will not happen overnight. Nevertheless, as digital, customer-centric transformation gathers pace and scale, banks that fail to embrace the opportunity today will find themselves at a serious competitive disadvantage tomorrow – and struggling to catch up with their customer-centric competitors.
Rather than ‘go it alone,’ banks will likely choose to partner with fintech start-ups, other ‘scale’ providers or build their own green field digital payment platforms to offer new services to the market quickly. Fintech companies offer excellent customer experiences, access to niche markets and the capability to develop agile e2e flows. On the other hand, banks have expertise in capital, resources, liquidity and risk management, compliance and distribution reach to a huge base of Australian consumers who have implicit trust in their operations. Together, the combined offering reflects a formidable proposition.
Organisations who can offer differentiated, tailored, value adding experiences will be able to deepen their relationships with customers and take a dominant place in this changing landscape.
And banking is just the starting point – over time, this transformation will move to other sectors, such as wealth management, energy utilities, telecommunications and more – to become, an open data regime. The ultimate intent is to empower an enhanced customer experience and choice.
Connecting all of these dots of customer data opens up endless opportunities for sales, engagement and loyalty. Clearly, there is significant value for a bank to hold all the pages of your customer’s story.
The views and opinions expressed herein are those of the author and do not necessarily
represent the views and opinions of KPMG, an Australian partnership and
a member firm ofthe KPMG network of independent member firms affiliated with KPMG