Sea of change requires a new agility to surge ahead in Open Banking

Banks, once so serene, now find themselves in a sea of change that demands a new type of agility.  

In retail and commercial banking, change has been accelerated by Covid with the rapid advance of digitisation, the extensive adoption of online commerce and the exponential growth in cashless payments. These have all added to the longer-term pressures of competition from neobanks, fintechs and the rise of peer-to-peer lending. Compared with ten years ago, it is a very different world.  

The world’s largest financial services group – Ant Financial – now has more than a billion customers, but no branches, for example. As more customers go digital can anyone be too surprised that in the UK Santander has announced plans to close 111 branches by the summer of 2021? Change is everywhere – a Bank of England report highlights that 83 per cent of SMEs now use a mobile banking app. Meanwhile, investment and savings platforms have proliferated, as have consumer-facing trading apps and cryptocurrency portals.  

Most of the banking sector recognises that these changes make it time to ‘reset and reimagine’, which is why a Deloitte survey of 200 finance industry leaders found more than half intend to increase spending on data analytics in 2021 and 40 per cent or more plan investment in AI or robotic process automation. Banks recognise they must do things differently to compete with the leaner newcomers and to differentiate themselves from their established rivals. Despite their notoriously complex back-end systems, they need slick, user-friendly and highly efficient digital interfaces generating a high quality of customer experience. This emphasis on customer experience is one of the main consequences of Open Banking.  

This is where agility is vital so that banks respond quickly to changes in demand such as new interest rates or credit regulations and get it right when they launch new services or platforms. The essence of Open Banking is the integration of data from multiple accounts and other relevant sources such as credit histories or insurance records in near-real time to allow for fast decision-making. If the data architecture behind all the new interfaces is over-complex and the integration poorly executed, then they will fail to deliver for either bank or customer. Without a smart data fabric to bring it all together, innovative account-opening, loan or trade credit approval interfaces and almost every other kind of advanced application will fall down. 

Banks may want customers to transition to solely digital interfaces, but it is easy to end up providing a poor experience in the rush to implement. In Canada, for example, satisfaction with mobile banking declined last year as usage went up.  

Banks may want to implement AI to provide much faster and more personalised experiences, either through bots or much better-informed contact centre agents. But if the architecture that supports innovation is too complicated and the data heavily siloed, then the required real-time availability and responsiveness are almost impossible to achieve. To remain competitive, banks must pay the closest attention to how they manage their data, or they will struggle to keep pace with more agile rivals.  

Guest blog by Tim FitzGerald, EMEA Financial Services Sales Manager, InterSystems. Tim FitzGerald has over 30 years of successful IT sales experience helping customers in the banking and financial services arena with roles previously with Digital Equipment Co, AT&T, Computer Associates and IBM among others. You can also follow this author on linkedIn.

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