Will Open Banking Enhance the Quality of Daily Life?

A wholesale re-orientation of business has been championed by platform companies now exemplified by Amazon, Google and Ant Financial. A central, customer-driven core defines how they organize themselves, how they operate and especially how they leverage customer data to achieve market success. Open Banking is simply the platform business model applied to financial services that is now rapidly projecting its future shape – through the birth of marketplaces, inclusion of non-banking industry players and intense focus on amplifying a customer’s daily life through financial means. But how does this impact banks and their need to redefine how to think about customers?

In the minds of recent generations, life can’t wait. Decision timeframes are perilously brief. And it is all around us – the disappearance of cash, digitized credit card wallets, biometric authentication facilitating instantaneous financial transactions and, in many cases, having a net promotion effect on commerce. Today’s fascination with simplicity in transactions, scan and pay and click and buy are just the beginning.

The flight to modern banking, however, is dragged down by tradition. There’s just something wrong about a bank relationship when 30-year mortgage commitments have a typical life of five years and the industry views re-financing with a competitor an acceptable practice. Further, the static nature of these product-centered relationships fails to contemplate what’s evolving in the life of customers, their immediate family and household or, better yet, the opportunity potential in their personal P&L.

To stay in the game, banks need to relentlessly focus on enhancing the quality of their customers’ daily lives. Knowing a customer’s daily life is the decisive source of inspiration for rapid, responsive innovation in customer interactions, servicing, delivery, pricing and packaging of services. Working backwards, it reveals the type of marketplace partners banks need to engage to deliver services holistically and how to best position themselves. Potential partners in the retail, medical, telecommunications and transportation sectors have data awaiting monetization through a financial transaction.

So, what exactly does it mean to enhance a customer’s daily quality of life? For banks, the first step is to study customers with the intent of recognizing their real needs. Take financial health, for example. At any given point in time, every customer is concerned with their financial health and the expectations associated with it. Things like income, debt, expenses, college savings, retirement, insurance and perhaps business finances. Any mortgage or credit card product today contributes just one disconnected component. What service could a bank offer a customer when they access cash in a given month? How could they suggest insurance products to anticipate coverage for financial gaps? How can a bank make a customer feel like they have their back?

The customer-first design principle feeds every bank’s virtuous economic cycle. Banks serving the whole customer and not just their financial needs expand their scope of opportunity. This drives sustained customer value (e.g., revenue flows) through loyalty and trust gained in driving a perpetual and evolving economic cycle of services.

Anyone who has ever heard the old phrase “banking on relationships” will appreciate that the modern way of cultivating relationships is driven by and expanded using customer data. This is where battles for customers are fought and won. Connecting customer data to traditional banking, mobile geolocation, household and non-banking consumption and projections for life events, together enrich knowledge of the customer. When fed into the continuous analytical milling machine, banks will be prepared to anticipate customer needs, design, and fulfill personalized service offerings and competitively monetize customer relationships.

Winning customers (or a greater, more profitable wallet share) is a direct benefit gained by enhancing the quality of customers’ daily lives. Allowing customers to spend more time on the activities and experiences that matter in their lives. Injecting intelligence into what otherwise would be mundane tasks. Relieving customers of tasks that may not happen, for example, regularly rebalancing one’s retirement account, if not for Open Banking. Saving customers time and money all year long – while sacrificing short term profits to secure longer term loyalty and deep trusting relationships is the way of business life for banks embracing Open Banking.

In the next discussion, we review what should be the mechanics of an open banking platform – expanding well into a future state characterized by on-demand, hyper-volume, hyper-speed transaction ecosystem environments.