The financial industry is transforming rapidly. From multi-channel approaches to omnichannel experiences and the rise of AI-driven seamless banking, institutions are embracing changes at various stages. This transformation is being accelerated by Europe’s enthusiastic embrace of open banking, which will shortly be followed by open finance. Together, they offer customers greater control over their financial lives. As Europe sets the stage, North America now has a front-row seat to witness the profound impact of this new banking paradigm, where customer-centricity and financial growth converge.
ebankIT Summit, a pioneering digital banking platform, recently hosted a groundbreaking banking conference in Porto, Portugal. The conference delved deep into the implications of open banking and the future of digital transformation. This two-day event brought together leaders and experts from financial institutions across four continents. Shikatani Lacroix Design (SLD) was honored to present insights from a comprehensive study on the pivotal role of financial advice in driving growth, covering both European and North American respondents.
In this blog, we’ll share the key takeaways from the conference and their implications for financial institutions in North America. These insights are like pieces of the puzzle, which starts with open banking and the age-old “build vs. buy” dilemma faced by banking executives.
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Open Banking: Rethinking the Banking Model
Europe has embraced open banking for more than five years, notably with the release of the second Payment Services Directive (PSD2). Other regions, including India, Japan, Australia, and Singapore, have since followed suit, learning valuable lessons from the European experiment. Open banking has paved the way for customers to seamlessly share their financial data with other fintech companies, removing friction points in managing their finances. ebankIT Summit also highlighted that it simplifies the ways to secure banking products such as loans, insurance, or credit cards, as third-party lenders gain access to a customer’s financial behaviors.
With AI-driven technology, open banking is set to provide real-time advice on optimal financial choices. However, its disruptive potential demands careful management and adoption from financial institutions. European banks have already embraced customer-centricity by partnering with fintech companies to deliver seamless experiences. With power shifting toward customers, banks must reimagine their strategies for growth and profitability, while fintech players capitalize and diversify their offerings.
Considerations:
- Reinforce the role of institutions in providing secure financial records storage
- Explore the opportunities for monetizing the transformation of open banking
- Identify unmet customer needs and collaborate with third-party partners
- Establish strategic partnerships with fintech companies that align with your values
- Broaden the scope of financial services for customers, including healthcare, fitness, and mental health
Creating Seamless Advice-Driven Experiences
Open banking’s evolution into open finance reveals an unmet need for a holistic banking experience. It encompasses budgeting, investing, spending, and even health management – all within a single, user-friendly mobile dashboard. Yet, our study revealed two critical factors that weren’t considered: the quality of financial advice and the role of branches.
High-quality financial advice is pivotal in customer retention, especially in an era of open banking. Banks now have an opportunity to meet customers’ growing demands for insightful advice that goes beyond traditional offerings. However, our study revealed a significant gap between online/mobile and branch experiences.
Branches remain essential for delivering financial advice. The shift towards digital platforms coupled with lackluster branch experiences poses challenges, especially since our study indicated that customers would visit branches more often if they received better advice.
Considerations:
- Identify the role and depth of financial advice throughout the customer journey
- Invest in employee training to enhance the quality of financial advice
- Redesign branches to offer greater privacy and advice-oriented services
- Strengthen the connection between digital and physical channels
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Security: An Opportunity Disguised as a Risk
The world is grappling with heightened security concerns, from ransomware to sophisticated cyber theft. Financial institutions face substantial losses, with bank transfer and payment fraud alone costing billions of dollars. Striking the right balance between security and convenience is a critical challenge.
Many institutions are turning to biometric tools such as facial recognition to enhance security while maintaining seamless banking experiences, as AI plays a pivotal role in rapidly identifying fraudulent transactions and mitigating security gaps.
Considerations:
- Educate customers on fraud detection and prevention
- Develop new security products and services in partnership with fintech companies
- Leverage AI for identifying potential fraud
- Address security bias issues among the underbanked populations
The Role of AI: Human Empowerment
AI has become an integral part of banking discussions, sparking debates about the ethical implications and the future of human relevance. Despite this, the banking industry is embracing AI to reduce operational costs and risks. Over the years, AI has evolved, with institutions using it to consolidate vast amounts of data into valuable insights.
The role of AI extends to providing advice, with smart chatbots integrated into conventional channels. It’s also shaping marketing and communication, enabling personalization and relevant content creation. The overarching theme is clear: AI empowers humans to excel in complex tasks and respond more effectively to client needs.
Considerations:
- Explore the role of AI in the entire customer journey for banking
- Enhance the quality and level of advice through AI-driven solutions
- Establish ethical standards and guidelines for the use of AI across the organization
To Build or Buy: The Ongoing Digital Transformation Dilemma
The pace of digital transformation is accelerating, driven by customer expectations. For larger financial institutions, the initial goal was to build their own differentiated digital experiences. However, as competition intensifies and customer demands evolve, the value of building in-house solutions is diminishing. Many conference participants noted that building and buying technology to adapt quickly to new fintech platforms and governance changes was easier.
With the introduction of many new fintech platforms, ebankIT Summit noted in its presentation that it’s critical for institutions to become nimble and adjust quickly to the changing financial landscape. In addition, banks should take account of the customers’ desire to have a holistic, seamless experience that connects all their financial information in one convenient area. Building your own solutions may be too expensive and time-consuming that they hinder your responsiveness to the ever-changing regulations.
Considerations:
- Reevaluate the value of building vs. buying digital platforms
- Create a pipeline for vetting vendors and partners with strong business cases
- Develop scenarios for implementing digital platforms
- Collaborate with forward-looking platforms like ebankIT to embrace seamless banking experiences
Conclusion
As the market advances toward seamless open banking, the conference insights underline numerous themes. Financial organizations have thrived via the early use of digital technologies. They must, however, remain adaptable as new services and regulations transform their landscape. They must alter their focus from cost-cutting to humanizing counsel while also redefining revenue generation. The future isn’t solely digital – it’s intuitive, advice-driven, safe, AI-powered, and open.
