APIs and Fintech ecosystem: the vehicles to evolve in the financial industry
By Jens Rabe, COO at unblu
According to KPMG, innovation has never been so accessible to banks and aside from simply becoming compliant, banks should build on that foundation in order to deliver more value-added services and a better customer experience. In the new competitive scenario, banks now have the opportunity to utilize new distribution channels and take on different roles in the value chain. To not take advantage of these new roles and distribution channels would simply leave banks with the huge costs of compliance.
There is no doubt that new regulations, like PSD2, mean a new starting point for the open banking ecosystem. Banks are now transforming themselves into technological platforms, but customer relationships are still fundamental. Banks must find a way to use these new technologies to increase margins, enhance customer experience, adopt digital without losing momentum and, most importantly, remain complaint. According to McKinsey., a failure to handle these transformations properly put 60% of core banking profits at risk within the next 10 years
APIs will be crucial to connect silos and improve Customer Experience
In traditional banking, customer information often goes from one department to another, fragmenting the data and locking it into silos. Putting in place the right API strategy will help to break these silos and unify the information so that it can be shared between different business units, facilitating the management of data, content, and analytics of customers, and ultimately providing a vision upon which critical decisions can be made. This data can also be made available to customers, giving them the possibility to interact with and manage their own financials.
The integration of data does not have to be limited to the existing data in the entity. The development of APIs will be fundamental in allowing users to add third-party information that can be consumed through a single interface. Success, in this context, is the ability to provide all the information that the user needs in a single, logical, location, regardless of where that data is physically located.
According to Gartner, the winners will be those who can distill the entire financial relationship down to a single dashboard. Banks must encourage their customers to aggregate their account data from other financial institutions to their banking application. In this way, banks become “customer data experts” rather than simply data custodians.
What is the role Fintechs should take in this play?
Fintech has managed, in just a few years, to gain trust with banking customers simply because they provide a positive customer experience. According to Capgemini, by focusing on specific areas of the banking value chain, and leveraging agile processes, Fintechs are delivering frictionless, personalized, and highly-attractive offerings to customers.
Banks now understand that they cannot fight Fintech. It makes more sense for banks to partner with the Fintech companies that offer to smooth the path to the digital world. A survey by Accenture UK found that 76% of consumers are likely to choose traditional banks over third-parties. Banks still, overwhelmingly, have the trust of consumers. Customers want the security and continuity and experience offered by banks but they also enjoy the experience of banking that Fintech can help to create.
In recent years large banks have partnered with Fintech all around the globe. Some banks have even created investment funds to nurture the most promising Fintech prospects. Fintech is no longer a threat but an ally.
Times have changed. In the past, the key appeal of any large mainstream bank was the vast network of branches that could be scattered all over the world. Such vast networks were able to generate brand awareness as well as subsequent brand loyalty. New customers, especially younger customers, do not want a local branch, they want a branch everywhere; on the train, in their living rooms, in their pockets; at hand.
This trend is something already highlighted by Capgemini in its World Retailer Report 2017. According to the report, 91% of banks and 75% of Fintech expect to work together. Capgemini also stresses that the value of collaboration lies in being able to fuse a trusted bank brand with the innovation and agility of Fintech.
PSD2: Impact on customer experience, self-service and collaboration solutionsDownload