In Europe the move to open banking has been driven by regulations such as the revised Payment Services Directive PSD2 and General Data Protection Regulation (GDPR), which compel banks to open their core systems to allow customers to control and release their data to third parties delivering added-value services.
In other territories with no regulatory imperative, the drive toward open banking is led by the desire to provide the best customer experience, with added value services, new business models and connected marketplace products from third parties and vice versa. To do this, the application programming interfaces of the bank will need to be open and connected to external providers. And cloud technologies will be fundamental in enabling this to become a reality.
Moving beyond “omnichannel” or even “optichannel,” the adapter-survivor banks will be planning how to have presence and provide multiple points of contact with their customers whenever financial advice is needed. It is about having invisible “digital advisors” that work behind the scenes, accompanying the customer in their decision-making throughout their daily financial life.
For this, technologies such as augmented reality, virtual and mixed reality, together with voice response will be fundamental.
Cognitive technologies will work across the entire technology stack of the bank, boosting the entire range of services available to customers and maximizing internal efficiencies.
Machine learning, deep learning, natural language processing and a large number of artificial intelligence disciplines will provide new opportunities to provide added value services for customers, providing additional support such as optimized custom products and other financial advice. The exploitation of the “digital footprint” generated by individual customers will allow banks to understand them even better, and provide hypercustomization of their portfolio of services and products to meet the needs of the individual customer.
Now that we are aware of the four main pillars of exponential banking, it is easy to imagine an example of a future customer journey within an adapter-survivor bank, which is fully aligned to meet the needs of their customers.
As an illustration, consider "Bob," who needs to buy a new refrigerator for his family.
Bob is a “Bank 2020” customer; he goes to the neighborhood store and opens his banking app and using the camera in his smartphone he photographs each of the shortlisted refrigerators that are in the store.
Before the payment even takes place, Bob uses the screen of his smartphone to see the price of the refrigerator he is focusing on and can get a comparison of other refrigerator offers, all in real time. The goal is not to bypass the store owner and his merchandise entirely, but to provide the best possible deal to Bob.
Bob can view comments online from other buyers in real time, to gain more insight that will help inform and support his purchase decision — information which supplements that provided by the retailer. Bob can also share details of the product he intends to buy with his family, friends or roommates, in order to instantly consider their views and opinions.
At the point of sale, Bob can request instant and customized financing in order to make the purchase, and can even visualize the impact of the immediate purchase on his long-term savings goals. This type of consultation can help Bob to understand his broader financial picture; for example, that he is perhaps buying above his means, or that if he decides to proceed, that he should cancel his vacation which is planned for five months’ time, if he truly wants to buy the refrigerator today.
Bob can utilize his banking App to take a photo of the purchase invoice and link it to the credit card transaction; this allows him to have control over the manufacturer’s or retailer warranty, enabling the bank to notify the customer “X number of days” before it expires and encouraging him to extend it. As part of the purchase process, the bank may already suggest to extend the cover or duration of the warranty for an additional fee.
Post purchase, Bob can use inbuilt augmented banking functionality to select his refrigerator and understand the number of installments he has left until the refrigerator is fully paid off, at which point he may request an extension of credit.
He can also review the expiry date of the current warranty and understand the energy consumption of the refrigerator, and its economic impact on his electricity bill. Bob can also provide his evaluation of the product in order to help other potential buyers of the product, perhaps earning some digital “points” for doing so. In case of any problems, he could use the app to arrange technical servicing and keep track of the number of repairs conducted, or even arrange to sell his refrigerator in future.
These are examples of how a potential use case involving the purchase of a refrigerator could work in the future, shaped and driven by a bank that has embraced exponential banking. Throughout the “user journey” Bob is able to make different decisions without leaving the digital environment of his bank, whether through his mobile, his computer or a digital assistant such as Amazon Echo or Google Home.
The example we have provided is just one of many digitally enhanced scenarios that can be imagined in the future, utilizing the components of the exponential banking approach. We are certain that the adapter-survivor banks that embrace this digital journey will be the brands that survive long into the future, shaping the future of digital retail banking and putting the customer back in control of his or her journey and relationship with their bank. The alternative for a bank is to be recorded in the unfortunate list of floundering relics; those banks whose long-term future is far from certain, if one exists at all.
Exponential banking offers a successful blueprint for the existing mainstream banks to build their customer relationships while simultaneously fending off the advances of the “digitally native” challenger banks and other emerging fintech competitors who are seeking to take away parts of their business. Those who embrace the approach and are able to adapt their approach will certainly reap the rewards.