Stuart Simmons, Director – Financial Services, Northern Europe at Denodo
We’re in an era of hyper-personalisation, with businesses across all sectors focusing on building a richer picture of their customers to tailor products and services to their unique needs. From beauty brands using quizzes to recommend the most suitable products to the travel industry offering tailor-made trips, we’re seeing personalised experiences being built across the board.
But one sector is lagging – banking. Today, banks are seen as simply a vehicle to get the products you need, such as a credit card or a savings account, and can only differentiate with small improvements in interest rates or other charges, meaning customers are rarely incentivised to move providers. With customer expectations for personalisation catching up to them, and challenger banks now offering increasingly digital-first experiences, traditional banks need to move from simply providing products to building services, using comprehensive insights to help customers make better financial decisions now and in the future.
Beyond Open Banking
To enable this industry shift, banks need a unified view of their data, in real time. This is what Open Banking was designed to facilitate, by allowing banks to share data to create a unified view of any one customer’s finances, as well as using automation and real-time data retrieval to make it easier to process decisions in as little time as possible.
But since 2017, when Open Banking was initiated in the UK, adoption has been slower than expected. While Open Banking payments are slowly starting to increase, doubling in the first half of 2023 compared to the same period in 2022, it still hasn’t quite reached the mainstream. Clearly, banks need to be looking at other ways to build a competitive advantage and do more than just sell products. Enter instant decisioning.
From product to service
Imagine a system where all of your data can be found in one place, giving banks an instant, holistic view of your finances. These banks would be able to develop personalised insights on spending to offer more control over savings, such as flagging opportunities to save by cutting subscriptions or moving to cheaper like-for-like providers. These insights could give people more control, a sense of security, and help build successful investment plans.
Add instant decisioning to this, and banks would see customer experience and loyalty skyrocket. Instant decisioning simplifies processes like mortgage and loan applications by utilising consolidated data to build a richer picture of the customer and approve applications faster. By avoiding the unnecessary process of repeatedly inputting the same data, instant decisioning transforms the customer experience and boosts convenience. As well as improving the banks’ customer reputation, this also unlocks opportunities for further innovation. For example, when customers apply for a mortgage, a bank could blend in complementary products based on their unique needs, such as car loans or insurance packages.
What’s holding banks back?
Clearly the shift from product-focused to service-focused and the adoption of instant decisioning holds huge potential, but the sheer amount of data held by banks today is a huge barrier. A traditional bank holds years’ worth of data on every one of its customers with multiple, disparate sources feeding into enormous data lakes. Plus, external data such as from partner companies, Open Banking, ESG efforts and more expand the volume that banks need to hold, causing data silos that impact the customer experience and hinder progress internally. As a result, it’s difficult for these banks to gain a greater visibility of their customers’ data and transform it into valuable insights to be harnessed as part of a personalised financial experience.
To meet these evolving demands, banks need to gain a real time unified view of their decentralised financial data – from both their internal systems and data from other banks. If they can build a clear picture of a customer’s financial situation, they can cross-reference with risk agencies and similar partners in real time, enabling instant decisioning. Critically, this should be done without duplicating or migrating the data to avoid creating data silos.
Uniting customer data and implementing real-time capabilities also enables future innovation, opening up opportunities to implement AI and other key decisioning engines that enabled modern fintech ecosystems. The first step in delivering on the promise of instant decisioning and personalised financial management is data virtualisation. Offering real-time access to data from various sources, data virtualisation eliminates the need to move or duplicate data by providing a single access layer for finding and using financial data from multiple sources. By using this capability to create unique customer insights, whether it’s giving tips on smart investments or offering savings on vital insurance, banks can move from simply providing products to offering true value, significantly improve customer experience and creating lasting loyalty.
