This month marks the tenth anniversary of the run on Northern Rock, leading to a more widespread financial crisis, with a number of banks bailed out by governments in the UK and around the world. A decade later, large established banks face new threats on several fronts.
As challenger banks and disruptive technology companies increasingly eat away at the services traditionally offered by the banks, the situation is exacerbated by the incoming regulatory changes of the Open Banking initiative. When the second Payment Services Directive (PSD2) comes into force in January 2018, banks will be required to open up their customer data to third parties. Customers will be able to directly compare the offering of their traditional bank with those of competitors.
Pini Yakuel, CEO of Optimove, which studies the science behind customer engagement, comments: “The past ten years have in some senses been defined by the aftermath of the financial crisis, but the next ten years will be defined by technology disruption that changes how banks interact with their customers forever.
“The disruption coming with the Open Banking initiative is huge for customer engagement. Customers will be able to compare the value that each financial services company offers them quickly and easily.
“We know already that eight out of ten millennials are happy to switch banks for better rewards. The move to make the industry more transparent will allow individuals to compare these rewards like-for-like and switch to companies that provide them. Banks now have a real fight on their hands to retain a generation of smartphone-empowered, brand-agnostic consumers.
“Understanding behaviours, preferences and needs more clearly is key to developing the kind of emotionally intelligent communication with customers that makes them feel comfortable with their bank and helps them to make good financial decisions. Those banks who can offer something back at each stage of their relationship with each customer will set themselves apart under the intense scrutiny of Open Banking.
“To keep ahead of their competitors, they will need to tailor services to support customers more effectively, offering real value that appeals to each customer personally. Artificial Intelligence and automation tools which reveal what value looks like to each customer will be the secret weapon to help banks succeed in this environment.”