Clever Marketing is Key to Thriving in an Open Banking Environment
Pini Yakuel, founder and CEO of customer engagement specialists Optimove, talks about the coming changes in the financial services sector.
Ten years ago, UK bank Northern Rock collapsed, marking the beginning of a global financial crisis whose effects on financial services are still being felt today. Consumer mistrust in traditional banks does still linger from the fallout of the last decade. With new regulations looming on the way, financial services organisations use customer account data, more established financial providers need to update their marketing strategies to build strong relationships with their customers, before they are led away by new online challengers.
In a survey last year on confidence in banking, only 39% of consumers reported having complete confidence in banks with branches, as compared to 44% for internet-only banks.  Customer loyalty is still low, with online challengers pulling into the (admittedly narrow) lead. As these competitors grow, banks need to reach out to their customers and build a more personalised relationship with them.
Consumers tend to not change banks once they have chosen one, even if they are dissatisfied, and this inertia in the industry has meant that banks haven’t focused on sustaining close customer relationships. But this is changing, with a record number of customers switching to a different provider last April. 
The change has been in part enabled by the variety of digital and app-based financial providers that have emerged in the last few years as competitors to the more traditional banks. By offering services tailored to each user, such as retail discounts and financial advice on how customers can use their money more efficiently, these challengers are taking business away from established providers. Research by Kasasa has found that eight out of ten millennials would switch banks if a competitor offered better rewards. These challengers are making the most of this new generation of brand-agnostic customers by offering more individualised rewards to their customers.
After the implementation of the Open Banking Initiative and the Payment Services Directive 2 (PSD2), which comes into force in January 2018, the spur for customers to compare the services and rewards of different financial services providers is set to increase. Banks will have to share customer account data with third parties (with the customer’s consent). They will be required to open up the back end of their systems to other payment providers. This means that customers will be able to easily compare the services of different providers on an equal playing field, giving FinTech companies a great opportunity to win customers, as transparency may overcome inertia.
To respond to this, banks will need to make the most of the customer data available to them. Using data analytics to divide customers into separate groups based on what kind of account-holders they are, they can develop specific, individualised marketing schemes. By trialling a variety of marketing strategies, such as individualised retail discounts or reductions on charges, banking marketers can use AI programmes to make smart observations on which strategies bring in the most revenue, for each type of consumer, leaving no customer behind. From this, banks can forge strong customer relationships that provide ongoing value in both directions.
The way that established financial services firms respond with their marketing and customer engagement will be key to survival. Fintech companies have focused on the value they demonstrably add to customers. Traditional players must get better at articulating their proposition to customers – personally, emotionally, and intelligently. With the large amounts of customer data available to them, traditional banks have the resources to do this too. By applying AI and data analytics to their marketing strategies, banks can gain deep insight into what is most useful to their customers. They need to develop their own personalised services for their users, using this insight to create meaningful relationships with their customers.
 EY, “Trust: Without it you’re just another bank”, http://www.ey.com/gl/en/industries/financial-services/banking---capital-markets/ey-trust-without-it-youre-just-another-bank
 The Telegraph, “Record number of customers switch their bank account”. http://www.telegraph.co.uk/business/2016/04/19/record-number-of-customers-switch-their-bank-account/