Open banking, APIs, and regulation. US Banking industry
In Europe and the UK its all about competition, therefore they are already on top of the Open Banking aspect. Banks, in general, need to become more open. Protectionism will result in your bank to shut others off and they will build the future around you anyway. You’ll be missing out on the opportunity. The biggest challenge in the US is ensuring the security of the data while it’s flowing openly in the environment. As an end result, we’re expecting to see more, better and newer products.
Open banking and API’s will also ensure that partnering is easier in a more fluid manner. This should also help with the internal and external disconnection most larger banks are suffering from.
The fundamental question isn’t “who owns the data”, its “how can the data be shared in the ecosystem without sacrificing security along the way”. Otherwise, it’s the consumer who owns the data. Banks are the trusted keepers of the data and have to be transparent about it. The customer should be able to take his data to another provider. And this is not a bad deal for the banks, as without context data is data and there is no special meaning to it as it is. This data, while still entrusted to the bank, should enable innovation and transformation.
There are also some questions regarding these issues. If the customer asks the bank to share their data with a 3rd party, is the bank still liable if anything happens? If something (such as a breach) happens whats the plan for damage control? What steps the banks and regulations governing banks should take in case of a breach?
So overall is the US going to have significant steps taken towards Open Banking anytime soon? According to the speakers, there are already advances being made by banks and 3rd party fintech companies. Its future depends if the customers really embrace the concept or not. But the fractured state and federal systems present in the USA are making the process difficult. It is happening, but it’s going to take longer than EU and the UK.
Thriving in an Era of Disruption
Everyone keeps asking what does the branch of the future looks like. Which is interesting because no one asked what does the coffee shop or retail store of the future looks like. Its agreed among most people that the branch of the future is already here, it is already performing banking tasks and most people are already switching to it. The mobile phones are capable of every banking task we can think of today, and the progressing technology makes sure they will keep their ability as more banking applications come up.
Which also means that we should be making the “branch of the future” more capable as time goes on, which means innovation. It is crucial to define innovation before attempting it.
Innovation IS NOT:
- The look and feel (UI/UX). While it is very important to have an easy to use solution to the particular friction our customers are having, advances made in the UI and UX cannot really be considered as innovative.
- The Fintech “petting zoo”. This was the actual metaphor that was used during the presentation. This means that trying out every new fintech solution will eventually lead to it not being integrated. It will just be an “attraction of the week”, and not explored to its fullest potential.
- Merely technology without the context. Speaker gave the example of the Fintech innovation that we as bankers are most proud of; the ATM. It serves specifically the purpose it was designed for and nothing more. We should take this example and focus on how to achieve a better outcome for our customers.
- “Solving a problem nobody has with technology nobody wants.”
- Implementing new ideas with the explicit purpose of creating value. Improving on
- Customer experience
Every organization needs a definition of innovation. This explanation should cover the reasons behind the attempt at innovation, as well as the expected outcome of the attempt. The innovation culture, and its motto “move fast and break things” doesn’t really work as well in highly regulated environments. The innovation should follow the FIRE acronym: Fast, Iterative, Responsive and Experimental. While experimenting with incremental changes that are based on the data available is the best way to innovate (aka. FIRE), one must never forget that thinking big is also important. After all, the lightbulb is not an incremental improvement on the candle.
And finally, the best way to predict the future is to create it.
Customer Experience Summit
The customer experience of the bank starts with the opening of the account. Then, it goes through the following stages:
- Seeing your money,
- Paying bills,
- Paying anyone (money transfer, can be the equivalent of the phone call. At first, you called the operator and asked to be connected to someone, now you can dial any number from anywhere, around the world. The big issue here is that governments want to know who is sending money to whom.)
- Savings. Opening a savings account on any deposit (as low as $1) can be something that the millennials be interested in. The speaker gave the example of playing with cryptocurrencies and using the leftover money to open a savings account.
The main focus here should be the relevant speed of operation that can be initiated and completed by the customer. For example, the customer should be able to open an account without too much friction and relatively easy.
Most banks accomplished the beginning of their digital transformation, where the legacy systems are no longer in place and most operations are digitized. Next steps should be making life easier for the customer. Customer experience steps explained above can be a guide for this endeavor. For example, most customers spend quite a large chunk of their lives on the road commuting. So why not use their car as a banking UI and have them check their balance and pay their bills while they are driving from one point to the other.
On the topic of Blockchain applications in a bank, the main issue is finding a proper use-case for blockchain in a highly regulated private environment. So it comes to the biggest advantage of the blockchain, centralized vs decentralized infrastructure. The blockchain is a highly useful technology on decentralizing systems. While working with blockchain, cryptocurrencies are the first application that comes to mind because of the popularity of the topic but it should be viewed through the technology perspective instead of focusing on the one potential application. Tokenization (the process of replacing sensitive data with unique identification symbols that retain all the essential information about the data without compromising security) of the bank accounts can be considered.
Role of Humans (if any) in the Future of Customer Service
With the constant talk about Machine Learning and Artificial Intelligence, the human factor in customer service is getting disregarded. Humans as of this second are underrated. We are relying now on chatbots to handle most of the issues customers might be having, and that’s great. But it doesn’t always work in extreme cases. So whats the point of throwing money on innovation if customers can’t directly benefit all the time?
Technology and innovation (chatbots were the example in this specific case) are great for bringing the service to the customer. There are questions the customers want to ask and most of the time the AI will be able to answer these questions if the question is formatted properly by the customer. But there will be cases where the customer is having an issue with something, but they don’t have the familiarity with banking systems and processes to form the question in a way the AI will be able to understand exactly what the issue is.
If they were talking to a real person at that time, the customer representative will be able to understand what the problem is, confirm it with the customer if that actually is the case and then look for a solution. This will yield a better customer experience since the customer was able to get help with the problem they were having. AI, if the question isn’t formatted in a way that it can understand, won’t be able to help the customer and under current operational parameters will redirect the customer to a person instead. This is undoubtedly creating dissatisfaction since the customer has to first explain the problem, then wait to be connected to a person if AI wasn’t able to solve this problem, then explain the problem again to a person. These are extreme cases but these extreme cases will always require human empathy and operation.
Digital is great when it works, but a source of frustration when it doesn’t. Statistics show (they didn’t show sources for these statistics at the panel) that the most satisfied customers are the ones that are using digital banking most of the time, but still going to the branch (or calling in) once a while to solve more complicated problems they’re having.
Technology should be augmenting human interaction, not replacing it. AI-driven advisors and customer representatives are unlikely to take one human interaction due to the empathy factor. Instead of trying for a human-less customer service experience, we should be giving the digital tools to the humans in customer service and making them better at their jobs. Technology itself should be focused towards making the simplest of things (paying bills for example) as seamless as possible from the customers’ point of view.
How will AI Change Customer Interaction and Create a Better Customer Experience
The biggest mistake most companies are making is that they are trying to implement a new and exciting technology into absolutely everything. They are trying to change too many wheels in motion and usually failing to do so. In the case of AI, it shouldn’t change everything. If it eventually does, it should be an incremental goal, and it should always change it for the better.
Companies must keep track of the “Time Horizon” at all times. What technologies are available, what can be done with them now, what is the customers accustomed to, how can we take it one step ahead? One solution that works great now, will be outdated soon. On the other hand, one solution might be too complicated to be adopted right now, but the users will be more accepting later in the future. Companies should be keeping track of this at all times. AI right now is the hot topic but do your customers want any change in this direction yet?
It’s also imperative to understand what problem exactly are you trying to fix. If there isn’t a problem to be fixed, buying more AI capability or acquiring an AI company doesn’t really matter at all. Applying it to the overall strategy of the company, towards the goals you’re trying to accomplish is what’s important.
As an example, there were several applications for tracking the customers’ spending. Early implementations required a lot of manual entry from the customer and didn’t allow for customer customization (setting their own budgets, spending goals etc.). It wasn’t successful because of the manual labor the customer was expected to go through, and the lack of amenities these solutions had. Over the years these applications were simplified in their use, more interaction for the customer was included and it was overall improved. In the meantime, the customers were educated in the use of AI and how it can make their tasks easier. So around the second implementation, it was successful and now its a regular application of AI in most of the banks.
AI can also be protective of the customer. When a customer wants to borrow money, but their spending habits are not that favorable and shouldn’t borrow money right now, the AI (or chatbot) can actually tell that to the customer. “Based on your spending history and other debts, you probably shouldn’t borrow any money right now.”
Chatbots are mostly being used for customer interaction, right now. They can also be very capable of true engagement. Chatbots can help customers find the right product (for example a credit card) among all other available products. Personalized recommendations based on the data gathered on customer activity and identity.
This, however, also comes with a delicate balance that should be upheld. There is a fine line between being helpful and being creepy. If the chatbot can solve the problem customer was having, with a product the customer was needing at the time it’s helpful and should be improved further to be better at it. But failure to do so, i.e. providing the wrong product at the wrong time will be seen as creepy by the customer.