Last month, the CMA released a new set of rules that are set to transform the finance industry. Managing director of agency Sonin, Paul Jarrett, explains how the new banking regulations are going to impact small service providers.
The latest announcement from the Competition and Marketing Authority (CMA) states that all banks must offer all of their services via a single mobile phone app by 2018. It’s not news that we live in a connected world, or that our mobiles have become a vital tool for everyday life. In fact we’ve seen many businesses and entire industries evolve and mobilise their offering to improve the customer experience. So really, it was only a matter of time before the financial industry followed suit.
Consumers already have access to basic financial tasks on their mobiles, such as checking balances and transferring money between accounts, but these are fairly limited and don’t give a full view of all their finances. The new regulations will transform the entire banking sector as providers need to evolve their offering to put the control into their consumer’s hands.
Coined ‘Open Banking’, all UK finance providers will be required to offer all their services through a single digital ‘app’ giving consumers the ability to manage all their accounts with multiple providers in one place. Providing consumers with 100% transparency on all of their banks services means they‘ll be much more likely to switch service providers to get a better deal. The two key driving forces for this change are to ensure that consumers benefit from technological advances and that smaller, new providers entering the highly competitive market are better supported. Larger banks don’t have to compete hard enough for customers’ business which makes it incredibly difficult for smaller and newer banks that are offering better services to grow. This opens up a huge opportunity for new entrants to the sector, giving visionary start-ups and entrepreneurs the chance to compete with the established banks on a level playing field. Surviving as a typically traditional industry, the banking industry needed a shake up so new entrants can win share by offering a better customer experience through new products and innovative processes.
In the last few years technology has rapidly evolved, and the pace of innovation will continue to increase, forcing banks into new digital channels and further improving security and verification. The smart device already supports fingerprints and voice recognition, and customers expect them to become commonplace for transactional authorisation.
So what should you be doing? To succeed in the changing landscape, banks need to re-address their position and create a clear strategy to deal with the changes, and do it quickly. It’s less about the technology at this stage, and more about the direction of the entire industry. The introduction of Open Banking puts more control in customers hands when it comes to switching providers, so will inevitably mean providers need to put more emphasis on retaining customers. Banks will need to organise themselves around their customers by tailoring their offerings so that they view banks as meeting their needs instead of pushing generic products. Offering a seamless experience and deepening relationships will become key to keeping engaged, loyal customers.
Ultimately, the success of the Open Banking programme will inevitably be down to its execution. Just like any other mobile app or initiative, it needs to be communicated properly to the consumer. As a service provider you need to be transparent with how data is access and shared, and how customers will benefit from staying loyal to you.
By Paul Jarrett, Sonin