Article published on April 5th, 2017, by :

In summary

Next year is likely to be a game-changing year for the banking and finance sector. As the General Data Protection Regulation (GDPR) and Revised Payment Service Directive (PSD2) are implemented across the European Union, the exclusive control of banks and other financial institutions on financial data of their customers is about to end. These new regulations will transform the banking and finance industry and result in a new wave of partnerships between banks and ecosystem enterprises to create a win-win situation for everyone, including customers, financial institutions, major tech players, such as Google, Amazon, Facebook, eCommerce companies, as well as small fintech start-ups.

While this may look like a challenge to many, we, as journey science experts, view this as an opportunity for banks to partner with large tech, eCommerce, and fintech enterprises and leverage their expertise at managing customer experiences to revolutionize customer journeys and offer an improved, more holistic experience to their end-users.

Will upcoming regulations revolutionise the banking industry?

The new regulations will introduce banks to two new competitive forces — PISP and AISP.

  • PISP or Payment Initiation Service Providers are the merchants who will able to access customers’ accounts. This will allow customers to choose third-party providers to initiate their transactions.
  • AISP (Account Information Service Provider) are the third-party providers that will aggregate the financial data of customers with more than one bank account to offer a more integrated and improved experience to the users.

Depending on the adoption rate, there are two possible scenarios that may result from the implementation of the upcoming regulations.

  • Slow Adoption —The slow adoption of the new solutions by customers due to lack of interest will provide banks the time they need to create improved solutions using their legacy systems.
  • Fast Adoption — In this scenario, tech companies, particularly Google, Facebook, and Amazon, will be able to use their robust, future-proof infrastructure to create new solutions and improve customer experience substantially. A mutually beneficial partnership between banks and these tech companies constitutes the ideal scenario as this will provide an opportunity to analyze and draw insights from the large amounts of data available to banks. This, consequently, will improve customer journey, benefitting everyone involved in the process, including customers, banks, and tech enterprises.

An ecosystems approach — a golden opportunity for banks?

Banks cannot afford to ignore the long-term implications of the upcoming regulations, particularly PSD2 and GDPR, if they intend to stay competitive and ahead of the game. Theses implementations  may look like a challenge to banks, but it is an opportunity to grow new revenue streams by progressing towards an extended ecosystem — an ecosystem that drives value and fosters customer loyalty by allowing users to acquire information and conduct transactions in a ubiquitous manner. This ecosystem consists of three major players:

  • Tech giants, such as Facebook, Google and Amazon
  • Fintech companies
  • eCommerce/Retail Companies

Revamping the customer journey

In order to stay relevant and competitive, banks must offer customers what they desire, and to ensure this they will be required to thoroughly study their customer journey. While banks have immense amounts of data available at their hands, their limited experience in journey science could potentially hold them from unleashing the true potential of a superior-quality customer experience. Perhaps the only and the most viable way banks can overcome this issue is by working in collaboration with the likes of Google, Facebook, Amazon, fintech and eCommerce companies.

The role of banks in the payment chain remains questionable. Here are a few possible ways that banks can embrace opportunities of this extended customer journey and stay competitive include:

  • API Economy — To offer an improved experience to customers, banks should look for ways to deliver their core services to the customers at the right place and time.
  • Best of Breed Customer Experiences — To stay relevant and competitive against the emerging players, banks are required to extend the scope of their offerings and act as a distributor of financial products that their customers prefer.

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