In the age of digitisation, developing high value services for consumers is essential. An event, organised by NetEvents and hosted by Ondot Systems at the Royal Exchange in London, included experts discussing the challenges and opportunities of digital banking, reports Briony Richter

The continuing shift to digital technology means that industries must change their business models to suit what the consumer desires.  The panel was moderated by Georgie Frost, broadcaster and consumer champion, and Steve Walker, lead analyst, digital retail banking at GlobalData.

Opening the discussion, Steve Walker spoke about digital innovations and the challenges that the financial industry faces.

“We’re closer to it than we’ve ever been, and we’re in a position to see if what’s coming is what we expected, and the open banking that we think customers need. At a minimum, we’d expect to see a change in buying behaviours.

“Open banking is a difficult end state to engineer, and certainly a difficult one to maintain. We’ve still seen banks delay agreeing on the standards on the grounds of security and reliability.

“I think we’re going to see, with open banking, a channel displacement that resembles what happened with mobile banking, and the banks that don’t design and deliver services through APIs will see themselves becoming less and less relevant in customers’ day-to-day activities.”

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Consumers want to be able to access online banking services anytime and anywhere, using the channel of their choice. As well as deciding whether to fight or join the competition, banks must be able to protect themselves from cyber-attacks and all forms of financial fraud. It is inevitable that all financial institutions will need to boost investments in their digital agendas.

What will it take to become fully digital?

Naturally, when consumers want to change the methods in which they conduct their banking affairs, so too must the financial institutions to keep and gain customer loyalty.

Scott Manson, head of payment strategy at Nationwide, stated: “We’re in a stage of evolution within digital banking where we’ve gone from moving through from a statement, through to the online bank, to the mobile bank. We’ve done things ourselves, because we think we are better at doing it.

“Ultimately, I think what we’re looking at in the future is partnership philosophies around different organisations. It’s about being able to service the customer where they want to be serviced. Now, if that’s on Facebook, WhatsApp, or Snapchat, having those partnerships where we have the ability for customers to do their digital banking in those areas, I think, is where the evolution moves to.”

John James, head of digital product at first direct, agreed that there is still a long way to go before the industry can actually provide consumers with the most effective tools to effectively engage with digital services.

Vaduvur Bharghaven, CEO of Ondot, said: “So long as we are talking about banks offering the services, and not disintermediating that, I think it’s really about digitising information.”

Full digitisation comes with a wealth of opportunities. However, taking up these opportunities creates new challenges for financial institutions, such as meeting regulation requirements, security threats and getting consumers to adopt the new systems.

Getting consumers on board.

One of the biggest hurdles for the industry to overcome will be getting consumers to trust these new developments and adopt them. There needs to be consistent and transparent communication between the industry and the public.

If used correctly, data can make all aspects of banking much simpler for the consumer, but there needs to be much more guidance from banks and fintechs on exactly how the data will be used securely.

James stated: “From a customer perspective, until there’s something they can touch and engage with, then the questions are quite academic at the moment. When you can get a proposition out there that they can use, then that’s when you’re going to get high levels of engagement.”

Manson highlighted the importance of finding the best way to use data to make the consumers’ life easier. To communicate the stages and advantages of digital and open banking clearly, it is essential that staff at the front desks or on the phone are aware of what open banking means to the consumer. This way, consumers can get straight answers to their questions.

It is essential to give control back to the consumer so they can decide where, when and how they conduct their banking affairs.

Security

Open banking does not come without conduct risks. A digital world where platforms are more open, although brings more personalised services, also carries security risks.

Walker said: “With mobile banking adoption, of the people that don’t use those services, 40% of them said security was the reason. These people want more security, not less, to be reassured. Bankers and the industry have got to deal with the actuality of security, and the perception.”

Bharghavan agreed that verbally reassuring the consumer is not enough to convince them that their data will be safe. He stated: “It’s important to make sure that the consumer makes sure they feel secure.  I think explicitly giving consumers control gives them the feeling that they’re secure, and this is based on direct research, as well as indirect research that we’ve done.”

The panel all agreed that the digital era we live in has plentiful opportunities for both consumers and the financial industry. By digitising services, there can be more time spent tailoring them to suit the consumer. Furthermore, it will improve operational efficiency for the businesses applying it.

There are security concerns and the industry will have to be vigilant in combating these threats as quickly as they arise. Trust is the cornerstone of any relationship, thus it is imperative to acquire that trust so that consumers feel secure in the process of open banking. Overall, digital banking is not something to fear. With strong security and the customer’s needs put first, it could be a great success.