Bank account switching is a big focus area for the Competition and Markets Authority, regulators, and the UK government. Yet, the latest figures show that promoting switching is not working for the public. In the UK for example, the latest research reveals that there are around 70 million deposit accounts, and yet the market is only seeing a million account switches a year. That is, only 1.4% of customers switch, while 98.6% of customers stay with their banks. At face value, that is impressive customer loyalty. The problem is, it’s not that clear cut. The reality is that customers are now likely to have multiple accounts. For instance, Monzo, the digital bank startup, is attracting a staggering 60,000 new accounts per month which customers are using to supplement dissatisfying experiences with their traditional bank. On a daily basis, customers also face problematic mobile banking transactions, archaic interfaces and slow networks. This points to an alternative, and ultimately less positive, explanation for their apparent loyalty.
Historically, the key driver in customer loyalty has not been user satisfaction, but the complex layer of policies for sharing data with third parties that has governed the industry. This siloed control over customer data has made it difficult for competitors to encourage customers to switch, and has stifled innovation. But, with the rise of Open Banking this is about to change.
Leading the Open Banking charge
Open banking—a policy that requires financial institutions to provide complete and standardised access to customer data by third-parties that are registered with the UK Financial Conduct Authority (FCA), so long as the customer consents— was enacted in 2018. This change in policy gives financial institutions the opportunity to access potential customers and offer them a more attractive alternative to their existing bank, increasing the likelihood they will switch.
While the UK might have taken the lead, it is not alone in adopting Open Banking as standard. In Europe, EBA Clearing subsidiary Preta has also signed up 40 banks and tech firms to Open Banking Europe, an initiative launched in June last year to create a centralised PSD2 directory. As such, with the backing of major European banks, Open Banking Europe is seeking to address regulatory concerns about the interoperability of bank data sharing initiatives under PSD2.
Ultimately the open banking movement—with its focus on democratising data and enabling innovations—hands back control to the customer. And once customers, and end-users, have control, the banks will have to invest more time and money in developing user-friendly systems which provide a superior end-user experience for customers and staff. Those who do not, will be incapable of competing with financial-tech startups and alternative money management app players who are sleeker and more responsive.
But how can institutions begin to improve their offering?
Visibility is key
Despite clear user dissatisfaction with faulty or slow systems—as expressed on review sites, such Trust pilot, and social media platforms—customers and employees alike are surprisingly unwilling to report ill-performing technology to the bank or service provider; meaning IT teams are at a disadvantage to resolve the issues, while their reputation slips.
Therefore, overcoming the need to rely on end-users to report problems is essential. End-user experience monitoring solutions do just this. They measure user experience by establishing “normal behaviour” and then proactively identify deviations from this benchmark. As a result of having a more intelligent and proactive infrastructure, areas of degrading performance can be identified and resolved more easily, empowering banks to offer superior digital services and become competitive players in the market.
It’s understandable that companies may initially see open banking as a nuisance rather than an opportunity. However, greater access to customer data, mined through intelligent end-user experience monitoring solutions, will empower institutions to develop innovative, customised offerings they know will resonate with users, driving customer satisfaction and retention.
The introduction of open banking across Europe is indicative of the future of banking worldwide. If companies want to survive and stay ahead of competitors, at home and abroad, it is vital that they embrace the new policy and use it as motivation for designing and delivering superior services. Failure to do so will mean the loss of the business they depend on. However, it’s the customers who are willing to share their data that will be the biggest beneficiary of all.