Recently The Competition and Markets Authority (CMA) concluded in a new report that Britain’s biggest banks will be forced to offer customers details of the best offers available to them in a single app by 2018.
The shake-up was based on a two-year probe into the state of Britain’s financial institutions. The app will increase competition and will allow consumers access to all of their finances – including current accounts, savings, mortgages etc. even if they are managed by different providers. This will cut through some of the red tape, confusion and time that would otherwise be spent in order for the average Briton to look into their financial status. The app will also allow customers the ability to compare their current banking package to others, eliminating some of the need to visit banks in person or use online banking.
There were a number of responses to the news; some experts argued that in order for the apps to work, individuals would need to sign over a large amount of their personal data. Diane Coyle, Professor of Economics at the University of Manchester told the BBC: "I am not at all sure these new measures will increase the amount of switching.
"There's a lot of reliance being placed on more information, but consumers will need to give all of their transaction information to third-part providers, and there's the trust question... do you really want another party to be able to see all the transactions that you make in your bank account and be able to tell other potential competitors about that?"
Breaking the Piggy Bank
Security is an obvious worry whenever you’re sharing a large amount of data, especially with the majority of online bank users, and by conclusion, the largest group who would use an app for banking are millennials.
As marketers, we talk a lot about millennials. Why? They are the largest consumer generation ever (aged 18-35), they adopt and adapt to new technologies at a higher rate than any previous generation and are typically regarded as a bellwether group acting as a catalyst for mass market adoption – if any behaviours are to be monitored it’s theirs.
They’re highly digital, savvy to technology, influential and they spend but when this comes to sharing data. That conflict with sharing data is manifested as - the desire for personalisation (experience and product) vs. a growing reluctance to share data without knowing the explicit benefit to themselves.
This tension has been captured in a number of recent reports and research pieces, the latest one published in the 2015 by Deloitte and YouGov. Speaking to 1.5k UK consumers, they found that the desire for customised products and/or services was especially high amongst those within the millennial category:
“Whereas in general one in five customers were happy for businesses to use their personal info to offer more personalised products and services, amongst 16-24 year olds that goes up to more than one in four.”
Millennials have quickly come to understand that there is great value in their data, and it is indeed a currency they are willing to trade in with brands if the value is right. The app the CMA is proposing will give financial institutions a chance to capitalise on this inherent value and transparency to millennial audiences.
Banking on Digital
Banks have often been criticised for being behind the curve when it comes to digital or technical innovation; while other industries seem to be making leaps and bounds, sometimes the financial industry can seem to be left in the dust. Even though internet banking is very popular and has been a firm step in the right direction, it’s been seen as a small step and one that doesn’t hugely benefit customers. A recent BBC report showed that whilst most other industries reward low-cost online users, banks don’t offer any incentives for its online customers.
Financial institutions are no strangers to legacy systems gumming up the plumbing. The majority of banks have built their main transaction-processing systems on a programming language called ‘Cobol’ invented in the 1950s, which has failed many times.
Meanwhile, figures from the British Banking Association show internet banking logins fell by 100,000 to 4.3 million a day in 2015, down from 4.4 million in 2014, while mobile device apps were used 11 million times a day in 2015, up from 7 million a day in 2014. It’s clear that most users expect easy, uninterrupted and instant access to their banks, with seamless customer service, but most banks just aren’t delivering. Perhaps this is why so many people are turning to the new FinTech players in the industry to solve their issues.
The CMA is pushing banks into the future, and whilst there may be worries about data security, it’s the best time for the large financial institutions to take a look at some of the ways the FinTech industry is revolutionising their industry. FinTech was accessed as gaining huge traction in consumer adoption according to a report by the UK Government in 2015, reporting that 14% of digital active users are currently using FinTech products.
A Safe Pair of Hands
Despite financial efforts by regulators to get more people to switch bank accounts, fewer people are doing so more than ever . In the last 12 months, 1.05m people moved their current accounts, that represents a drop of 4.7% on the previous 12-month period according to a report by Bacs.
Before these rules are into place in 2018, it gives banks a huge opportunity to take a look at the strategy of their interaction with their customers, and perhaps their consumer innovation or disruptor techniques to shake-up internally before they’re shook-up externally.
We’ll be taking a look at how digital is influencing AI, Security and Content at three upcoming events, read more about them here.