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Banking Evolution and Open Banking APIseNewsletter Winter 2019

At the start of every year, numerous studies show the evolving trends in the financial services industry. This year it seems almost certain that these trends are to be materialised. The need to achieve personalised customer service, overcome the Fintech competition and utilise new technologies are the main areas banks are focusing on, especially with the experience of Open Banking and the benefits that it can create. The transformation of banking services has already begun.

According to the The Financial Brand, the main trends for the retail banking industry in 2019 include: data analytics tools, making customer journey easier, use of APIs, improvements in multi-channel delivery, building partnerships with Fintech firms, digital payments, etc. These trends are also supported in Marketforce’s report [MoneyLIVE report 2019] which combines the major trends and what the future holds for banking.

The key focus on both is how innovation, digital culture and technology can help incumbent banks accelerate their pace to meet the new era, improve their internal processes, utilise APIs and Open Banking to their benefit, in view of the competitive surge from third-party providers, Fintech firms, large tech firms and challenger banks.

Real-time and personalised data integration with Artificial Intelligence, advanced analytics and robo tools rank on top in improving automation, streamlining processes and freeing time up to focus on important tasks, therefore saving more than 70% on operational tasks. RPA in terms of cost savings and customer outcome is considered as the major return on investment from the majority (81%) of respondents that took part in the survey. Onboarding is also an important element to enhance with the use of AI tools. More than 40% of customers/consumers have admitted that they have abandoned onboarding processes that took too long to complete.

The customer-centric perspective is second in line of importance for banks, as eliminating the friction from the customer’s journey is a necessity. This can be done with the adoption of new technologies that can identify the customer’s details online, voice activation and use of biometric readings thus offering clients a faster and easier way to onboard. Although, customers do not easily change banks, more than 37% are expected to use non-traditional financial services firms within the next 2 years. The rise of APIs is also supporting a digital ecosystem bringing together large communities of customers, suppliers, partners, leveraging big data and advanced analytics.

The use of APIs in an Open Banking platform is the third major trend that concerns banking professionals in 2019. Open Banking methodology can potentially offer a competitive advantage to banks. Banks need to use the available data to tailor and understand their customers better to be able to competitively serve them. Customers feel that Fintechs and digital banks have a better understanding of what they need and thus they are much more eager to move to one. This could potentially create an opportunity for banks to embark into offering non-financial products in a few years’ time as large tech giants (GAFA) already do by focusing on the “distribution” of the service instead of the “manufacturing” of the service (that is the core banking business).

Building partnerships with Fintechs, adopting an innovative approach while having this conveyed properly in the company culture, can empower banks to affect the pace of change and meet the digital needs faster. Besides, customers are feeling that the gap in the quality of the digital experience delivered by traditional banks compared to Fintechs, is narrowing. Large banks are working with Fintech firms or creating ones to elaborate in this setting and are changing their service offering, thus potentially creating competitive advantage, loyalty and consequently, profitability.

Profile Software has vast experience in both domains, having implemented demanding banking projects as well as Fintech solutions in financial firms, with great success. The FMS.next Banking platform is a flexible comprehensive system with a robust bank-end to cater to the evolving market needs, that enables easy transformation when most needed with the least of effort.

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