The Battleground for the Consumer Experience – Opened up by Open Banking

On 25 March 2018, a Quantas 787-9 Dreamliner touched down at Heathrow airport to inaugurate a new non-stop service between Australia and London. It cut a full three hours off the normal 20 hour journey.

In the commoditised world of air travel, that is a game-changer.

Differentiating from the competition has been a challenge for the airline industry for many years. But with the customer experience now on offer significantly better, simply because three hours of travel time are avoided, aviation now has a new battleground that will be seen on many long-haul routes, including the emergence of new ones.

A similar battleground for the customer experience will happen in retail financial services, a direct result of open banking and regulation such as PSD2. For many years, banks have failed to differentiate their services from their competitors, as evidenced by very low switching rates. Inertia rules – the service provided by banks is typically mediocre and virtually the same.

As an example, my own bank in the UK has an online banking service that has barely changed in 15 years, at least the parts I use, and is replicated in their mobile service – to pay beneficiaries I need to wade through a list of over 150 to get to the most recent I need to pay. My children have bank accounts and they are unable to understand why they have to click on a “statement” field to see their transactions. My explanation about the old days of paper statements confuses them.

The fact is, although the majority of people have bank accounts mainly to receive and make payments, the much of the retail banking industry has a blind spot about the importance of payments to consumers.

With open banking that will change.

For two reasons – firstly, third parties, in particular retailers, will have a choice in the payment experience they expose to their customers; and secondly consumers will become aware of the differences in the banking services available on third party applications.

An obvious example is the use of voice with digital assistants such as Amazon Alexa and Google Home. Those banks that have voice biometric authentication, available through open APIs, can be discoverable by these digital assistants and used to make payments and answer balance enquiries. For more sophisticated or for high value transactions, voice authentication can be combined with mobile apps to confirm transactions. Banks offering these services will be significantly differentiated to those without them, and consumers will notice, using social media to highlight and tell each other about “cool” new payment experiences.

Retail is another area. Many retailers have the ambition to remove friction in the checkout experience, by eliminating queues. A mobile app to scan items, followed by a simple voice command or selfie to pay while walking out the door; perhaps backed up by confirmation from accelerometers already standard in smartphones to recognise and authenticate the payer (behavioural biometrics), is seen by many retailers as the ultimate in checkout experiences.

There is no way a retailer will allow an experience such as one-time passwords or two factor authentication using a pin entry device at in-store checkout, but a seamless, biometric-enabled checkout is exactly what they seek. Banks that enable such a checkout through voice, facial and behavioural biometric APIs will win over retailers, and will excite consumers. And additional APIs such as for point-of-sale credit, age verification, subscription payments, logistics and refunds will surely follow.

As an example, PayPal has grown exponentially off the back of a superior customer experience for over a decade, unchallenged by banks except in countries such as the Netherlands with iDeal, and Poland with Blik.

I made these points in a payments conference recently, and was asked by an audience member who promotes financial inclusion for the aged, whether these new consumer experiences targeted at the masses will further exclude the old, the infirm and the disadvantaged. On reflection, I believe they will benefit everyone.

Through banking APIs, retailers and other third parties can tailor each interaction to the context of the consumer, whether they be fully functional or have an impairment for whatever reason. For example, those who are immobile (the old or the infirm) can be authenticated through voice recognition and behavioural biometrics to conduct their banking transactions remotely, as can those who are unable to see, while those who are unable to hear can use different combinations of facial recognition and behavioural biometrics – and so on.

Just as non-stop long distance flights will drive new competition in aviation, so will open banking and open APIs drive new competition in banking.

Let the battle commence.

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