Borrowing the opening lines of Charles Dickens’ “A Tale of Two Cities” novel, banks are now in the best of times and the worst of times. Advancements in technology have given rise to changing consumer behaviours and enabled non-traditional players to offer banking services. According to a recent study by Roy Morgan, the number of Australian customers turning to mobile and internet banking is increasing rapidly, while banking in branch is declining. These consumers are also showing interest in using banking services offered by tech companies. For example, Apple’s mobile payment and digital wallet service Apple Pay and Samsung’s Samsung Pay are now widely used by Australian consumers for transactions.
The need for banks to deliver exceptional customer experiences is now more important than ever, as customers are becoming more open to switching financial services providers (even if the provider is not a bank) if they found one that offered them a better experience. However, all hope is not lost. By making the right technological investments and adopting more flexible business models, banks can enhance operational efficiency and accelerate innovation in order to improve customer satisfaction and increase revenue.
Banks going digital reap the rewards
Banks in the Asia Pacific region are recognising the advantages of going digital, with IDC forecasting that 80 per cent of banks across APAC operated on hybrid cloud architecture this year. By doing so, they may be able to lower the total cost of ownership and increase agility. Since cloud provides the ability to quickly provision resources, it allows banks to quickly develop and deploy new apps and services that address changing market and customer demands. Taking it a step further, those banks could also deploy automation tools to both improve operational efficiency and free up staff for revenue-generating tasks such as cross-selling and building relationships with customers.
Adopt open banking or risk falling behind
Although banks have already started digitally transforming to better compete in the digital age, they should bear in mind that digital transformation is a journey, not a destination. As the business environment becomes increasingly volatile and uncertain, banks need to remain nimble and continuously innovate to quickly address the ever-changing consumer and market demands. Banks have a duty to constantly refine their applications to keep up with times. This is where open banking can help.
Open banking is a model in which banking data is shared between two or more unaffiliated parties through application programming interfaces (APIs). It provides opportunities for banks to gain a 360-degree view of customers that can be used to help enhance their services and create new revenue streams. For instance, banks could use data from insurance companies to provide real-time comparisons of insurance plans and automatically suggest the best deal based on the customer’s financial capacity/needs.
Recognising the benefits of open banking, some Australian banks are opening access to their APIs to co-create new and more customer-focused financial products and services. Such a move will enable banks to leverage each other’s strength and accelerate the speed of innovation.
To further benefit from open banking, banks should take a microservice-based approach to building apps, in which large apps are broken into smaller, independently scalable components (also known as microservices) according to their functionalities. This enables app developers to make changes to specific microservices instead of a big piece of code, reducing the complexity and time it takes to release app updates. Moreover, microservices can help banks accelerate software development as they can be reused as the foundation of new apps. With such a capability, banks will be able to constantly keep up with changing customer demands, which is crucial in ensuring good customer experience and retaining customer loyalty.
Macquarie’s Banking and Financial Services Group is one bank that has benefited from adopting microservices. By using microservices and containers, it now takes the Australian bank minutes instead of hours to release software updates and features, updating existing applications quickly without any downtime on the customer end, as well as meet customer demands for new services.
Just as tyres on a race car are adapted to the changing weather conditions of a track, elements of open banking such as APIs and microservices can not only help formulate solutions to the challenges faced by banks in Australia today, but they can also help build the right foundation to meet future customer demands and business needs. The industry is dynamic, leaving banks with no option but to be agile to effectively deal with unknown disruptions that will come their way. Open banking is the key to achieving this.