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Open banking: a game changer for millennials

Posted: 12 April 2017 | | No comments yet

Bankers are anticipating a huge impact on the relationship that banks have with their customers…

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Most bankers believe open banking will have a dramatic effect on the market structure and competitive environment for consumer banking services, according to the results of a survey conducted by Earnix.

Nearly 90% believe that Millennials will be using banking services from a variety of providers that are accessed through a single aggregation portal, significantly impacting the relationship banks currently enjoy with their customers.

Conducted in January, the survey of 300 UK and European bankers focused on how open banking and APIs will affect their business, and their ideas on how they will need to adapt to the new competitive landscape.

Banks will need to overhaul their pricing and value models

Traditional banking services will be redefined, becoming more personalised and customer-centric

Open banking is part of the Payments Services Directive 2 (PSD2) that comes into effect in January 2018. It requires financial institutions to make customer data available to third parties, enabling customers to construct hybrid services from a variety of providers. 72% of the bankers surveyed think that this will significantly diminish their existing customer relationships, making it more difficult to cross-sell financial services. Given this, 75% think that their bank will need to overhaul their pricing and value models to maintain market share.

Analytics and machine learning will be the most powerful tools to win customers

Predicative analytics and machine learning will become the most powerful means through which to win bank customers over the next five years

Bankers almost unanimously (93%) believe that open banking will bring a deluge of new customer data that will revolutionise how analytics will be used to create more customer-centric financial services. 73% believe that predicative analytics and machine learning will become the most powerful means through which to win bank customers over the next five years.

Commenting on the survey finding, Earnix CEO Udi Ziv said: “Open banking is a game-changer for the financial services industry. Traditional banking services will be redefined, becoming more personalised and customer-centric. We believe that incumbent banks have a unique opportunity to excel in this new environment, and we are helping them deploy advanced analytics that leverages the gold mine of customer data they already have.”

Summary

  • 80% of bankers expect a significant increase in competition over the next five years as a direct result of open banking
  • 88% believe that most millennials will be using banking services from a variety of providers that are accessed through a single aggregation portal
  • 72% of bankers think open banking will significantly diminish their existing customer relationships, making it more difficult to cross-sell financial services
  • 75% of bankers think that their bank will need to overhaul their pricing and value models to maintain market share
  • 93% of bankers believe that open banking will bring a deluge of new customer data that will revolutionise how analytics will be used to create more customer-centric financial services
  • 73% of bankers believe that predictive analytics and machine learning will become the most powerful means through which to win bank customers over the next five years

Read the report in full here.

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