How digitalisation transforms financial services – BIAN interview

Traditional banks need to adapt and expand their offerings to provide the best customer experience and to compete with new industry entrants. How are traditional banking platforms and systems changing to keep pace?

During the pandemic, financial services organisations were forced to become digital entities overnight. It became evident to the industry, however, that the extensive use of legacy technology within banks, and a lack of industry standards meant the speed at which these established institutions could bring new services to life was often too slow to satisfy customer demand.

A lack of industry standards has intensified this problem in recent years. This means that banks are restricted by having to work with partners based on their proprietary technical language and the way they operate alongside their existing ecosystem. This, instead of functionality and how they could potentially transform the bank and its services, which limits the organisation's ability to integrate new best-of-breed services into their customer experience (CX) capability, impacting overall customer satisfaction.

To keep pace and overcome these obstacles, banks have started to take a coreless approach to their technology strategy. A coreless banking platform can support banks in modernising their core banking infrastructure by translating each proprietary message into one standard message model. This enhances communication between financial services and technology vendors and ensures each solution can seamlessly connect and exchange data. This provides endless opportunities for connection, collaboration, and upgrades, and allows different solutions to operate within the same framework as existing CX systems, so banks can expand their service offerings throughout their banking ecosystem and avoid having a siloed or limited use.

As the popularity of digital banking grows, more and more traditional banking groups are starting to close their high-street branches and shut down their ATMs. This pushes aside a growing number of people preventing them to access essential services. How do we deal with this financial exclusion?

As banks accelerate digital transformation projects, the closure of high-street bank branches is inevitable. As a result, those who prefer to bank at their local branch have been unable to manage their finances. Banks must make sure they are continuing to innovate while ensuring no customers are left behind.

Some banks are providing hands-on support at their branches or libraries to support those unable to access digital services at home. This approach has helped to improve accessibility and increased education around digital initiatives.

A pilot agreement has also been launched for banks to share services to support the local community and the future of cash. Large banks across the UK will assess local needs every time a branch closes. The assessment could recommend a shared branch open, an ATM installed, or a Post Office is upgraded.

The agreement means that banks will have to commit to delivering whatever is recommended to support those customers who prefer to bank in person.

Additionally, the Financial Conduct Authority (FCA) has proposed that banks will have to provide a more detailed analysis to justify closing a branch. The FCA will also have the power to ensure local communities across the UK have access to cash and banks that refuse to comply could face fines. This will ensure that access to physical services will remain a priority for banks.

These are promising initiatives, but the industry must do all it can to ensure these initiatives are widespread. It must also continue to think outside the box, innovate, and develop other initiatives to restrict financial exclusion as much as possible.

Should a bank try providing financial services to different generations or do you think that the future will be represented by niche banks targeted at a different group? What should an ideal banking experience look like?

In short, yes. Banks should make an effort to know their customers so they can provide tailor-made services, especially from a generational point of view and between those who are digitally more able and those who prefer in-person banking. Focusing on a personalised customer experience will be what sets banks apart and helps them remain competitive, and if those niche banks can target different groups better than traditional banks, customers will likely look to specialised banks for an experience that suits their needs.

For an ideal experience, the most common consumer transactions, which would primarily be payments, should be as easy as possible. In today’s digital environment, contactless should become the standard as we move toward a cashless society. As online banking becomes more widespread, the ‘interface’ of the bank, including the app, website, branches, and call centres, should be multi-language to be accessible and serve all customers equally. What’s more, there needs to be step-by-step guidance for the more complicated transactions, such as a loan. If it’s too complex to do online, there should be easy ‘in-person’ guidance available, or access to video chats, for example. Ultimately, providing an effective online and in-person experience is the key to an ideal experience.

How is BIAN helping the banks to be future-ready and to adapt to a constantly changing environment?

BIAN was created to establish, promote, and provide a common framework to solve banking interoperability issues. The organisation consists of more than 80 banks, fintechs and technology vendors, which collaborate to boost innovation and lower the cost of banking.

Members combine their industry expertise to define a banking technology framework that standardises and simplifies core banking architecture, which has been convoluted and outdated.

This approach to collaboration is the main contributor to the knowledge and services needed to facilitate and implement banking interoperability to develop and operate a community assisting user organisations with platforms and services.

We are hearing a lot about Open Banking and the changes it produces in the industry. As its popularity grows, how can it be used to help underserved communities?

We are seeing considerable growth of Open Banking users across Europe. In 2021, for example, there were 18.8 million users, a number that is expected to grow to 63.8 million in 2024.

As awareness grows, Open Banking can have a huge potential in addressing underserved communities. Open Banking, for example, can help to provide access to responsible credit using alternative financial data that can expand access to financial insights that help increase the consumer's chances of getting approved for loans.

It can also help to encourage better financial wellbeing. Insights provided by different suppliers based on spending patterns can give a detailed analysis of the consumer's financial situation and offer tailored suggestions on how they can improve their finances.

Lastly, Open Banking has the potential financial inclusion by helping millions upgrade from cash-based transactions to digital financial transactions in a secure ecosystem.

About Hans Tesselaar

Hans Tesselaar has over 30 years of experience in Financial Services Industry, being active for banks, insurance companies, and pension funds. Hans Tesselaar has special areas of knowledge such as people development, re-organisations/re-structuring of the labour force, negotiating with labour unions and workers councils. As a managing partner of an ICT Consultancy Firm specialising in financial services he has long term experience in the areas of expertise like Strategic Business Planning, Enterprise Architecture, HR development, Innovation.

About BIAN

The Banking Industry Architecture Network (BIAN) is a collaborative not-for-profit ecosystem formed of leading banks, technology providers, consultants, and academics from all over the globe. Together this network of professionals is dedicated to lowering the cost of banking and boosting speed to innovation in the industry. Members combine their industry expertise to define a revolutionary banking technology framework that standardises and simplifies core banking architecture, which has typically been convoluted and outdated. Based on service-oriented architecture principles, the comprehensive model provides a future-proofed solution for banks that fosters industry collaboration.