PSD2 and Open Banking: Part 3- Redefining the customer experience
As the Second Payment Second Payment Services Directive (PSD2) and the UK Open Banking Standard kick start a financial services revolution, we explore how this redefines the customer experience.
Download the Microsoft PSD2 and Open Banking whitepaper
This first wave of PSD2 and Open Banking regulated APIs are designed as a small step to increase competition and innovation in the financial services industry. But it isn’t difficult to imagine these APIs being used in creative ways, combining services from different vendors and markets to form a single customer journey to a desired outcome. The customer experience would be defined by the purchasing context. Take the example of a car purchase: frequent car repairs, high fuel costs, imminent lease term expiry or other factors prompt or predict a need for a new car.
Responding to the prompt, APIs facilitate research across multiple vendors, ask social channels for recommendations, secure a loan or credit check, check availability and place an order – all from a single app or personal digital assistant.
The ultimate goal here is the provision of a single experience for customers through one interface that combines the best of third party prediction, recommendation, analytics, payment, product choice, delivery and ongoing support services into one seamless end-to-end journey to the desired customer outcome – in which payment or purchase is a fundamental component.
However, whilst APIs enable this, these new inter- and cross-domain partnerships could easily push many current common banking touchpoints to be invisibly integrated as part of the experience. The movement of money from one account to another could become nothing more than a behind-the-scenes transaction, with the bank in danger of being relegated to a bit-part in the overall journey.
Further, many other money management tasks will inevitably be automated through artificial intelligence (AI) or trusted digital agents such as Cortana, Alexa or Siri, which automatically synchronize the functionality of a variety of apps from a diverse range of vendors. In this event, the most successful agent and apps are likely to be chosen for ease of use and quality of insight, rather than brand and trust.
Banks are therefore ushered into a new battleground of integrated service, with the winners claiming the right to be a customer’s preferred digital point of entry into banking services. The customer experience differentiators will be based on insightful prediction of customer need, seamless integration, breadth of connectivity and assistive AI to support full lifecycle customer journeys.
All this will take some time to materialize, but elements of the new landscape will appear in the short term. And whilst customer experience has always been a distinguishing feature for many banks, their competition has only really ever been other banks. PSD2 and Open Banking regulation accelerates the introduction of an API economy, expanding that playing field beyond traditional banking institutions and allowing recognized leaders in experience management to compete, setting the bar for customer experience far higher, and increasing every year.
Download the Microsoft PSD2 and Open Banking whitepaper. In this whitepaper, we explore the opportunities for innovation and how this acts as a catalyst for your digital transformation.
Read more on the Microsoft Banking & Capital Markets and Insurance blogs.
