A new dawn, a new day: but are the banks feeling good?
Not only is there economic and governmental insecurity in the world – now, for financial services, there is also a legislative insecurity. There are changes afoot that will supposedly change banking for the better. But are the brands feeling good?
Are the banks feeling good? Aimée Bryan at Rapp finds out.
Nina Simone’s Feeling Good is a great song and would make a great company anthem, but I’d bet my bottom dollar that right now no bank in their right mind would choose it as theirs. The new EU directives and regulations being introduced over the next 12-18 months are forcing the banks to rethink both their operating models and their customer propositions. They’re driving disintermediation in the banking sector, so it’s no surprise that they’re feeling a little blue about it.
Partners who’ve previously strengthened their market position are now posing a direct threat to their livelihood. The imminence of open banking is enabling the likes of Google and Facebook to get a solid foot in the door. And the banks are having to face up to the fact that, very soon, their customers may be stolen from right under their noses.
Four characters is all it takes to rock the banking world. PSD2. GDPR. Not much to look at, but the word on the street is that they’re sending shivers down the spine of many a banking lead right now.
From 13 January 2017, the Directive of Payment Services (PSD2) became enforceable in UK law, requiring UK retail banks to open their APIs up to the business world at large and tighten their technical belts, ultimately creating a new competitive landscape.
On one hand, the directive is taking away a significant chunk of the interchange fee revenue and, on the other, it’s forcing them to give their customers the authority to approve the sharing of their personal data with any business they deem appropriate.
A pretty tough hand to be dealt, you might say. Arise the dawn of open banking: well suited for the nimbler and agile within the fintech world – definitely a directive on the side of the consumer, not one likely to be welcomed with open arms by the banks.
Enter our second abbreviation: GDPR (General Data Protection Regulation) comes into play in May 2018 and has been passed to create greater harmony across markets and companies in the way that we manage and use consumer data. A levelling of the playing field. An opportunity to clear out the data hanging around at the back of the data warehouses like a once worn 80s prom dress – nostalgic, but no longer deemed necessary or appropriate by the EU. From May next year, any data held that has not been explicitly consented to within the average customer lifecycle will have to be destroyed.
This ‘zombie data’ as we’ve named it at Rapp, continues to be collected by brands today. But personal information collected with only a vague intention of using it for something in the future will no longer be viable for use once GDPR legislation comes into force.
Bearing in mind the apathy of many banking customers – their indecision and inaction when it comes to switching and their disengagement with banking brands when it comes to marketing communications – we anticipate a high level of zombie data sitting at the back of the banks’ closets. So, now is the time to get their data warehouses in order. But that’s no mean feat.
While consumers can feel comfortable that the EU has their back, the banks will, understandably, not be sitting so comfortably. There’s simply no time to sit back and play the fast follower role. Only action will give the banks a chance of staying in the game.
Time for show and tell
Trust, integrity and honesty are what we expect as fundamentals from our banks. During times of change, this is what we cling to. It therefore seems imperative that the banks focus on helping their customers make sense of the new opportunities opening up to them. We know from our research that today’s confident and connected consumer values the knowledge, choice and control to make the right decisions. Being actively seen to be on the consumers’ side would speak volumes.
After all, our research showed us that consumers expect both functional and supportive relationships with their banks. With the dawn of a new data management era, it’s time to put that supportive role front and centre. Our research reported that, on average, a third of those in either the ‘happy’ or ‘cautious’ to share data camps would be encouraged to share more of their personal information with banks in exchange for greater transparency on how it will be used.
As the banks bring new products and services to market, the ones that help consumers better manage their lives, setting the right tone in terms of data usage, will be of vital importance.
For the banks, 2017 needs to be all about action. No more skeletons in their data closets. No more banking on their heritage. It’s all change. And now, more than ever, UK banks need to build the right support network around them if they want to survive.
Aimée Bryan is marketing strategist at Rapp.
This article was originally published in the March 2017 supplement 'The Drum Network Does...Financial Services'.