People rely their life on technology. Through screens, we usually manage our holidays, our hobbies, our insurance, our healthcare appointments, and even the search for the first or a new home. As a result, people constantly switch between applications to do different things, leading to dozens of applications being installed or websites being visited. But, what if we could manage the essential things of our life through one application that understands our needs and considers their singularity?
Banks have the opportunity to be more than a Bank
Through open banking, bank customers are able to share their financial data with third parties if they give consent to do so. For example, if a client wants to have all the information of his bank accounts in a single application, he can do it through an AISP – Account Information Service Provider. Moreover, he is also able to do payments without using one of his bank applications, that is, he can do it through a PISP – Payment Initiation Service Provider. This means that two new players (AISPs and PISPs) can leverage bank data to provide new services to their clients.
Notwithstanding the above, banks can also leverage the data that they have about their customers and build new innovation services oriented to customer experience. Based on a customer-centric strategy, banks can partnership with companies from different business areas and provide integrated end-to-end experiences that will put them at the center of the life of their customers.
These are just two examples of lifestyle banking, already implemented in some banks with success. In NTT DATA we have developed more use cases that suit this approach to Open Finance – for financial services – but also to Open Economy – for all the business areas that interact with financial services.
The key of lifestyle banking: customers will share data if they understand what it is used for
For lifestyle banking, customization is a key success factor. Since they need to share their data, they will expect highly customized experiences and they will expect to be treated as a single person and not by using processes that suit the most possible users without considering the person that is being dealt with.
If banks don’t provide this experience, fintechs will surely do as we have seen when these players offered services that banks were no longer willing or able to do. For example, in South America, the Brazilian neobank Nubank has currently more than 70 million clients as they understood that a simpler and digital experience was a gap in the banking market. In Europe, Klarna, a buy now pay later platform, has now more than 450.000 retail partners and more than 150 million active retail customers by developing a new business model for retail payments where the customers don’t need to pay interests in the purchase of their products.
Furthermore, about personal data sharing, instead of asking customers to sign text-based standard forms to authorize data usage, banks should probably show them how their data will be used and what will be the advantages of giving consent.
How to do it?
On one hand, from a business perspective, it is important that banks create a clear strategy and a roadmap of use cases implementation to enable lifestyle banking and there are a lot of advantages for all the players involved, such as:
- For banks partners: they will be able to reach new and more loyal customers as they will have a fully integrated and simpler experience.
- For banks customers: they will have the chance to do these processes in a single application, in a simpler way and without losing time switching between applications. In addition, customers will have highly customizable experiences.
- For banks: they will be centric in the life of their customers instead of being in a position where many of the interactions they have with their clients can be replaced by AIPs, PISPs or even other banks that provide these integrated services and that facilitate their customers’ lives.
On the other hand, from a technological perspective, to incorporate a lifestyle banking strategy, banks need to have the technology, architecture and systems that allow them to integrate easily with their partners and this is key.
Lifestyle Banking is not a distant future
We already have lifestyle banking. There are some banking apps that support customers in their life and not only in their relationship with the bank. Some neobanks and fintechs have also developed new use cases and built more options to help their customers become centric in their lives.
The banks that don’t have open finance and/or open economy in their strategy should at least make a reflection and consider including this approach on it.
From NTT DATA perspective, we believe that lifestyle banking is the future, so we have started to develop some use cases leveraging in a top notch banking use cases architecture like NTT DATA Platea. Platea can orchestrate all interactions between banks and third parties (vendors, partners, other banks) to offer a better service to their clients and community.
NTTD DATA Innovation & Open Finance Director