Customer experience: the new battleground for banking?
Through Ada Westerinen, Director, Solutions Engineering, MuleSoft
Expectations for frictionless digital experiences have never been higher as global lockdowns have accustomed us to transacting online. For banks, the customer experience has become the new battleground on which they compete, as the ability to offer more sophisticated digital services becomes the key to success. It shows no signs of changing, so we can only expect digital banking experiences to improve more and more. However, for banks that rely on legacy IT environments, achieving these ambitions could be a challenge, requiring a fundamental overhaul of how their operating models work.
Adopt a digital-ready strategy
To lay the foundations for this new approach, banks will need to adopt a “digital ready culture”. This underscores the willingness to continually invest in new service delivery models to meet and serve customers through digital channels. To further strengthen the impact of these efforts, many will begin to look for new ways to make the customer experience as smooth as possible. Automation will be a particular focus, driven by the use of technologies such as AI-enabled chatbots and capabilities such as straight-through loan processing. The principles of open banking will also become more relevant than ever, as banks seek to harness the power of APIs and third-party capabilities to find new and better ways to serve their customers.
As the momentum for this API-based innovation picks up, banks will take their first steps towards an “ ecosystem mindset, ” in which they will re-imagine their traditional business model in favor of a model where their services are offered as a platform. In this approach, banks white label their digital services and capabilities for others within their larger ecosystem to use. A real estate platform, for example, can use a bank’s mortgage application capacity to allow customers to apply for a loan directly from the app. In this way, banks will be able to support better digital experiences and reach more customers through indirect channels, rather than “owning” every customer relationship in the traditional sense.
However, putting all of this into practice is often far from straightforward. The reality is that banks’ IT operating models typically aren’t about customer experience innovation or working with third parties. Too often, IT banking is a complex mix of legacy systems, where valuable customer data is dispersed in disparate silos. This makes it difficult for banks to pull together the right sets of customer data to deliver more personalized experiences, directly and indirectly, through collaboration with others. In today’s environment, the success of banks depends on their ability to connect these data silos and third-party information, and make them readily available to any part of the organization. This is a fundamental requirement to create a 360-degree view of each customer and to be able to better understand and meet their needs in order to improve profitability through data analysis and customer-based insights. ‘IA.
A future driven by APIs
To overcome these challenges, banks have started experimenting with API-based integration. An API strategy can play a key role in breaking the silos that prevent stores from using their data to create personalized customer experiences and collaborate more effectively with others. By placing APIs in front of every system they need to extract data, banks can create a flexible integration layer that allows them to effortlessly pull everything together to create a single view of the customer.
In addition to supporting more personalized digital services, it also allows banks to become more composable, to accelerate innovation in customer experience. This gives them the ability to create new digital services faster, both internally and through external collaboration. Using APIs, banks can expose their IT assets as a network of reusable capabilities that others can discover and leverage. A third party wishing to use some banking capacity can simply connect the bank’s API to their own product or service, to create a better and more connected customer experience. The more banks are able to open up in this way, the more opportunities they have to join new value chains, which generates more revenue.
What is common to all of these trends? The ability to rapidly develop new offerings and capabilities, reach new audiences, fend off digital competition and create ecosystems, all of this requires banks to have a platform mindset, both in their IT approach and commercial. The universal connectivity behind this platform approach are APIs, which must be seen as a strategic ingredient to thrive.
Win the battle
While this approach may seem like a long way off, we’ve already seen how theory works in practice. For example, a UK-based SME lender Allica Bank uses APIs to connect its apps, data and devices, so it can quickly bring together all of its digital capabilities and connect with those of other organizations to create market-leading experiences. Allica’s brokerage portal has been rated as the best in the market by its clients as its API-based approach allows it to pull data from various external sources to dramatically speed up the overall lending process.
With customer expectations for frictionless digital services at an all-time high and rising steadily, we should expect more banks to strive to gain the kind of experience Allica has been able to deliver. As a result, APIs will become a critical cornerstone of banks’ IT strategies, providing the flexibility and agility they need to become ‘digitally ready’ and continue to redefine customer expectations and industry standards. in terms of connected experiences.