The disruptive force of fintech innovation is driving the retail banking sector toward an open-source model that is founded on its use of APIs. According to the newly published World Retail Banking Report 2017 by Capgemini and Efma, in order to successfully build and maintain customer relationships, banks will need to embrace and even lead the Open Banking evolution.
The future of banking lies in APIs and open source, and is already being fuelled by increased collaboration between the opposing worlds of traditional banking and fintech. Those banks that are unable or unwilling to adapt to accommodate an Open Banking model will be faced with the very real risk of disintermediation from their customers. That’s according the findings of the new Capgemini World Retail Banking Report 2017, published in association with global non-profit network and knowledge-sharing organisation for decision-makers in banking and insurance, Efma.
As in previous years, the latest edition of the World Retail Banking Report [WRBR 2017] offers an in-depth look at customer experiences around the globe, exploring the disruptive impact of fintech innovation and the perceptions of modern banking customers with respect to these changes. The report draws insight from the findings of one of the industry’s most extensive surveys to date, with a total in excess of 16,000 bank customers from 32 countries around the globe having responded. In addition to this wide-reaching survey of consumers, upwards of 140 in-depth interviews with banking executives helped to determine the dos and don’ts of successful symbiotic relationship building across a diverse range of industry stakeholders.
Disruption demands transformation
- Although fintech firms are among the most recent newcomers to the financial services industry, these innovators are already capable of delivering better levels of positive customer experience than banks. By focusing on specific areas of the banking value chain and leveraging agile processes and the latest technologies, fintech companies are able to deliver frictionless, personalised, and highly enticing offerings to customers.
- While traditional banks still have significant sway over their customer-base, non-traditional firms are gaining ground, with nearly one-third of banking customers reporting a relationship with at least one non-traditional firm.
- Countries with thriving fintech hubs have taken a lead in offering the highest levels of positive customer experience – a clear indication of the growing relevance and impact of fintech disruption.
APIs – essential to collaboration & the evolution of banking
- Collaboration with non-financial services providers to create a value-based marketplace for consumers is key to improving long-term customer loyalty. The value of collaboration lies in being able to bring a trusted bank brand together with the innovative agility of the fintech ecosystem. Collaboration will likely become the preferred way of doing business; 91.3% of banks and 75.3% of fintech firms indicated that they expect to partner with each other in the future.
- APIs will enable service providers to take innovative ideas to market more quickly and cheaply, without having to build their own infrastructure. In addition to providing the opportunity to offer new products and services, opening up of APIs will enable banks to monetize their data and open up new revenue streams.
- As banks create their API strategy, they need to consider the potential risks arising out of data security and customer privacy. Likewise, as the prevalence of APIs grows, it will become increasingly necessary for the industry to ensure interoperability of the various stakeholders, enabled by common API standards.
Open banking offers opportunities, but also poses threats
The conclusion of WRBR 2017 by Capgemini and Efma asserts that in order to get the most out of fintech collaboration and open APIs, banks must strive to identify and act upon the role they want to play in the digitally connected ecosystem. Although open banking will undoubtedly provide banks new opportunities to offer next-generation banking services through various channels, it nevertheless presents the simultaneous threat of disintermediation from third parties. A digitally sustainable business model should centre on customer innovation through simplicity of use, security across all channels, and, last but not least, the ability to quickly consume relevant banking offers.
To access the complete World Retail Banking Report 2017 [PDF] by Capgemini and Efma, click here.