Utility or Everyday Bank? New EU Regulations Force Organisations to Choose

The Revised Pay­ment Ser­vices Direc­tive and What It Means for Your Cus­tomer Expe­ri­ence, Part 2: Util­i­ties and Every­day Banks

Accel­er­at­ed change has trans­formed many aspects of the finan­cial indus­try over the last sev­er­al years. From mobile wal­lets like Apple Pay to dig­i­tal-first banks like Mon­do, new com­peti­tors have dis­rupt­ed old par­a­digms, and forced every bank to place the cus­tomer expe­ri­ence front and cen­tre.

In the first blog post of this two-part series, we exam­ined two types of ser­vice providers that will find them­selves new­ly empow­ered by the PSD2 regulations—third-party pay­ment ini­ti­a­tion providers (PISPs), who’ll enable cus­tomers to make pur­chas­es from any bank account using phones and oth­er con­nect­ed devices; and account data aggre­ga­tion ser­vice providers (ADASPs), who’ll lever­age data from mul­ti­ple bank accounts to pro­vide per­son­alised spend­ing analy­ses and rec­om­men­da­tions to cus­tomers.

Now, in this sec­ond arti­cle, we’re going to explore the impli­ca­tions of PSD2—and the new dis­rup­tors it empowers—in terms of your own organisation’s approach to cus­tomer ser­vice. What does PSD2 real­ly mean for your organ­i­sa­tion, from a cus­tomer expe­ri­ence per­spec­tive, and how can you lever­age it to gain a lead on your com­pe­ti­tion?

It all starts by mak­ing a cru­cial choice about the nature of the ser­vice you pro­vide.

The util­i­ty approach

If, at the bare min­i­mum, you choose to sim­ply com­ply with PSD2 and take no oth­er action, then you risk los­ing both sig­nif­i­cant vol­ume and qual­i­ty of cus­tomer inter­ac­tions. This will put you in what has been called the “util­i­ty” cat­e­go­ry: man­ag­ing the core under­ly­ing bank­ing sys­tems and pro­vid­ing access to it to third par­ties who own the cus­tomer expe­ri­ence,

Think of it like the Nation­al Grid. They pro­vide the core infra­struc­ture to con­nect homes and busi­ness­es to elec­tric­i­ty and gas sup­plies, but the likes of British Gas and EDF pro­vide the “front-end” cus­tomer expe­ri­ence.

Banks that go down this route will no longer serve cus­tomers in any tra­di­tion­al sense, just as the Nation­al Grid doesn’t real­ly serve cus­tomers direct­ly. Instead, these banks will pro­vide the depend­able, eas­i­ly acces­si­ble back­end infra­struc­ture that cus­tomer-fac­ing ser­vice providers need to func­tion.

Yet, although some banks may choose to fol­low this util­i­ty route at the expense of their cus­tomer-fac­ing func­tions, they are like­ly to lose out on mar­ket share in the long term.

Every­day engage­ment

If the util­i­ty approach doesn’t sound par­tic­u­lar­ly appeal­ing, a sec­ond option is to become more of an every­day bank—a cus­tomer-fac­ing ser­vice provider that aggre­gates data from accounts at your bank and oth­ers, and offers ser­vices that lever­age the open APIs to help cus­tomers in ways oth­ers can’t.

To suc­ceed, these every­day banks will need to realise the pow­er of cus­tomer insights by com­bin­ing their own first-par­ty data with the data made avail­able through the open APIs to dif­fer­en­ti­ate them­selves by offer­ing stand­out dig­i­tal expe­ri­ences and ser­vices that are high­ly per­son­alised and tai­lored to the indi­vid­ual. These cus­tomer-cen­tric expe­ri­ences will need to bring con­tent and data togeth­er to delight the cus­tomer at every turn by antic­i­pat­ing each customer’s needs. By rais­ing the bar, these every­day banks will gain mar­ket share, ensure cus­tomer loy­al­ty, and dri­ve growth through new rev­enue streams.

These changes will impact every­one from retail banks to wealth man­age­ment firms—anyone who inter­acts and engages with con­sumers. For exam­ple, if an insur­ance provider can access a customer’s his­tor­i­cal data, then con­sumers will start to expect high­ly per­son­alised and unique quotes tai­lored for them. As the data shared will be ubiq­ui­tous, the dif­fer­en­tia­tor will need to be not only the bespoke quote, but also the expe­ri­ence and the way the insur­ance com­pa­ny engages with them.

The good news is that this isn’t an “either-or” choice. Your organ­i­sa­tion can func­tion both as a util­i­ty and as a cus­tomer-fac­ing every­day bank; and in fact, this is very like­ly the smartest approach of all. Banks that become sole­ly util­i­ties will grad­u­al­ly van­ish into the back­ground, while those that focus on pro­vid­ing prod­ucts and ser­vices that address both finan­cial and non­fi­nan­cial needs of the con­sumer, com­bined with great expe­ri­ences, will become an every­day bank cen­tral to a customer’s needs.

Most banks are still debat­ing the tech­ni­cal, IT, and secu­ri­ty chal­lenges that the PSD2 pos­es. But if you decide to fol­low the every­day bank route, it’s time to start focus­ing on the user expe­ri­ence now, to make sure you’ll be ahead of the curve in becom­ing a lead­ing every­day bank.

Thanks for join­ing me on this two-part series on the ways PSD2 is poised to trans­form the cus­tomer expe­ri­ence in bank­ing. If you’re ready to take the next step on your own organisation’s jour­ney toward bet­ter cus­tomer expe­ri­ences, we at Adobe are here to help.

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