In force since January, the Second Payment Services Directive (PSD2), aka Open banking, is a regulation that forces the largest of our banks to open up access to their data; a necessity that could change the way many people and businesses bank. Below Jerry Matthews, Commercial Manager & Head of Bridging at KIS Finance, explains everything you need to know, touching on the risks and opportunities therein, and answering the big question: is it safe?

The Competition and Markets Authority (CMA) has started a revolution which encourages consumers to share their financial data to third-party companies, after years of being told to do the exact opposite.

The Open Banking Implementation Entity (OBIE) was created in response to the UK Government’s request for a fairer, more transparent banking and financial services. Transparent is definitely what they got.

What is Open Banking?

Open Banking is a new system which means customers can allow third party providers, other than their bank, to access their financial information.

These providers can be anything from insurance and mortgage companies to shopping sites, mobile phones and broadband providers.

The main idea is to give consumers more control of their financial information and have access to a wider range of products and services. Customers can allow the company to analyse their spending habits and offer them better deals, tailored to them.

There has been a new change in UK law which means that banks must allow FCA regulated businesses to access a customer’s personal and financial information, but the customer must give their permission first. Customers can give and withdraw permission at any time they choose.

The bank can only prevent the business access, on the customer’s behalf, if they suspect that the company is fraudulent, or not regulated by the FCA.

When will Open Banking Start?

Four of the nine largest UK account providers, Lloyds Banking Group, Nationwide, Allied Irish Bank and Danske are ready to start Opening Banking now.

Six weeks maximum has been given to RBS, HSBC, Barclays and Bank of Ireland by the Competition and Markets Authority (CMA). Santander’s Cater Allen has been given another year to prepare.

In order to integrate the new system smoothly, for the first 6 weeks the banks and companies offering Opening Banking services have been asked to only make it available to a small group of selected customers and to limit the amount of instructions processed.

How Will These Third-Party Providers Gain Access to our Information?

There appears to be two methods as to how your information can be accessed;

API’s: New communication technologies have been developed, Application Programming Interfaces, which are designed with customer security at the forefront. API’s are regularly used by various online tools and mobile apps to provide joined facilities, allowing software from numerous companies to, essentially, ‘talk’ to each other. This way, your information will be securely passed between companies with this technology in place.

Log-In Details: Another method may be that third-party providers will request that you share your online bank log-in details directly with the company. Yes, you read that right. A separate piece of legislation, the Payment Services Directive, will allow some companies to do this.

The company can then log in to your online banking account, like they were you, to access your financial data, such as; transaction history, direct debits and standing orders. This means that the company is likely to be able to access a much larger range of information, so really, the one way to withdraw your permission to this company, for certain, is to change your account password and other security details.

Do you Actually Have to Share your Information?

I am glad to say no, this isn’t mandatory.

The new rules state that banks must allow third-parties access to your information, but you have to explicitly give that company your permission – they can’t just look at your account willy-nilly. There will be an option to either switch on or switch off Open Banking on your account.

Once you have given that company permission, it’s not set in stone either. You can withdraw your permission at any time.

So, there is some security in knowing that this isn’t some sort of new binding contract.

So, what are the Potential Risks with Open Banking?

Current surveys suggest that a majority of consumers are reluctant to hand out personal and financial data. But, with the new system, this behaviour is expected to steadily change over time.

However, this does open up massive risks surrounding data privacy and security.

There are worries concerning the fact that by creating more chains of data access, it will be much harder to prove who was at fault if the customer’s information is stolen, making it harder than it already is to be compensated in these situations.

Not to mention how people handing out personal and financial data is like a gold mine to fraudsters.

To name just one potential scam, fraudsters could easily mimic third-party providers, by copying their choice of contact, to trick people into handing over their data which leaves consumers at risk of losing their money, and potentially, their identity being stolen.

Also, giving a company your bank log-in details with the only secure way of knowing that you have cancelled your permission is by changing your password? This is the main thing that consumers are told to never do, to never hand out your bank log-in details. This leaves your details at huge risk, and something just doesn’t make sense to me.

It is absolutely vital that the industry regulators ensure that consumers are wholly protected from any data breaches if they are to use these services with confidence and trust.

The Positives…

Although I think there is a lot at stake for people who decide to go forwards with Open Banking, I do think, for some people, this could be a way to gain much better control over their finances.

With Open Banking, it could be made easier to assess what type of bank account is best for you by analysing how you actually use it. For example, a lot of people can be unsure of how much their overdraft is costing them, but if a company can see your account, they may be able to provide you with a much clearer perspective and give you cheaper alternatives.

Or, for people who want to save money but are struggling to do so, sharing their data with budgeting companies/apps could help them see where and how they can save money.

As we herald a new era of banking, will PSD2 result in FinTechs challenging the dominance of traditional banking services?

13^th January 2018 marked the beginning of the Open Banking era. The EU’s Second Payment Services Directive (PSD2) which took effect earlier this month forces banks to allow third parties, including digital start-ups and challenger banks, access to their customers’ financial data through secure application programming interfaces (APIs), and create a new way for customers to bank and manage their money online. If all goes to plan, PSD2’s main objective is to ensure maximum transparency and security, whilst encouraging competition in the financial industry. The Open Banking revolution aims to create a form of cooperation between banks and FinTechs – however, this doesn’t seem to be the case 18 days after the triggering of PSD2, with a number of banks that still haven’t published their APIs and incorporated the necessary changes. Naturally, the directive is good news for the FinTech sector. FinTech companies and digital payment service providers will gain greater access to high-street banks’ customers’ financial data – something that they’ve never had access to in the past. This will then undoubtedly inspire FinTechs to develop new innovative payment products and services and provide users with opportunities to improve their financial lives, whilst allowing them to compete on a more-or-less level playing field with the giants of the financial services industry, the traditional banks. Does this mean that traditional banks will need to up their game when competing with the burgeoning FinTech industry? Are they scared of it, and if not – should they be?

Traditionally, and up until now, banking has always been a closed industry, monopolising the majority of other financial services. The recent advancement of digitisation has shaken the industry, with FinTech start-ups offering alternative solutions to more and more clients across the globe. From a bank’s point of view, PSD2 will forever change banking as we know it, mainly because their monopoly on their customers’ account information and payment services is about to disappear. Banks will no longer be competing against banks. They will be competing against anyone that offers financial services, including FinTechs. And even though the directive’s goal is to ensure fair access to data for all, for banks, PSD2 poses substantial challenges, such as an increase in IT costs due to new security requirements and the opening of APIs. However, the main concern is that banks will start to lose access to their customers’ data.  Alex Bray, Assistant VP of Consumer Banking at Genpact believes that a possible outcome of Open Banking is that banks could end up surrendering their direct customer relationships. If they don’t acknowledge the need for rapid change or move too slowly to adapt to the landscape, they risk becoming “commoditised payment back-ends as new aggregators or payment initiators swoop in”.

However, Alex Bray also argues that for banks to take advantage of PSD2, “they will need to find a balance between openness, privacy and data protection.” There is also a case to suggest that traditional banks who embrace and utilise the new directive to its potential could transform a potential threat into a huge opportunity. He also suggests that: “they [banks] will need to improve their analytics so they and their customers can make the most of the huge amounts of new data that will become available”. Only a well-thought-out strategy will help banks to survive the disruption to the long-established financial industry – and cooperating with FinTechs can be part of it. Alex Kreger, CEO of UX Design Agency suggests that “Gradually, they [banks] could turn into platform providers of banking service infrastructure… As a result, successful banks may lose in service fees, but they will gain in volume. Many FinTech start-ups will not only offer services on their platform, they will actively introduce innovative products designing new user experiences, thereby enriching the financial user’s journey and transforming the banking industry. This will attract new users and provide them with new ways of using financial instruments.”

Only time will answer all the outstanding questions related to the open-banking revolution. FinTech firms are expected to ultimately benefit from all these changes – however, whether the traditional banks will cohere to the new regulations quickly enough, whilst finding ways to adapt to them, remains to be seen.

As of this month, the revised second Payment Services Directive (PSD2) is in force and set to cause significant disruption within the European payments & banking sector. The first and foremost disruption is the possibility of Open Banking, as the legislation now allows a level playing field for PSPs to operate.

From data and cyberattacks to market competition, there are lots of opportunities and challenges to confront, but are Your Thoughts on the prospects of Open Banking? Below Finance Monthly hears from a record number of sources on the introduction of PSD2, each with a different take.

James McMorrow, Head of Payment Strategy, Global Transaction Banking, Lloyds Banking Group:

It is still very early days. Open Banking is now live and we are working with regulated third parties. What’s immediately clear already, from a client perspective, it has laid the groundwork for a range of new financial services solutions for consumers and businesses.

Saying this, it’s still worth noting that we’re still very much at the beginning of the journey in the UK and Europe. PSD2 is now live, but new payment and account types will be added to the API channels throughout 2018 and 2019 to meet regulatory requirements.

However, what these solutions will look like in practice, who will be providing them and the rate at which businesses and consumers will adopt them is not yet clear. An important consideration for the entire financial services industry will be finding the right balance between ensuring customer security and developing an exceptional user experience.

Winston Bond, Technical Director EMEA, Arxan Technologies:

All banks are now required to share their Application Programming Interfaces, or APIs, to third-party applications, however, many have still not been advised how to do this securely.

The principal weakness in sharing APIs is the simple authentication that is widely used by most API Management Solutions to confirm that the client app on a device is genuine and, has been authorised to utilise server assets. If a cybercriminal breaks through an app’s security and decompiles its code, they could potentially root out the encryption keys. Attackers can then trick the system into recognising them as a legitimate client, giving them access to anything the API is authorised to connect with.

To prevent attackers from exploiting an API in this way, banks will need to ensure they cannot access the cryptographic keys it uses to authenticate itself, by using code obfuscation, for example.

As we’ve said before, the onus really is going to be on the banks. The PSD2 regulation makes it clear that they are responsible for the ownership, safety and confidentiality of their customers’ account data. Consequently, banks are going to have to do everything they can to maintain their well-founded reputation as leaders in security, including creating a united approach to ‘open banking’ as they work on their own solutions throughout 2018.

Gunnar Nordseth, CEO, Signicat:

By providing their users with a safe way to store identities and offering access to these through an API, banks can leverage the trust they have fought to establish and defend.

Unlike physical identity credentials, such as passports and driving licenses, a bank identity API can expose only the required attributes—a business can ask if someone is who they say they are, where their country of residence is, or prove that they are over 18 without needing access to additional irrelevant information. A focus on identity will offer banks an opportunity where previously there was only challenges.

Ryan Wilk, VP, NuData Security:

While open banking will allow a myriad of services for customers to take advantage of, it will also open them up to third-party vendors and therein lies the challenge. Securing the supply chain so that personal information is protected from attacks will take a herculean effort and one that has not been entirely successful up to this point.

The new European directive mandates the use of strong customer authentication (SCA) – two or more identification elements – to increase customer protection. One of the three pillars of SCA is biometrics technology. Physical biometrics provide a convenient authentication layer for customers, and passive biometrics help institutions detect and avoid screen scraping from third-party providers who try to access customer accounts through the bank interface. With a multi-layered approach that includes passive biometrics financial institutions can block screen scraping and provide a higher level of safety to open banking.

Daniel Hegarty, CEO and Founder, Habito:

Open Banking will be a fantastic innovation for consumers. However, with one in five people in the UK classifying themselves as financially illiterate, it also presents a pressing need to be implemented safely and securely. The consent-based data sharing that Open Banking will bring, will enable many to potentially save thousands per year, for example by simply switching from their standard variable rate mortgage, to a fixed rate product. However correct data management is imperative - low levels of financial literacy, mixed with a new ease of financial information sharing, could put some at risk. Financial services firms need to continue to invest in technology and prioritise safe Open Banking implementation, for the benefit of UK consumers."

Alex Bray, asst. VP of Consumer Banking, Genpact:

While this is a potential goldmine for fintechs which want to revolutionise the banking experience for customers, it poses significant challenges for banks which risk becoming a back-office utilities. In fact, a possible outcome is that banks could end up surrendering their direct customer relationships, becoming a commoditised payment back-ends as new aggregators or payment initiators swoop in. For banks to take advantage of PSD2, they will need to find a balance between openness, privacy and data protection. At the same time, they will need to improve their analytics so they and their customers can make the most of the huge amounts of new data that will become available.

Graham Lloyd, Industry Principal of Financial Services, Pegasystems:

As with all regulation, the unstated issue is what’s coming next in the pipeline, be it PSD3 or some other impactful directive. Beyond scenario planning, responding to the unexpected is all about the ability to change processes and technology rapidly and with minimal disruption. They must regularly redefine what it means to ‘promise’ and ‘deliver’, not just generating rich insights, but selecting the right recommendation and next best action within time and budget constraints. Also, operating models and IT should be quickly and painlessly changeable from a single point.

Jeremy Light, Head of Payment Services, Accenture:

Under the new regulations, banks will have to release customers’ financial data, with their consent by a few clicks online or through a mobile app. We found two thirds of consumers were reluctant to share their details with third party providers, and overwhelmingly trust their bank with financial information. Until new entrants to the financial services sector can earn consumers’ trust, banks can draw on their extensive heritage to secure an important early advantage. But, if banks move too slowly to adapt to the open banking landscape, they risk becoming back-end, transactional players, while retailers and third parties become the face of faster and frictionless payments

Victor Trokoudes, CEO and Co-Founder, Plum:

We anticipate a host of new providers coming to the fore in the wake of Open Banking. But these will be different to traditional banks, acting more like advisors to people’s financial life (from saving, to investing, to finding the right financial products). Users will still use their current provider to transact, but will manage everything else via these new wave of “added value” providers that are focussed on offering services that make their users better off.

Jessica Leitch, Principal, Adaptive Lab:

The biggest problem is that banks will start to lose access to their customers’ data. If you’re transacting purely through say Paypal or any other P2P payment platforms the banks not only can’t see what your spending your money on, they also can’t take advantage of overdraft, FX or other kinds of fees associated with financial transactions.  Losing this also takes away the data the banks use to feed their risk models.  Basically, it has the potential to disrupt the banks current prime account model as well as their payments value chain.

Lorenzo Pellegrino, CEO, Paysafe:

In this new world, fintechs no longer have to work within the limitations of legacy bank infrastructure. Instead, they can grasp the opportunity to refine their user experience, making it even more seamless and frictionless. More to the point, open banking — as well as the faster payments rollout in the UK and EU — may well result in card volumes shifting to online bank transfers, creating an environment ripe for disruption.

We also believe that services that allow users to send funds from their bank account in real time will benefit from these developments. And this holds especially true in Austria and Germany, where over 80% of all transactions are still cash- based.

But it’s not all roses. The price of payments is also intensely competitive. For businesses that have already achieved scale, large volume at low margin makes economic sense. For the rest, there will be a need to differentiate based on the ability to keep transactions as seamless and frictionless as possible.

Christian Ball, Head of Retail Banking, GFT:

The APIs of tomorrow will give banks a means to let customers do complex things quicker, such as apply for mortgages at the swipe of a mobile touch screen.

Our latest research confirms customers are excited by the prospect of more personal services, showing that 67% of them would be more likely to take out a loan with a bank if it came with practical advice unique to them. But to achieve the level of innovation required to stay relevant in an Open Banking world, banks need to be able get their customer data in order. Specifically, they need to get better at processing and segmenting customer data, which can be done through greater understanding of transaction metadata. This data can be described as the holy grail to unlocking the customer experience, and being able to use it properly will enable banks to understand what services customers actually want, and subsequently help to uncover new revenue opportunities.

Alastair Winsey, Regional Director EMEA, Thousand Eyes:

When a business’ network becomes unruly and far-reaching, locating the true origin of a problem, degradation issue or even a DDoS attack can take the best part of a day. This is due to the number of third-party providers that cloud computing ultimately relies upon to create an application ecosystem enabling a wide range of services ranging from payments to text and voice notifications. By providing true instant visibility of a complete network path including corporate networks, the internet and connected APIs and Cloud Provider apps, companies can shrink this time from days to mere hours, enabling them to quickly remedy any problems. The dawn of Open Banking in 2018 will make network health a vital component to business success in the finance industry.

Alexander Beattie, Enterprise Director UK & Ireland, Anomali:

From an overarching cyber security perspective, a major concern is the fast-growing number of new organisations who are now authorised to handle sensitive information. Whereas this data was previously held in the hands of a few well-known and visible organisations, under pressure to adhere to regulatory standards and security measures, now the same data will be shared with numerous other, relatively unknown, untested organisations.

This may create a greater chance for fraudulent activity, as Threat Actors explore the weak links in this new enlarged target-rich environment. Undoubtedly, this plethora of new market entrants will be held accountable and will have to adhere to regulation, to safeguard the security of the data they handle. To ensure this they will be investing heavily in the state-of-the-art cyber security systems and processes to try and stay ahead of the curve.

Nick Caley, VP financial services and regulatory, ForgeRock:

PSD2 and Open Banking will democratise the payment services industry by creating more choice for consumers, in turn opening up possibilities for innovation and changing the relationship between consumers and payment service providers for good.

While a lot of the discussion has been focused on how this change will put more pressure on the established banks from tech-savvy fintechs, it is often overlooked that retail banks do have considerable advantages over new players entering the market. For instance, the big retail banks have had decades to build trust with their customers, and they have a strong track record of protecting customer data. This foundation of trust is something that emerging fintechs will need to try and replicate if they are to succeed in the long-term.

Vanita Pandey, Vice President Product Marketing, ThreatMetrix:

Any new payments schemes governing payment initiation service providers (or PISPs) will need to be carefully crafted. Existing payment infrastructures are based on years of heavy investment, with specific operating regulations, settlement protocols, liability measures and pricing structures mutually agreed upon by innumerable parties. Many of the risks associated with a wholesale migration to a new schema can be mitigated by the use of risk-based authentication that preserves the balance between security and convenience.

With all the investment retailers have made in backend processes for one-click payments, it is critical that final directives include provisions for risk-based payments, so retailers can maintain friction-free customer experiences while securing all one-off and recurring transactions.

Camilla Sunner, Managing Director for the Global Partnership Business Unit, Valitor:

When you think about the number of options we now have to purchase goods when we are shopping, it is incredible. On top of that, the process involved in making a payment is highly complex. The fact is, we no longer expect to be faced with numerous decisions in a store or online. We want a simple equation where the consumer buys, the merchants sells, and payments shouldn’t even need to be thought about. PSD2 will help us along that path, making payments quicker and easier by opening up banks’ data.

However, the responsibility for steering this change shouldn’t just lie with the regulators. Traditional businesses need to focus on working together to build one uniform high-tech payments pipe that will ultimately make buying and selling less complicated.

Edward Berks, Director of Banking, Fintech and Ecosystem, Xero:

Open Banking means three major changes for accountants and bookkeepers – better access to digital bank feeds, slicker payments and new tools to empower accountants to predict when a business might need more working capital. The smartest banks and fintech players are already recognising the important role that accountants play in supporting businesses through this transition. Competition for mind-share among accountants will amplify in the coming months as new services and experiences become available across banking, payments and lending.

The most forward thinking accountancy firms, regardless of size, are finding ways to deliver great value and services to their growing client bases by embracing digital.

We would also love to hear Your Thoughts on this, so feel free to comment below and tell us what you think!

There are three core principles for Open Banking. This video explores those three principles and talks about the risks and opportunities involved.

The 3 key principles of Open Banking are:

1. Real time sharing of data, including statements and transactional data

2. Real time initiation pf payments, that allows other organisations to initiate payments for you

3. Information of products and services that allows comparison

Open Banking brings opportunities to work with new organisations and provide consumers new and innovative solutions but also creates new compliance and governance questions to ensure that organisations can protect consumers' privacy and support consumers to get the value out of their data.

Below Felicia Meyerowitz Singh, Co-founder & CEO at Akoni Hub, talks Finance Monthly through the implementation of PSD2 legislation this weekend, with an overview of open banking, what it means for financial services, and what opportunities are in store for banking customers.

It’s been a long time coming but we are entering an era of greater access and better financial services that will finally put the needs of customers first.

The catalyst of achieving this much needed and long overdue result is the culmination of big debate, endless lobbying and necessary government legislation.

For years banks have sat on the most valuable asset to any business: the infinite transactional and financial data of customers that essentially define individual’s tastes, preferences, budgets and - crucially - their requirements for building and planning their lives.

High street banks - reluctant to share their oligarchy of power, held on tightly to this data - unwilling to share it with others - or use it to enrich their consumer experience and put them at the heart of their business model.

With open banking, this power will be wrestled from the big incumbents and data will be available to third parties, SMEs and new digital players. This will lead to a better future for financial services, one that increases competition and creates a greater consumer experience. More businesses will finally have a shot at delivering services that are tailored and relevant to individual customers.

Open Banking will also strengthen the role and influence of FinTech companies that have the agility and open APIs to make data sharing possible and to disrupt the status quo. We have already seen new banks like Starling Bank taking the lead, by creating partnerships with other FinTechs to create a customer rich ‘Amazon of Banking’ experience.

Together with multiple significant other sources of data being made available with consent and through API format, this will finally deliver financial products in a simple and meaningful manner, with automated prompts as companies or market products change, resulting in data innovation and improved financial outcomes, as well as removing the hassle for enterprises, saving time and money.

Key to this is delivering analytics in an easily understandable form without overwhelming businesses - leveraging the rapidly advancing data science technologies, machine learning and AI, as well as outstanding design and user experience is part of the market change we are moving towards. While the UK and EU lead the way, there are early sprigs of global growth for international solutions.

Incumbents are not resting on their laurels. Many banks and financial institutions that make up the global sector are making impressive strides to capitalise on open banking, while also exploring valuable collaborations with new innovators that can help them harness the immense value of their data.

A great example is BBVA, which has embraced the digital movement and has set itself apart from other global offerings and is putting the client front and centre. The Spanish bank has nurtured the development of impressive FinTech firms – such as the digital ID startup Covault- while also making some canny acquisitions to keep it at the forefront of innovation that resonates with a new generation of consumers and keeps them agile and technology focused. This includes the purchase of digital bank Simple.

Open banking also presents some challenges. Exposing large quantities of personal consumer data could increase the risk of cyber-attacks, hacking and identify-theft. The possible reluctance of customers to share their personal data could also derail the initiative. Educating consumers and gaining their trust around data sharing will therefore be crucial to the success of this initiative. So too the need for businesses to share information within a secure platform and for online payment providers to be scrutinised by the rigorous laws in place.

If all goes well, the developments of open banking – and the opportunities they bring to consumers– cannot be overstated. Banks will get another chance at creating better value-added services, while SMEs will finally have the access they need to deliver what their customers truly want and ultimately transform their consumer experience. Additionally, corporates are also now included in the scope of Open banking, increasing pressure on banks to deliver improved services to the neglected business market.

We only hope that customers will see the value of it all to willingly share their data and banks will leverage their relationships of trust to deliver solutions of value to their commercial client base. With their consent, the blueprint for a better future of finance can be mapped out for generations to come.

Pini Yakuel, founder and CEO of customer engagement specialists Optimove, talks about the coming changes in the financial services sector.

Ten years ago, UK bank Northern Rock collapsed, marking the beginning of a global financial crisis whose effects on financial services are still being felt today. Consumer mistrust in traditional banks does still linger from the fallout of the last decade. With new regulations looming on the way, financial services organisations use customer account data, more established financial providers need to update their marketing strategies to build strong relationships with their customers, before they are led away by new online challengers.

In a survey last year on confidence in banking, only 39% of consumers reported having complete confidence in banks with branches, as compared to 44% for internet-only banks. [1]  Customer loyalty is still low, with online challengers pulling into the (admittedly narrow) lead. As these competitors grow, banks need to reach out to their customers and build a more personalised relationship with them.

Consumers tend to not change banks once they have chosen one, even if they are dissatisfied, and this inertia in the industry has meant that banks haven’t focused on sustaining close customer relationships. But this is changing, with a record number of customers switching to a different provider last April. [2]

The change has been in part enabled by the variety of digital and app-based financial providers that have emerged in the last few years as competitors to the more traditional banks. By offering services tailored to each user, such as retail discounts and financial advice on how customers can use their money more efficiently, these challengers are taking business away from established providers. Research by Kasasa has found that eight out of ten millennials would switch banks if a competitor offered better rewards.[3]  These challengers are making the most of this new generation of brand-agnostic customers by offering more individualised rewards to their customers.

After the implementation of the Open Banking Initiative and the Payment Services Directive 2 (PSD2), which comes into force in January 2018, the spur for customers to compare the services and rewards of different financial services providers is set to increase. Banks will have to share customer account data with third parties (with the customer’s consent). They will be required to open up the back end of their systems to other payment providers. This means that customers will be able to easily compare the services of different providers on an equal playing field, giving FinTech companies a great opportunity to win customers, as transparency may overcome inertia.

To respond to this, banks will need to make the most of the customer data available to them. Using data analytics to divide customers into separate groups based on what kind of account-holders they are, they can develop specific, individualised marketing schemes. By trialling a variety of marketing strategies, such as individualised retail discounts or reductions on charges, banking marketers can use AI programmes to make smart observations on which strategies bring in the most revenue, for each type of consumer, leaving no customer behind. From this, banks can forge strong customer relationships that provide ongoing value in both directions.

The way that established financial services firms respond with their marketing and customer engagement will be key to survival. Fintech companies have focused on the value they demonstrably add to customers. Traditional players must get better at articulating their proposition to customers – personally, emotionally, and intelligently. With the large amounts of customer data available to them, traditional banks have the resources to do this too. By applying AI and data analytics to their marketing strategies, banks can gain deep insight into what is most useful to their customers. They need to develop their own personalised services for their users, using this insight to create meaningful relationships with their customers.

Website: http://www.optimove.com/

[1]  EY, “Trust: Without it you’re just another bank”, http://www.ey.com/gl/en/industries/financial-services/banking---capital-markets/ey-trust-without-it-youre-just-another-bank

[2] The Telegraph, “Record number of customers switch their bank account”. http://www.telegraph.co.uk/business/2016/04/19/record-number-of-customers-switch-their-bank-account/

[3] https://kasasa.com/landing-pages/switching-millennials.html?utm_source=the%20financial%20brand&utm_medium=guest%20post&utm_campaign=2017-Partner-Marketing&utm_content=switching%20motivator%20for%20millennials&utm_term=millennials