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As open banking beckons, banks need to recalibrate the way

A TECHNOLOGY revolution called open banking is about to hit, muddling the future for banks. Open banking will allow consumers to aggregate their information across financial institutions, insurance companies and brokerages on a single platform.

AS BT reported last week, the Monetary Authority of Singapore (MAS) will announce details of such a platform next year. MAS managing director Ravi Menon noted that this poses a challenge for traditional banks. The question is: what will they do to keep their customers?

I liken open banking to the porting of mobile numbers, which was not easily available to consumers until 2008. Back then, many who badly wanted to quit their telco never did because they wanted to keep their original phone numbers. With full mobile number portability came a centralised database infrastructure which served both existing and new telco players. Users responded - by telco-jumping with gusto.

Similarly, open banking may lead to customers "porting". Right now, consumers use traditional banking touch points to access expenses tracking or make e-payments. Accounts, loans and investment-related products all lock a consumer in with a financial establishment. But in an open banking environment, banks will no longer enjoy such "loyalty"; instead, they will have to earn it.

An open banking platform will allow consumers to review data from multiple institutions using application programming interfaces (APIs). There can be detailed analyses and reports, based on past information. Data will not only be laid bare, it will be presented in a way that allows individuals to see how their money - in totality - is working. They will be able to compare financial institutions against each other. All this will be essential for consumers as they plan for their sunset years, noted Mr Menon.

Easy comparisons will lead to easy "portation" as customers may be inclined to switch their accounts for higher rates of return. Artificial intelligence tools may even prompt customers to move their funds into different investment portfolios and insurance products. All these could potentially lie with a competing bank and will change how banks operate as they will need to "up their game" in order to retain their customers.

What would entice the consumer to stay? In my view, it will come down to a customer-centric approach - something banks can begin to sharpen right now.

How banks must adjust

Europe is already embracing open banking: last year, the Competition and Markets Authority rolled out mandatory API specifications, from payment initiations and customer account information, to standardised formats and coding languages for the interfaces. China, too, has the technical potential to "go open" while consumer sentiment favours it, according to an Ernst & Young report.

In Singapore, MAS has adopted a progressive but even-handed approach. It was also one of the first in the region to formulate open banking policies but is not yet requiring banks to divulge data.

Open banking is good for consumers. Banks must gladly keep building their capabilities to embrace that inevitable future. OCBC, for instance, was the first bank to launch an open API platform in May 2016 with a strategy to set up an in-house team of specialists to develop APIs for retail and business customers. Since then, we have developed more than 500 APIs, creating value for customers and helping make their lives more seamless.

We have been selected by government agencies such as the Central Provident Fund and the Inland Revenue Authority of Singapore to roll out a number of first-to-market APIs to save customers' time and do away with tedious processes such as form-filling. Such innovations, from us and others, help build foundations and vital links for Singapore's Smart Nation initiative.

But as a business, to keep the business, all banks must adjust their priorities. What is needed is a new, friendlier approach, one where the factor of experience will weigh heavier in the balance.

Customer kinship will lead to understanding

If there is one thing that banking institutions can adopt, it is this: a bank's mindset must go beyond the transactional, and into the relational. It cannot start with "what products to sell" but, rather, "who is the person that we are serving?"

Banks should intuit what their customers require through all their life stages. Banks should understand every aspect of those life stages and see how they can be part of their customers' lives, removing pain points and paving the way for customers to move forward with their financial goals. Then, banks should give the customer something beyond what they might have imagined. The focus then is not on the product but on the customer.

Incidentally, open banking should not be about collecting customers' personal data. Bank representatives must be clear as to what information customers agree to provide. Those representatives ought to ask the right questions, listen and then communicate respectfully on how customers' needs and wants will be addressed.

Imagine if a bank did this, every step of the way. Imagine if it understood your habits and behaviours - and warned you of pitfalls and risks ahead of time. Imagine if you truly felt a kinship with your relationship manager.

Even though open banking has not yet quite arrived, banks need to recalibrate the way without delay.

  • The writer is executive vice-president, Group Operations and Technology, at OCBC Bank

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