Financial services

How digitalization is transforming financial services – BIAN interview

Hans TesselaarExecutive Director Banking Industry Architecture Network (BIAN)talks about the impact of the digitalization of financial services on the sector, how it can promote financial inclusion while leaving some customers behind.

Traditional banks need to adapt and expand their offerings to provide the best customer experience and to compete with new entrants to the industry. How are traditional banking platforms and systems changing to keep up?

During the pandemic, financial services organizations have been forced to become digital entities overnight. However, it became clear to the industry that the extensive use of legacy technology within banks and the lack of industry standards meant that the speed at which these established institutions could bring new services to life was often too slow to meet customer demand.

The lack of industry standards has intensified this problem in recent years. This means that banks are forced to work with partners based on their proprietary technical language and how they operate alongside their existing ecosystem. This, instead of functionality and how they could potentially transform the bank and its services, which limits the organization’s ability to integrate new cutting-edge services into its customer experience (CX) capability, this which has an impact on overall customer satisfaction.

To keep pace and overcome these hurdles, banks have started adopting a coreless approach in their technology strategy. A coreless banking platform can help banks modernize their core banking infrastructure by translating each proprietary message into a standard message template. This improves communication between financial services and technology providers and ensures that each solution can connect and exchange data seamlessly. This provides endless possibilities for connection, collaboration and upgrades, and enables different solutions to operate within the same framework as existing CX systems, so banks can extend their service offerings across their banking ecosystem and avoid confined or limited use.

As the popularity of digital banking increases, more and more traditional banking groups are beginning to close their branches and shut down their ATMs. This excludes an increasing number of people preventing them from accessing essential services. How to deal with this financial exclusion?

As banks accelerate digital transformation projects, the closure of street bank branches is inevitable. As a result, those who prefer to do their banking transactions at their local branch are unable to manage their finances. Banks must ensure that they continue to innovate while ensuring that no customer is left behind.

Some banks offer hands-on assistance at their branches or libraries to help those who cannot access digital services at home. This approach has helped improve accessibility and increase education around digital initiatives.

A pilot agreement has also been launched for banks to share services to support the local community and the future of cash. Major UK banks will assess local needs with each branch closure. The assessment might recommend opening a shared branch, installing an ATM, or upgrading a post office.

The deal means banks will have to commit to providing whatever is recommended to support customers who prefer to do their banking in person.

Additionally, the Financial Conduct Authority (FCA) has proposed that banks will have to provide more detailed analysis to justify a branch closure. The FCA will also have the power to ensure local communities across the UK have access to cash and banks that refuse to comply could face fines. This will ensure that access to physical services remains a priority for banks.

These are promising initiatives, but the industry must do everything to ensure that these initiatives are generalized. It must also continue to think outside the box, innovate and develop other initiatives to limit financial exclusion as much as possible.

Should a bank try to provide financial services to different generations or do you think the future will be represented by niche banks aimed at a different group? What should an ideal banking experience look like?

In short, yes. Banks should strive to know their customers so they can tailor services, especially from a generational perspective and between those who are more digitally savvy and those who prefer in-person banking. Focusing on a personalized customer experience will be what sets banks apart and helps them stay competitive, and if these niche banks can better target different groups than traditional banks, customers are likely to turn to specialty banks for an experience that meets to their needs.

For an ideal experience, the most common consumer transactions, which would primarily be payments, should be as simple as possible. In today’s digital environment, contactless is set to become the norm as we move towards a cashless society. As online banking becomes more widespread, the bank’s “interface” including the app, website, branches and call centers must be multilingual to be accessible and serve all customers. in the same way. Additionally, there should be step-by-step guidance for more complex transactions, such as a loan. If it’s too complex to do online, there should be easy ‘in-person’ advice available, or access to video chats, for example. Ultimately, providing an effective online and in-person experience is key to an ideal experience.

How does BIAN help banks prepare for the future and adapt to an ever-changing environment?

BIAN was created to establish, promote and provide a common framework for solving banking interoperability issues. The organization is made up of more than 80 banks, fintechs and technology providers, working together to drive innovation and lower the cost of banking.

Members combine their industry expertise to define a banking technology framework that standardizes and simplifies the core banking architecture, which was convoluted and outdated.

This approach to collaboration is the primary contributor to the knowledge and services needed to facilitate and implement banking interoperability to develop and operate a community helping user organizations with platforms and services.

We hear a lot about Open Banking and the changes it is bringing to the industry. As its popularity grows, how can it be used to help underserved communities?

We are seeing tremendous growth in Open Banking users across Europe. In 2021, for example, there were 18.8 million users, a number that is expected to reach 63.8 million in 2024.

As awareness grows, Open Banking may have enormous potential to reach out to underserved communities. Open Banking, for example, can help provide access to responsible credit using alternative financial data that can expand access to financial information that helps increase a consumer’s chances of getting loan approval.

It can also help promote better financial well-being. The information provided by different providers based on spending habits can give a detailed analysis of the consumer’s financial situation and offer personalized suggestions on how they can improve their finances.

Finally, Open Banking has the potential for financial inclusion by helping millions of people transition from cash to digital financial transactions in a secure ecosystem.

About Hans Tesselaar

Hans Tesselaar has over 30 years of experience in the financial services industry, being active for banks, insurance companies and pension funds. Hans Tesselaar has specific areas of knowledge such as people development, workforce reorganisations/restructuring, negotiation with unions and works councils. As Managing Partner of an ICT consulting firm specializing in financial services, he has extensive experience in areas of expertise such as strategic business planning, enterprise architecture, resource development people and innovation.

About BIAN

The Banking Industry Architecture Network (BIAN) is a collaborative, not-for-profit ecosystem of leading banks, technology providers, consultants, and academics from around the world. Together, this network of professionals is dedicated to reducing the cost of banking services and accelerating innovation in the industry. Members combine their industry expertise to define a breakthrough banking technology framework that standardizes and simplifies core banking architecture, which has traditionally been convoluted and outdated. Based on service-oriented architecture principles, the comprehensive model provides a future-proof solution for banks that fosters industry collaboration.