Tag Archives: Banking

Building the Future of the API Economy


The impact of API economy is across all industries. Because APIs by their very definition are supposed to promote interaction and dialog across multiple companies, often in different industries.

In my article on American Banker Don’t Give Away The Store When Enabling APIs, I brought out the focus on ensuring that banks maintain their customer experience front end, while allowing additional channels for growth. For example, allowing travel sites, Facebook and retailers to access the bank’s services were examples which if taken too far with potential competitors could result in commoditization and loss of value (as the service providers are hidden as utility providers).

APIs are the future in today’s connected world. In this new post on American Banker titled 3 Steps to API Success, I tried to provide a simple framework to guide the development of Bank APIs with those customer experience principles in mind. Essentially, apart from going to market rapidly by opening up new channels, it is important to start building a sticky and value-adding customer experience by focusing on projecting the bank’s brand, not just the utility service itself.

The 3 steps in the framework sort of follow a road-map because they increase in complexity of course. Also read the full article on American Banker.

  1. Fill in the gaps in our customer journeys: Like any business, we often fulfill our end of the bargain, while leaving the remaining customer needs to the other players in the industry.  However, in this rapidly innovating world, the most important use cases for API banking will be driven by 3rd party applications that help customers accomplish the objectives that ultimately matter. Otherwise, this gap will be filled quickly by someone else. For example, banks provide a bank account but the space is rife with innovations around P2P payments and check sharing, spending pattern analysis, savings goals and calculators etc. Examples abound for small businesses, as well as commercial banking. Perhaps the first step could be to address these end to end journeys by enabling a 3rd party ecosystem around APIs developed for these purposes. These applications meets the objectives of low cost services provided to niche customer bases. These innovations often failed the “business case criteria” for in-house development. But they help the bank establish its brand by creating an umbrella ecosystem that is similar to how enterprise technology providers create their partner ecosystem.
  2. Moving towards an App Ecosystem model: The next level of the API model will go beyond exposing APIs to third parties towards building controlled environments where discovery, adoption, experimentation and payments will be seamless. Fidor and Mondo are 2 European banks that have laid the foundation of this model. Powered by 3rd party innovation and supported by customer experience experts from the bank, this app model brings a much tighter integration of the banks offerings and aligns them with the customers. Such a model reduces the go to market friction for partners (e.g. advertising, or fulfillment). It also ensures that the bank can market the entire package of services to customers and create conversations around their end to end needs, instead of negotiating on product features and price.
  3. Becoming a connector of value: The ultimate goal is not just to provide a service, but to anticipate customer needs, and ensure they are receiving the assistance they need as they make financial decisions. Over the years, banking has evolved naturally (like any service) from being a custodian of money, to being an agent that helps (or can help) make the right financial decisions. The API model now provides banks the right tools to make this mission come true. For example, helping the customers maintain the right balances for their upcoming payments, their IRA contributions, or just sticking  to a monthly budget for various categories of spend. As customers utilize the banks services (or the apps), this ecosystem will tend to grow stronger. In summary, for the first time, banks will be able to connect the different use cases and bring singular focus on the overall customer objectives. For example, Citi’s Price Rewind program tries to do this but relies on customer signups instead to gain access to transaction data and customer context. The Bill Payment service comes close but it needs to be integrated with the rest of the bank’s ecosystems.

Connecting individual value propositions by creating overarching customer identities and helping customers with proactive advice is what will differentiate one banking API platform from the other. And for this to take off, banks must take steps to make customers aware of the new capabilities, clarify each value proposition from the customer’s perspective, and on-board customers quickly and comprehensively. Such a model will obviously be based on ensuring privacy through various opt-in mechanisms. In summary, working backward from the customer motivations and experiences in the digital economy is key to innovate and maintain relevance.

Read more on American Banker at 3 Steps to API Success. Your thoughts and suggestions are welcome. Image taken from https://pixabay.com/en/users/geralt-9301/


Practical, simple steps to banking customer engagement N.0


A recent report on The Disruption of Banking by The Economist highlighted that more than half of the banks are either ignoring the Fintech trend, or talking but not doing anything about it. In 2016, we are now seeing banks finally starting to tackle the emerging trends by partnering on many fronts, utilizing application program interfaces (APIs) and experimenting with innovations such as blockchain.

In this article on BAI Banking Strategies, I highlighted how customer engagement is proving to be elusive and what steps can be taken to overcome the challenges. The biggest challenge today is the defragmentation of the customer engagement front end. Banks need to be at the forefront, but are increasingly at the back end fulfilling transactions. They must take practical, simple steps to banking customer engagement, and possibly sidestep the traditional digital transformation journey as they grapple with customer engagement in today’s fast changing world.

First, omni-channel capabilities need to be looked at as a combination of capabilities and channels that are coming together to make magic. However, most reports and surveys out there ignore this and focus on “channel capabilities” – important but not enough. Instead of asking the question about which features must be made available to customers on which channel, we should be thinking of moving a customer along to the next step of their overall journey according to their expressed or implied needs. That may be the simplest way to tackle the burning question of contextual customer engagement and experience.The digital transformation agenda is almost too complex to make progress against. The underlying premise should be to create a customer experience that feels responsive and fresh, based on education and focused on the customer’s goals.

Second, the right approach for the future may be to prioritize key customer journeys, make them the top priority and do everything around them in an agile and incremental fashion. The reason is that all bets are off when it comes to the ideal tech architectures of the future even as these customer engagement improvements are needed now, not 12-18 months later. I took the example of a customer who’s logged in and browses credit cards or a mortgage. Try it. You’ll be surprised at what doesn’t happen. This customer journey approach also has the benefits of removing organizational silos and mobilizing everyone around the same overall metrics.

If you’re interested the entire article is on   BAI Banking Strategies.

The Banking API Leapfrog

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In a recent article on American Banker (Don’t Give Away the Store When Enabling APIs), I brought out three best practices for banks to adopt as they think of leveraging the Fintech and Banking API phenomenon.

Even as Banking API are being touted as a must for banks, the common position of argument is from the perspective of emerging companies and Neobanks who are trying to reach the customer in a world that has apparently just opened up. Banks are widely being positioned as too slow, expensive and unwilling to innovate with the customer in mind. While the API trend for open banking cannot be ignored, I’m summarizing the 3 key points of the American Banker article that highlight a 3-pronged approach:

  • A more open ecosystem does need to be created, but banks should be looking to improve, rather than letting the innovation defragment the customer experience. Banks should be looking at the innovations that meet the niche or fringe needs, and also build upon the customer 360, rather than destroy the integrated CX. The App store model that Fidor bank in Germany has initiated is a great way to do that. Citi is embarking on this too.
  • The benefits of Banking API should go both ways. Even as emerging players seek to leverage the bank’s data, the banks should be building a data pipe back into the bank as well. That will help build increased customer context (e.g. transaction detail) which has not been fully available as of now due to regulatory and privacy concerns. Citi’s Price Rewind program is a step in that direction that can be enhanced through such 2 way models with the consent of the customer.
  • Enable rapid innovation by engaging in white-labeled partnerships and perhaps acquisitions to accelerate technology innovation. Banks have been doing white-labeled offers for decades so this is nothing new. Services such as identity monitoring, and online retail marketplaces have existed for years. BBVA’s acquisition of Simple, and their real time payments service based on Dwolla are also examples of the acquisitions and partnership approaches. The key will of course be the pace at which banks can internalize these innovations.

Approaching the new digital world the right way is crucial to be able to maintain the customer front end. Its easy to be dis-intermediated. While being a provider of the banking and payments backbone is a viable option, the real risks may be about missing out on innovative revenue and business models that arising.

Thoughts are welcome. Photo credit: Kay Kim(김기웅) via Foter.com / CC BY

Read the full article on American Banker here...

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Digital Disruption in Banking – The 5 Most Urgent Priorities For Banks

I’m sure every one of us is looking at how our banks are going to respond to the winds of change. Disruption and disinter-mediation is in the air. The following is a summary of an article on this topic on BAI Strategies.

The most important task for banks in the age of Digital Disruption in Banking is to look beyond the traditional revenue models and prepare for the new ones. The silver lining is that as per a study by JD Power, overall customer satisfaction with banks is going up. The caveat is that customer satisfaction doesn’t necessarily indicate perceived future value or continued business. Rising customer satisfaction levels indicate better retention today, but the larger risks for the future are about maintaining banking’s position at the front end of the customer experience. That’s where transactions originate, even as fulfillment avenues tend to become commoditized or disrupted.

Based on the most impactful areas which are leading the CX away from banks, I proposed the following 5 initiatives that banks need to focus on with urgency to meet the challenge of digital disruption in banking head-on.

The full article is on BAI Strategies here so please do look it up for a more detailed description.

1. Orient mobile towards commerce and engagement: Banks have done well with mobile service. More than a third of bank customers regularly use mobile banking. This has improved customer retention as well. In 2016, however, the focus must start shifting to personalized marketing and affinity. According to a JD Power 2015 survey, more than 68% of virtual customers have not been contacted by the bank in over a year. It’s time for mobile banking to transform itself into a sales and consulting engine, leveraging simple marketing automation and lead nurturing principles to engage customers across channels.

2. Blend outbound and inbound channels. The benefits of broad relationships are well known. However, cross selling between product lines has been challenging and isolated at best. At the same time, 55% of customers say that being recommended products and services that will better meet their financial needs would strongly increase their loyalty to the bank. Instead of getting lost in the complexities of Digital Transformation, the first step should be address simple customer engagement scenarios across channels. Following up when a customers looks up a product online can be an easy quick win.

3. Innovate business models. Technology is enabling new non-banking disruptors to gain market share in areas such as person-to-person (P2P) lending. According to theMillennial Disruption Index, 53% of customers don’t think their bank offers anything different than other banks. More troubling is the fact that 73% of them would be more excited about a banking offering from a technology firm such as Google, Apple or Square. Instead of jumping headlong into FinTech, banks should keep an eye on retaining the customer front end. At the very least, initiating white labeled partnerships to provide these offerings to customers is key. Regions Bank has started this in 2015. It’s the right decision to avoid loss of customer engagement.

4. Improve payments capabilities. The consumer market has evolved to be much more demanding when it comes to the range and speed of transactions. P2P money transfers and small business payments are two typical areas where disruption is already occurring. As far as the future is concerned, revenue from payment transactions should not be the focus. Instead, preserving the ability to innovate business models by retaining the customer front end is vital. BBVA has partnered with Dwolla, and the ACH improvements have been announced. The market is picking up pace and momentum.

5. Rethink the branch network to be the sales generator, not the sales enabler.While branches are still useful for closing sales transactions, customers typically do not use them to originate those transactions in today’s digital environment. They most likely began with self-driven research on the Web. The branch should be leveraged for what it is. In an age when more than 75% of customers believe that their banking relationship is transaction- rather than advice-driven, the branch needs to start being the hub where customer goals are discussed. That transformation for the branch will mirror other industries like retail, where physical presence is becoming an important complement to online models.

The full article can be accessed on BAI strategies. I obviously leveraged the 5 principles from my book Dancing The Digital Tune. Photo credit: driver Photographer via Foter.com / CC BY-SA

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