When the Financial Services Royal Commission was established more than a year ago, no one could have known what lay ahead. There was no shortage of drama during the extensive public hearings — with one even halted for an ambulance to be called — and finally this week all the action reached a head with the release of the commission’s final report. Treasurer Josh Frydenberg says the government will take action on all 76 of Commissioner Hayne’s recommendations and consumer groups have reacted to the brutal findings saying they expect more when it comes to financial services.
One way banks can start to meet consumer expectations is to start thinking more like technology companies. Banks have everything to gain from operating more like tech unicorns. After all, Silicon
Valley tech companies are one of the major driving forces behind shifting consumer expectations.
In the report, Hayne wrote:
“Many in the industry have recognised that technology is likely to play an important role in the future of financial advice, but there is not yet a clear picture of what that role might be. Any recommendation directed to altering the current structure of the industry would need to grapple with the fact that the industry itself will very probably look very different in five years’ time.”
What’s clear is that the overwhelming theme of the report is a call for the banking sector to provide more transparency and better customer experiences — something technology companies have long known.
Take Google Maps. Looking for a restaurant? The app will give you turn-by-turn directions on how to get there, ratings and reviews, and recommendations for nearby alternatives. You can even order an Uber straight from the app. This frictionless experience is becoming the new standard across the board, and so too is the level of transparency apps like Uber offer. Before an Uber customer even calls a car, they are able to see exactly how much it will cost them, then, once the driver is on their way they can see where they are, who they are and what their rating is. Similarly, financial organisations that can deliver on the seamless and transparent experience consumers are looking for are the ones that will win their hearts (and wallets).
The success of online lending platforms, robo-advice, and other money management tools shows that consumers are craving convenience in this space. But beyond efficiencies in particular areas, consumers want consolidation – like with Google Maps and Uber, they want their finance apps to work together
What does that mean in practice?
It’s all about removing barriers – starting with the concept of ownership of customer data. Most would agree that customers own their financial data and in theory should be able to choose where it goes and how it is used, however, in practice it’s not usually that simple and that needs to change.
Take wealth management – an important part of which is being across all your assets and liabilities. Without easy access to data from all providers, the picture is incomplete. A more seamless experience in this instance means financial providers need to make a consumer’s own data more accessible
to them. With access to data from their mortgage provider or landlord, vehicle financier, insurers, investment platforms, financial institution and more, consumers can connect all of their financial information to get a more complete view of their financial world and make more educated decisions based on live data. The same applies to financial advisers who can leverage this holistic view of a client’s financial position to offer better advice around investments, tax and estate planning.
Coming into effect this year, open banking should bring us even closer to a world where consumers have more choice when it comes to where their data goes. By giving people greater access to, and control over, their data, the data-sharing regime will allow accredited third parties to receive banking data when customers provide consent.
In the B2B space, the rise of the Open Application Programming Interface (API) gave financial technology companies the ability to safely and securely access bank accounts with customer consent. This contributed heavily to a more frictionless experience for business owners, who really benefited from the ability to connect their financial data to applications such as accounting platforms. For example, it helped them get a live view of their cash flow and a better idea of when things might be a little tight in order to adjust — helping them keep their doors open, longer.
While the financial services sector continues to dissect the commission’s final report, one thing is for certain: the massive opportunity a more connected and transparent financial industry creates. Those who can deliver the reliable, frictionless experience people crave — whether government, advisers, banks or fintechs — are the ones who will reap the benefits.
Stephen Jackel is the CEO of myprosperity.
First published in the Business Insider Australia on 5th February 2019