Most commentary on Open Banking stems from our collective city-centric viewpoint - with all our built in biases. The conversation naturally, repeatedly, centres upon how models and established players will be disrupted by nimble challengers - the common story of David and Goliath. But the story doesn’t have to end that way.

"We’re at the very beginning of a new era: don’t wait to take part."

In our experience, a key problem with so much of the conversation on Open Banking is that it seldom focuses sufficiently on understanding what customers really want - especially in a world where mobile is an expectation, not a device. We see incumbents rarely develop this understanding robustly enough, particularly in comparison to the approach FinTech challengers take.

Customer engagement metrics with existing mobile banking products, for example, may be encouraging, but it’s a mistake to assume that indicates preference, or loyalty. Recently, TAB completed research with 1,400 UK banking customers, exploring how they felt about the mobile banking experience with their current bank. What emerged was a high degree of ambivalence: for most customers, usage is driven by lack of alternative, and necessity.

 

Some banks haven't seen change in 50 years

 

The problem is, the proposition for most banks hasn’t fundamentally changed for 50 years. Today’s mobile offering is primarily built around a shrunken web version of the original paper statement. That’s less problematic while banks retain a firm regulatory and structural control on supply.

Across industries, however, wherever this grip on supply weakens, new entrants have not only emerged, they have focused first on winning the customer experience. They aggregate high value customers, and then grow their focused offerings into larger, more efficient platforms – think Netflix, or Just Eat.

For retail banks, this regulatory change is already here with Open Banking. That poses an urgent question: can established incumbents succeed in retaining their most valuable customers?

"Customers actually valued a new set of mobile banking features substantially more, if they came from their existing bank - not the challenger alternative."

Our research highlighted that a bank’s highest value customers today, and in the future, are also those most ambivalent to their bank’s current offering - and the most interested in new potential solutions. High value and high switch-risk, these customers represented two distinct groups with dramatically different mindsets. And yet - we continue to see the majority of retail banks delivering one-size-fits-all digital products.

There is clear opportunity: in our research, customers valued a new set of mobile banking features substantially more if they came from their existing bank - not the challenger alternative. This is the incumbency advantage: epitomised by companies like Nike or GE and currently underutilised by most banks.

The future winners we see - like ING with their new proposition, Yolt - are acting now. They move fast to refine their understanding of what customers need, and responsively feed that back into their strategy.

We’re at the very beginning of a new era: don’t wait to take part.