Advances in communications technology created a conduit through which customers have wider access to their personal financial information and additional avenues of engagement with financial institutions. Market forces and regulatory agencies are combining to ensure consumers have firm control of their assets and the transactional histories, allowing for flexibility and choice in service providers.
By the early part of the 21st Century, many traditional banks had become complacent in their treatment of customers. After all, customer churn rates were relatively low and an individual’s choice of bank was generally dictated by their proximity to a branch, so options were limited. But the aftermath of the credit crunch and the rise of APIs has been the biggest wake-up call that the retail banking industry has ever had.
So-called ‘challenger’ banks and other innovative financial service companies began to spring up, giving digitally engaged consumers many more options than they had had before. These customer-centric services and products promised transparency, fairness and better integration into our daily lives.
Mercator Advisory Group anticipates the wider range of financial service providers and the lowering of barriers to market entry and participation is heralding many profound changes in how individual consumers will manage finances and the partnership role financial institutions will play. We take a closer look at the implications and near term realities in our report Banking as a Platform: API Technology Presents Opportunity to Financial Institutions. One potential outcome from greater competition in the marketplace will likely be an expansion of service to the underbanked and unbanked individuals, as technology will allow for banking services to be extended in cost efficient ways that benefit consumer, FI and the global economy.
Overview by Joseph Walent, Associate Director, Customer Interactions Advisory Service at Mercator Advisory Group
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