The age of invisible banking

Caroline Béguin: Yeah, because we evolve in a world that is moving very fast. We live in a world that is more digital than ever. So I was wondering how customer expectations for banking experiences changed in recent years? 

Nicolas De Genot: Yeah, the expectations have definitely changed a lot. Clients now are fully digital native clients. They expect and they’re trained not by banks, but now by every lifestyle app of every day. Could be a music app, streaming shopping app, a mobility app. All of those apps, Airbnb, Netflix, Amazon, have trained the customers that their interactions have to be instant, real time, intuitive and personalized so that it feels like it’s done for that specific client, even though we know it’s not maybe specifically done for that client, but it feels like it’s really tailor-made for me, and it’s also invisible. A lot of the features just come naturally. You don’t feel like you have to ask for something. It just pops up automatically. So that has become the new standard for digital experience. So now clients, when they open a bank app, they expect the exact same thing. They expect the loan to be instant, take a few moments, and they expect to minimize the obstacles, you know, having to upload documents or go through lengthy processes. So that’s what’s changed. And of course, when you look at the new generation, generation Z, Alpha, they’re now 15 years old. We need to think to ourselves, what would a 15-year-old today think about their current banking experience if they open a regular app? Would they be in sync? Would they be happy with that experience? So they definitely are expecting more, and they’re expecting the bank’s services to come to them. They don’t wanna come to banks. They live in a stress-free world, and whenever they need a moment of need or they need a loan for a car, at that specific moment, they would like the bank to come to them without a lot of redirections, without a lot of wasting time. So they want the banks to power all of those experiences, so then they become part of their lives. So that’s the shift, let’s say. 

Caroline Béguin: To you, what are the main differences between traditional banking and the new models enabled by open banking and embedded finance? 

Nicolas De Genot: It’s pretty simple for me or clear, is traditional banking mainly is pushing products out. It’s pushing products through their channels only, whether it’s their physical channels, branches or advisors, but also through their apps or many apps that they may have. So they’re pushing products out without specifically targeting a specific client. It’s just waiting for clients to interact. The new models are pushing those services into other distribution channels so that every app or every non-banking flow can embed banking products and services in that flow, in that moment of intent. So you’re switching the way you’re distributing your product, so that broadens the amount of clients you can reach and lower your acquisition costs and make sure that you’re at the right place at the right moment. You’re not just waiting. You have to be more proactive. So that’s the big switch, how to be proactive and how to connect behind the apps that my client is using on a daily basis. 

Caroline Béguin: At the beginning, you were saying that financial services are becoming more and more invisible. How does open banking allow financial services to become more invisible and integrated into customers’ daily lives? 

Nicolas De Genot: Yeah. In order to do that, you definitely need products that feel personalized, that feel tailor-made to you. And to do that, you need data. So when you have a client that’s been banking with you for a long time, you have a lot of data already, so maybe you don’t need more. But the issue is mainly with new clients or prospect clients where you don’t have a lot of information. They use your bank for just a few things. You need additional data. That’s where open banking, comes, and it’s a game changer because it allows to connect external banking information with, of course, your customer cons-customer consent, bring that information, three, 12 months worth of transaction inside, and thanks to that, you’re instantly getting a full picture, 360-degree picture of your client, which allows you then to tailor-make your offers and adapt and push exactly whatev- what is it that you, that the client is expecting. That’s the big change. And the ease of sharing that information is key. So you don’t have to share a paper statement that you don’t know where it will end up anyhow, and a lot of people have seen that, that information, which is maybe confidential. Here is an API-based transfer of information where the customer knows exactly what he’s sharing that information for how long, to whom, and he has context, and he can stop, remove that consent if he wants to at any time and regain back the information, let’s say. 

Caroline Béguin: I’m wondering what are the steps toward invisible banking and why each step is important. 

Nicolas De Genot: Yeah. So definitely there’s many steps. The first one is the banks need to make sure that they know how to use their internal data already, whatever they already know about the client, to be in a place where it can be consumed and tapped into. Then it’s using open banking data, which has existed since twenty eighteen, at least in Europe, and for longer times across the world. Using that because it’s available for you, so use it for getting to know your client better. And then to that you also add everything that has to do with contextual data, which is coming from those platforms, non-banking platforms, so you know exactly what the client is doing now. “Ah he’s looking for a flight”. Okay, so you get that information, so you know at what moment of that journey should I as a bank tell the client, “Hey, by the way, here’s a loan for your flight,” or, “Here’s an insurance. Here’s what you’re, you need at that moment.” So it feels, again, personalized. It feels like it’s coming at the right moment, and it allows the banks to tailor or know exactly what’s the best moment to intervene in that journey. So when you do that, those steps, the more you use this, the more you get information from your client on a daily basis, where they are, what they are doing, so the more you can learn and the more you can, again, tailor make, your products to fit that specific mold and fit what the clients need in a simple way without asking again the same information to the client. So this is powering this hyper-personalization and the new products in other distribution channels. 

Caroline Béguin: And from a technical point of view, what role do APIs and real-time data play in enabling embedded finance and better customer experiences? 

Nicolas De Genot: Well, APIs are key because they’re like the underlying infrastructure, this web of connections that allow them to quickly and seamlessly embed into other partner journeys. And by having all of this through an API, it’s very simple for a partner to embed and connect different things in different places of the journey without having to do transformational projects. It is simple to use. It is a simple onboarding. Developers know how to tap into APIs easily, so it’s something that has been around for a long time, so it’s not magic. No, it’s not something that is hard to use. But the banks need to make sure that whatever they’re exposing, the quality of the APIs, the description of those APIs, and the process to actually allow people to connect is really lean and clean, so it feels simple. That’s the most important. So APIs are key, a key foundation to interoperability, connection and changing information. 

Caroline Béguin: Do you have any examples of personalization that open banking and embedded finance can deliver? 

Nicolas De Genot: I mean, I would say one of the more clear examples is probably around, I would say for example, a car loan, because that’s a cool example where you’re looking for a car online. So you’re browsing on that webpage. You find a few elements. Usually, clients already know more or less the type of car they are looking for, so they’re gonna select a specific filter of the amount of the car, the type of brand. Is it electrical? Is it petrol? Is it for five, seven people? So that gives you a lot of contextual information from the client. So that’s one thing you’re getting. Then when you’re getting open banking data, you’re getting even more information about the client to make sure that he will be approved. And combining these two then allows the banks to very quickly tell the client, “Hey, Caroline, you are approved for your car. No worries, you can have the twenty thousand euros you need. And by the way, this is a loan that’s specifically tailor-made for you because it’s gonna adapt to your current income capacity. If you can only afford four hundred euros per month as a payment, we will do a plan so that you can actually pay that amount on your car. And by the way you’ve taken a all risk insurance on your car, so that shows me that you’re protecting the assets, so maybe I can even reduce the rate a bit more the rate because there’s less risk that the car will be lost and then the customer’s having zero at the end of the day.” So all of this allows to hyper-personalize and come back with a specific product or add on features around the product at that moment of intent behind that car website that you’re looking for, making the experience faster, so you don’t have to go through forms waiting three, four, five, a week or ten days to actually get a loan approved. And you also reduce the churn rates, you also reduce the dropout rates for the partner. So the car dealership has a lot to gain because he’s selling right away. He doesn’t need to wait 10 days hoping that the banking process happens how it’s supposed to happen. They know in advance already that the product is approved, it’s there, and the client just needs to click, and within two minutes, he goes on his way. 

Caroline Béguin: And from a bank perspective, what challenges do they face in adopting these new models, and how can they overcome them? I’m talking about traditional banks. 

Nicolas De Genot: Yeah. Definitely it’s a challenge in the sense that they need powerful platforms to allow them to tap into their legacy products wherever they have their information stored. It needs to be available and in real-time, so it needs always to be available through strong and fast APIs, and they need a performant, let’s say, structure or infrastructure to be able to use that data. They also need a performant platform to be able to connect to the external data and have all those processes embedded in their DNA. How do we handle data? How do we make sure it’s GDPR compliant? How do we make sure we get the right consent from the client? How can we be transparent to the client because we need to protect the client as well. So you need to combine all of these things internally in your DNA to be able to actually start-Providing products. And this is not a one-time job. It’s a loop, so you need to refine the product. The more information you get, the more connections you get, you’re gonna learn what has the client selected, what type of products are the most popular for a specific type of clientele. So thanks to that, you come back to your product teams, and they can adapt the products live and decompose a loan in many different sub-features that you can add on or move, which that’s how you wanna feel. You wanna feel that your product is modular so that the customer is actually the one sort of selecting how he wants the loan to be or the account or the investment. Whatever product you’re pushing, because again, it’s not only loans, it’s any product that you have, you can embed that product at another moment of intent in a specific page. So investments could be that. But if I understand what your physical position is, do you have kids, are you married, I might be able to give you the best investment advice thanks to that. But if I don’t have that information, my advice or the recommendation from the bank might not be the perfect one. So you, you can get lost in translation. You need to find the right moment, the right information to be able to push the exact thing that the customer is expecting. So again, it feels natural. It feels like the bank is talking my language. They know who I am. So of course, I’m gonna have more chances to say yes to that product. And it’s way simpler for a bank to get clients this way than going on the street with banners and advertisements, hoping to get to the right person with one monolithic product that is saying, “I do loans.” No. We need to break that into a specific type of loan so that you really reach that specific clientele. 

Caroline Béguin: So even if it wouldn’t be perfect, what would be your advice to a bank that wants to transform data into trust through open banking and embedded finance? 

Nicolas De Genot: I would just say not be scared to start small. You know, you can start with one layer at a time. Start by first getting to use your internal data already better. So if you’re able to make sure that your products are starting to be personalized based on your internal data, you already know more or less how to do it. Then you add another layer, which is open banking data. So you connect with an aggregator, you go fetch the best information out there from your clients, and you start ingesting small use cases, maybe only for loan origination to reduce risk, to get to do a credit scoring faster without paper. So already the customer is gaining. He doesn’t need to give you statements or income statements, and the process is done in a minute. But at the same time, you’re getting a lot of information, so you also get to learn more about the client and then starting to continue your loop to, “Okay, what else can I offer this client based on what I got?” And then you have the third layer, which is now I’m ready to actually expose my APIs and my services to embed in different places, different platforms, and that’s when you bring the contextual data in as well. So those three layers can happen progressively. And once you reach that third layer, you have the whole vision of the client, and you can start playing with that. And then you can start with one product, then you can add another product. And the more use cases you start adding to that loop, the bigger it becomes, and that becomes your moat or your protection, your wall against competitors. The best tailored, personalized products you have, the harder it will be for competitors to move you out of their way. So that’s the idea. Start small, but start. Use open banking data. It’s at a really mature level, and it’s only gonna get better in quality with the new regulations. There’s gonna be more and more information available, not only account information, but eventually, if FIDA or these type of regulations come into play in a few years, you’ll have access to loans, mortgages, investment, a lot more data that can be really useful at the moment of providing a service to your client. 

Caroline Béguin: Thank you so much, Nicolas, for being with us and sharing your insights. 

Nicolas De Genot: Thank you, Caroline. Great to be here.