When your bank realises financial advise is no longer enough

Banks these days are increasingly testing how to grow their value in consumers’ daily life. A few articles in the Belgian press in the last few days showed this once again. It is a process that is ongoing for quite a few years now.

A very interesting evolution I must say…

Your bank, your security guard

KBC started offering anti-virus subscriptions a couple of years ago. In the philosophy that online banking needs to be secure, this fitted perfectly with the values the bank stands for.

Banks put a lot of attention on taking the necessary measures for consumers to make sure they can safely do their online and mobile banking. Because all starts with the right, and safe, environment, cybersecurity services makes perfect sense.

Over time this service extended to anti-phishing, and even professional support, in case something would still go wrong.

bpost bank followed KBC’s example and started offering a similar offer a year ago.

The reasons for this are quite clear:

- it generates (limited) additional commission revenues

- by making the extra effort for consumers they show that they take cybersecurity seriously

- they lock consumers in with additional (subscription) services

Beobank took another approach: they provide a subscription to secure your house. This symbolises that your bank does not only secures your money, but even your house, and to some extent… your life: the bank as a trust provider remains absolutely valid!

Worth noting is that these subscriptions are often not only available for customers, but for everyone. The amount of non-customers that effectively subscribe is limited, but it shows that it adds an additional limited reason for this kind of services: additional cross-sell opportunities.

Take the example of Beobank: you don’t need a bank relation, but an appointment in a Beobank branch is required to activate the subscription.

Your bank, your real estate manager

To build on the example of Beobank, take the example of Hello bank! They provide online mortgage loans. This is a normal financial service you’d say, and that is correct.

However, Hello bank! brought this to another level: They positioned themselves in the very beginning of the process of finding a house. They don’t only allow you to simulate a budget and to sign for a mortgage loan, but they also integrated immovlam.be, a real estate website.

The bank is not only for credit provider, but in a way also your real estate agent. This is a very good example of Open Banking beyond payments.

Your bank, your transport manager

Years of talks on ecosystem thinking have past and so Belgian banks started rethinking their services as well. The idea is to get more traffic in-app, also from non-core financial services. In Belgium, we can find a few very interesting examples of this.

KBC and Belfius are taking the lead here. In the bank app of both banks, it is possible to order and instantly pay for public transport tickets, or they plan to offer it soon. KBC also offered from the beginning paying for parking on the street.

The services are slowly but steadily being picked up by customers: over the last 3 month, KBC sold 90.000 bus tickets, and over the last 6 month 120.000 parking tickets were paid through their app (I have no numbers available for Belfius).

Belfius had the scoop to be the first bank that is offering the service at Lukoil gas stations to pay your fuel simply with your app, no card needed anymore. Pretty nice, isn’t it? For this service, they collaborate with Carpay Diem, a very promising Luxembourg Fintech.

KBC countered this innovation with a few additional in-app services that play on mobility:

- invisible payments for Q-Park underground parking: after signing up for the service in your KBC bank app, there is no more need to queue in a Q-Park parking to pay. You can simply drive to the exit, a camera recognised the license plate, and in the back, the payments are done, with a notification of the amount that is deducted from your account

- Bike sharing: together with Olympus, KBC developed a solution to rent a bike of Vélo and Bluebike. That helps KBC customers to avoid the registration process before being able to rent a bike.

These services are integrated with your bank account, they require a bank relation. For customers that are convinced it will be a lot harder to switch banks.

On top of that, the bank can make interesting cost savings, once a critical volume is reached. These integrations make the payments behind it more efficient. A direct connection between the third party and the banks helps to avoid the expensive card payments. Interchange fees no longer cover the transaction costs, especially not for the smaller amounts. By pushing the low-value payments over another payments trail, the transactions become lower cost.

Outside-in Open Banking

This is what Open Banking is all about: APIs help to speed up developments. It becomes possible to develop more, and better services to help customers in their daily routines.

The first-mover banks try to get a few steps ahead before PSD2 kicks off. Today they determine the rules.

They say: “Dear partner, you integrate in our app”. That helps the bank to increase their touch points with the customers, to gather more data and to become more relevant.

It often helps third parties as well, since they also avoid the card fees, and they possibly attract more customers through the mobile banking channels.

It is the perfect way to test new things for a better diversification with competitors as well. Through these platforms, banks like KBC and Belfius hope to become the indispensable platform for everything.

Inside-out Open Banking

The other spectrum of Open Banking is the inside-out direction, the one the PSD2 facilitates. A bank facilitates services in third-party apps or platforms.

This is not the ideal situation at first glance. It generates a lot fewer possibilities, since the banks are no longer in control, it doesn’t get the data anymore and it allows less digital interaction with the customer.

The big fear of banks is that this evolution will force them in a defensive strategy where they become dump pipes of financial services.

Yet in some cases the inside-out Open Banking also generate opportunities.

Take the example of Raisin, a pan-European deposit platform. This fintech has bank relations in Belgium and the Netherlands. Through this platform, banks can start offering deposit products in new markets.

Your bank, your do-it-all

How will this Open Banking era end? Who will win this game? I still bet on the banks. There will be winners and losers, but the banking sector will likely remain the first point of contact for financial, and affiliated, services.

I believe that the winner will have to find the right balance between:

- being available out there in the digital world, and

- offering the right, relevant services in the app

In the past the ‘being available out there’ was covered with a card. Tomorrow this will no longer be enough: banks need to learn how to build a model that is ready for an API economy.

The internet opened a lot of opportunities, but we can expect a lot more possibilities in the future. Banks will also have to look beyond payments to stay ahead of the curve.

I’m afraid that pure diversification on price will no longer be sufficient to keep customers happy. You will need to become a ‘do-it-all’ to stay relevant. That is the only way how to convince customers to pay a little mark-up for loyalty to survive the interest politics of ECB.