In our last post, we ran through some of the monetisation options available to banks as they begin to look beyond compliance with the Consumer Data Right (CDR) to imagine their strategic role in the new open-data economy.

Since that post, CDR has progressed significantly. Today, all of the big four Australian banks have gone live with all three phases of CDR for Banking, and the 130+ remaining ADIs are due to go live with phase one in July 2021.

With this context we turn our attention for today’s post to channel strategy, to consider how CDR and wider Open Banking trends are having an impact.

Digital channels are now the norm across the world, and certainly here in Australia, with over half of retail banking customers preferring to use online channels for research, applications, and servicing of banking products and services.

Augmenting existing channels

Open Banking offers an opportunity for banks to augment their existing channels with third-party products. Through mobile apps and online banking websites, banks can aggregate and distribute third-party products to their customers through a ‘marketplace’.

A great example of this model is DBS in Singapore, which hosts marketplaces focused on specific needs that they believe are most relevant to their customers: DBS Car Marketplace, DBS Electricity Marketplace, DBS Property Marketplace, and DBS Travel Marketplace.

A benefit of this strategy for banks is that they can go to market quickly with new products, without expending time and effort on product development. This may also allow the bank to offer products which they are not traditionally experts in developing. These may include specialist financial services products or something altogether different, like DBS’s selection in the example above.

The other benefit for a bank of pursuing this model is that they retain, and perhaps strengthen, the relationship with the customer. This is because their customers are still interacting with them via the channels and brand they are used to.

For a third party partnering with a bank in pursuit of this strategy, the benefit is access to the large customer base and strong brand that the banks typically have. Often, third-party partners are start-ups offering innovative products, or brands unknown in the geography or customer segment in which the bank is an incumbent.

Success for banks pursuing this model will manifest in boosted revenue driven by a wider suite of products. They will also see an increase in NPS and customer stickiness, as customers get more value than ever out of their interaction with their existing bank through their usual channels.

A net-new channel: your developer portal

Open Banking also offers an alternative strategy: for a bank to distribute its own products via third parties. In this scenario the third party accesses the bank’s products via the bank’s developer portal, thereby making this a channel of its own.

As an example, BBVA partnered with Uber in Mexico to offer chequing accounts to new Uber drivers. The drivers were able to open a BBVA account within Uber’s app without ever visiting BBVA’s website or app.

Leveraging this strategy, incumbent banks are able to access new customer segments (for example new geographies) and save cost on UX, UI and servicing, as they don’t manage the relationship with the customer.

Meanwhile, the third parties that the banks partner with are able to access new revenue streams and offer regulated products without the capital expenditure of adhering to the regulatory requirements to which banks are subject.

Success for banks that pursue this model is seen in the form of increased volume of customer uptake for existing products. Customers, in turn, often get a better experience and benefit from more targeted products.

Which strategy is right for you?

We typically see banks choosing to pursue the strategy of augmenting existing channels if they want to offer new products quickly or outside of their area of expertise, e.g. products tailored to a specific geography or customer segment, or non-FS. This option best suits banks with a strong UX capability and those keen to retain the relationship with the customer. Often it is large incumbent banks looking to strengthen their position in retail and wealth that pursue this strategy. Third parties wanting to capture market share and grow their customer base quickly stand to benefit from partnering with banks pursuing this model.

By contrast, banks with a strong product development capability and back-end systems, and efficient operations, may be well suited to exploring the extension of their developer portal as a channel. This strategy is often pursued by banks that are targeting niche customer segments – such as SME clients or large corporates – or those looking to strengthen their position in payments with innovative products. Third parties that are keen to go to market without the capital expenditure of regulatory compliance and are looking to secure revenue generation opportunities are most likely to explore this model.

No matter which strategy you choose, or even if you choose both, building partnerships is critical to success. So is landing your channel strategy early – being a first mover in the market brings a significant advantage.

If you’d like to discuss your strategy with us, reach out to the authors of this article. You can also read more of Accenture’s latest thinking about Open Banking.