Better access to digital banking
products and services
The fast-growing digital society creates many opportunities: for customers who can access various and increasingly seamless banking products and services, and for banks, which improve their understanding of customers’ needs and increase their business opportunities. In order to make the access to banking products and services in this online world, a reality, the barriers identified should be removed.
Opportunities for banks and customers
• Access to banking product and services is constantly increasing. Almost four in five persons - 79% - who use mobile banking in Europe have bought an item using their mobile device in the last 12 months; and more than half of those customers surveyed believe that they will either “certainly or probably” use a mobile payment app in the next 12 months3.
who use mobile banking in Europe have bought an item using their mobile device in the last 12 months
• Banks have started to make significant investments to improve the access of their customers to their new digital banking products and services. In particular, this implies the development of sophisticated technologies such as biometric, audio, voice and image recognition software, data analytics and high-performance computing infrastructure. Today, banks provide customised deals at select stores through mobile apps, 24 hour, 7 days a week, account balance control, new concept stores or remote adviser systems connecting financial experts to customers from their branch or a mobile device via high quality video which allows financial planning, problem resolution and assistance/advice.
• These new innovative banking solutions let banks provide a ‘tailor-made’ customer experience which facilitates a faster access to banking products and services. More importantly, they ease the interaction between banks and their customers who are able to search further and faster for the best deals/value when and how it suits them. Now instead of having numerous passwords or log-ins, a number of banks propose biometric security solutions to customers, such as facial, fingerprint or voice recognition tools. The contact customers have with a bank also goes through new channels such as social media (e.g. Twitter, Facebook) or secure instant messaging platforms similar to Viber or WhatsApp.
• New banking technology also has a positive impact on the management of customer finance, especially via budgeting programmes developed by banks or through automated advice. It further contributes to helping consumers avoid financial mistakes such as overlooking the payment of bills and running into overdraft. This potentially prevents customers from being charged penalty fees. According to a recent survey4, the vast majority of people who use mobile banking indicate their money management has improved since the use of technology. For example, they feel more in control of their finances, do not miss payments and save more. In fact, 85% of mobile bank users in Europe indicate at least one way their money management has improved since they began using a mobile bank. In some countries, such as Italy, Romania or Poland this is 90% or higher.
of mobile bank users in Europe indicate at least one way their money management has improved since they began using a mobile bank.
• Through the development of analytics tools and algorithms, banks will be able to anticipate proactively the best time to provide advice to the customer without waiting for him/her to come to a branch. As a result, the advice is likely to have a more effective impact on the financial decisions taken by the customer during his/her lifetime. In this way customers can prepare key events more effectively (e.g. having a child, getting married, buying a house, travelling). Logically, online and personal advice will become complementary tools in the future.
• Digital technologies will also improve financial inclusion in reducing, for example, geographical distances and reaching customers located in peripheral areas to allow them to benefit from more offers.
• Banks as universal players are committed to serving all customers. Some customers do not like change and prefer things to ‘stay the same’. For instance, most banks actively support elderly people and non-digital clients who find it difficult to embrace new digital banking services. This might not be the case for new entrants on to the market. Banks achieve this by putting in place tools appropriately adapted. For instance, trained employees providing free advice (from how to shop online to protecting privacy) and digital financial education programmes.
Barriers to (cross-border) digital access /e-commerce
Well-known obstacles to the provision of product and services within the single market remain the same at cross-border level. Furthermore, it is paramount to keep in mind that selling financial products or services has potential risks and financial consequences quite distinct from those associated with selling books or shoes.
• Culture/language barriers create numerous difficulties at every step of the purchasing process on internet as the information is usually only available in the language of the country in which the product or service is sold. For instance, the information provided on websites at the pre-contractual, contractual phase, and post-contractual phase regarding the after-sale service, though in some cases banks try to make information available in English. Not surprisingly, history, tradition and culture necessarily influence the design of the products and services which are adapted to specific customers needs; needs which differs from one Member State to another.
• Different national consumer protection and contractual laws across the 28 Member States. As expressly stressed in the Digital Single Market Communication, one of the reasons why consumers and companies do not engage more in cross-border e-commerce is because the national consumer protection and contract laws differ throughout the 28 Member States and companies need to act in most of the cases in accordance with the host countries’ national consumer protection laws and supervisory measures. This is also true for the retail financial services markets, still very fragmented. This is mainly owing to the different consumer/investor protection rules, despite the EU initiatives on consumer & mortgage credit or payment accounts.
• Despite banks’ willingness to develop cross-border activities, they have had to invest huge amounts to ensure they comply with the national legislation on a daily basis (especially as national legislation is subject to regular review). In this instance, the resources invested for compliance purposes are not invested in the development of innovative solutions. This situation prevents consumers from benefitting from the most competitive and innovative online offers.
• Discrepancies in national taxation, civil law and product specifications defined by national regulations: the progressive integration led by the EU to date does not fully include tax systems and civil law in every Member State. The difficulties of having to deal with many different national systems when trying to offer services cross-border both on and offline constitutes a tangible obstacle for companies, including banks. Diverse national tax regimes prevent banks from designing pan-European retail products, and diverging national civil law regimes require providers to adapt product strategies locally
• Access to financial services will increase via automated financial services, allowing customers to make choices faster and take their own decisions. However, here, clarification needs to be brought to the issue of liability.
• Access to customers’ accounts and data information by third-party payments providers via banks’ infrastructure. The new Payment Services Directive (PSD2) stipulates that the “account servicing payment service providers” (namely banks) shall make possible for “payment initiation service providers” (third-party payment providers) to rely on the authentication procedures provided by banks to initiate a specific payment on behalf of the payer. It means that third-party payment providers will have access to clients’ accounts and customer data information via the banks’ infrastructure. The challenge is to ensure security and privacy for both banks and consumers in this new scenario. Indeed, the structure behind the functioning of certain payment initiation services/third-party payment providers potentially calls into question the banks’ measures to keep online banking secure, and per se, might put at risk existing anti-money laundering and fraud prevention measures already in place. A clear liability framework, as well as appropriate technical standards, should be implemented to face fraud incidents and data protection. (See EBF Blueprint chapter on Digital Payments and Removing regulatory inconsistencies).
• Interoperability is also required at the level of the bank, the switch, and the payment channel. Sometimes new technical services occur in a “walled garden” because interoperability is not technically allowed. Consumers wishing to swap between apps services must have multiple solutions and will not be able to switch between different digital wallets or services (incurring time, effort, and extra fees). In short, digital inclusion and interoperability is essential in order to avoid financial or social exclusion.