Will Account Aggregators ultimately own the customer experience in banking?
Open Banking, open APIs, PSD2… all these words imply that competition in the banking sector is about to intensify. As providers in our Account Aggregation Monitor are introducing new functionality, they are making their platforms more robust. If these platforms are able to offer customers a one-stop shop for all their financial data, along with account management functionality, could aggregators come to take ownership of the customer experience?
What’s the gist?
Well, a report from the World Economic Forum has predicted that ‘power will transfer to the owner of the customer experience’ and, with the rise of account aggregation platforms, ‘incumbents can no longer rely on controlling both product manufacturing and distribution.’ At least, not without creating their own platform and even then, it is an undertaking with challenges. Ultimately, the ownership of the customer experience will be up for grabs.
As we’ve seen, new entrants in financial services are starting to specialise; they focus on one product – current accounts, peer-to-peer lending, international payments, digital mortgages, and so on. As a result, the market will soon have a veritable smorgasbord of providers allowing customers to completely tailor their own banking proposition, using a selection of banking firms if they so wish.
While some people already hold products with different banks, keeping track of each individual account is a nuisance. This is where account aggregation platforms add value. Once banks are forced to open up their APIs (in the very near future), platform users will be able to access all of their financial data from one neat space. The question is, if these platforms can also offer account management services, what value would individual apps have?
It’s all about account functionality
Aside from giving access to a holistic overview of customers’ financial lives, in order to fully own the customer experience, aggregators need to give people access to the same core functionality as they have within each individual banking app. We are still in the early stages of account aggregation, and most platforms have not yet reached this stage.
Stephen Jones, senior analyst at Mapa Research, believes that customers are unlikely to buy into the notion of account aggregation platforms until they can offer such functionality, ‘At the moment, most customers using aggregators still have to switch back to the digital channels of their banks in order to perform simple tasks like transferring money between accounts and sending money to their contacts. This makes it hard for them to understand how aggregators can truly change the way they interact with the financial products they own.’
However, some providers in our Monitor have started introducing money transfer capabilities. Customers of US provider Clarity Money can make transfers between their own accounts within the aggregation app.
In addition, Germany’s Centralway Numbrs and UK’s Facebook Messenger chatbot, Cleo, allow users to carry out external transfers to contacts from the accounts that have been linked to the platform. Two straightforward processes carried out without ever leaving the respective aggregator’s proposition.
This trend of integrating peer-to-peer payments functionality within digital communication platforms is something we’re also seeing outside of account aggregation.
The number of aggregation platforms is rising but, even though consumer awareness and trust might not be going at the same speed, there are also many existing apps with the potential to become aggregators in the near future – especially in Europe, once PSD2 comes into force.
Potential account aggregators
There are many FinTechs who have different offerings at the moment but have the potential of turning themselves into account aggregation platforms in the future, we include the most likely candidates in our Monitor. They have new technology, agile work systems and are normally smaller in size – it wouldn’t be such a drastic move.
Of course, challenger banks are already talking about their future goals. Monzo has been very open with its intention to evolve into marketplace bank. The same goes for N26, and Starling launched their Marketplace recently. It’s similar to Fidor’s Finance Bay.
Now, incumbent banks will have to ask themselves whether they want to own the customer experience, in which case they’ll be forced to create an account aggregation platform, or if they want to compete on product, which could also be difficult due the current state of interest rates. While both options pose challenges for established banks, neither is impossible. Lastly, let’s remember that incumbents currently still have the advantage of owning the customer relationship and consumer trust… for now.