A New Salesforce Report Warns Traditional FIs to Embrace Open Banking Solutions or Lose Market Share

By W.B. King


With the goal of determining if the financial services industry is meeting, exceeding or failing the needs of the banking population, Salesforce recently released a report, The Future of Financial Services: Better Customer Experiences Start with Automation.


“Through extensive interviews with senior industry executives and a survey of 2,250 individuals, we learned customers have a strong sense of what they want, that they are often dissatisfied, and will switch providers to get what they want,” noted Salesforce Senior Vice President and General Manager of Financial Services Eran Agrios. “The message couldn’t be clearer: Consumers expect financial services institutions (FSIs) to provide experiences that are easy, transparent, and show concern for both their financial health and security.”


Based in San Francisco, Salesforce provides customer relationship management (CRM) software and applications focused on sales, customer service, marketing automation, analytics and application development.


The report, published in April 2022, included responses from 250 individuals in nine countries: U.S., Canada, U.K., France, Germany, Singapore, Japan, Australia and New Zealand. By demographic, the respondents were 13% Gen Zers, 31% millennials, 33% Gen Xers and 23% baby boomers.


“The successful FSIs of the decade will use technology to learn who their customers are, anticipate their needs, provide intuitive interactions and keep their data safe,” Agrios added.

Digital-First Demand on the Rise


The pandemic, the report noted, conditioned consumers to turn to online apps in greater numbers to complete various financial transactions. This trend is an offshoot of what was becoming common place in consumer retail online shopping habits prior to COVID-19, as well with certain banking services.


“For many, the first port of call is a website or app. Banks have been on the leading edge of this shift and remain leaders within the industry, in part because their basic services — like checking and savings accounts — are simple to understand,” the report stated. “That’s likely why 78% of banking customers initiate relationships on a website or app — nearly twice the rate for insurance (44%) and wealth management (42%) companies, where even basic products are more complex.”


But it’s not all good news for traditional FSIs. The report also found that banking customers surveyed are trying non-traditional FSIs for two leading reasons: Easy and fast setup, verification, onboarding, and first-time use of the app (47%) and easy and intuitive user interface/user experience and navigation of the app (41%).


This topic of open finance, also commonly referred to as open banking, was discussed during DataDay Conference 2022, which was held virtually in late June 2022. Zack Miller, founder and editor-in-chief of Tearsheet, broached the topic when speaking with MX’s Vice President of Product Management Crystal Anderson.


“What do you think prompted the dramatic rise and embracing of open finance that we are seeing in the financial industry?” Miller asked during A New Era of Financial Innovation session.


“It’s really being driven by some mega trends we are seeing in technology, regulatory and competitive landscape, but there is also a heightened consumer expectation for their digital experiences driving that need for open finance,” Anderson responded.

Crystal Anderson

The Lehi, Utah-based MX offers a financial data platform and connects more than 16,000 financial institutions and fintechs providing a reliable and secure data connectivity network.


The 2021 executive order from the Biden Administration pressing the Consumer Financial Protection Bureau to finalize rule making on section 1033 of The Dodd-Frank Wall Street Reform and Consumer Protection Act also set the tone for open finance systems that support innovation, secured data sharing and access to affordable financial services, Anderson explained.


“We have also seen a rise in alternative financial providers and that’s including digital-first challenger banks, and they have really exposed limitations of our [banks and credit unions] legacy systems,” she continued. “And consumers want and expect more from their financial accounts. They want a complete picture of their finances and they want secure, reliable experiences with their money and open finance addresses all of those things.”


Open finance, Anderson told Miller, also provides customers and members with the ability to access and act on their financial data, while building personal experiences, which, in turn, increases the pace of collaborative innovation with fintechs. She pointed to Australia, Japan and the U.K. as models for regulating and supporting forward-leaning open banking platforms.


“We are just beginning to see some of that regulatory movement here in the U.S. and I really thing that is what is prompting financial institutions to weigh in and really embrace open banking,” Anderson said.


Miller offered that open finance is a “natural extension” and “evolution” of where the industry has been headed for a number of years. He then asked Anderson for “real-life” examples of how consumers are responding to open finance.


“We did a survey here at MX and 90% of people said it would be valuable to see all of their finances in one place, however only 40% of them say they currently see that,” she said.

To further support her position, Andersen referenced another Salesforce survey, its annual State of the Connected Customer Report.


“Two-thirds of consumers expect their bank or credit union to know them, to understand them, to reward them, but only 34% of consumers feel their bank or credit union treats them as an individual,” she said.


Anderson also noted the 2021 Mastercard report, The Rise of Open Banking.


“Consumers really want more secure experience with their money. More than 80% of consumers in North America connect their bank accounts to fintech apps and 90% of them use online and mobile financial apps to manage their money,” she continued. “So open finance really means… consumers… decide how they engage with their finances and it allows them to gain access to products and services that they may have not had access to otherwise. These are the use cases we look at.”


Well-designed Digital Experiences Equate to Secure and Trustworthy Service


In Salesforce Agrios’ view, while banks and credit unions face challenges, she noted that organizations that invest in respective customer experiences outperform those that don’t by nearly 80%.

Eran Agrios

“Now is the time to focus on your customers, listen to their needs, and build more connected and trusted experiences,” she said.


To stay connected and offer best-in-class services, banks and credit unions have to be open to adopting and deploying new technologies. Salesforce’s The Future of Financial Services: Better Customer Experiences Start with Automation report, for example, also found that customer willingness to use artificial intelligence (AI) is growing – from 60% in 2020 to 69% in 2022.


“Many in the financial services world may be tempted to undertake comprehensive automation efforts that entail all customer-associated processes end to end. Many of the experts in our interviews recommended a more incremental approach, digitizing and automating certain error-prone areas to capture quicker value,” the report stated. “When digitizing and automating processes, FSIs gain the ability to create sophisticated reports that give a detailed view to spot inefficiencies in the customer experience. The members on our expert panel concurred that automation and reporting — along with alerts — are complementary features that reinforce one another. They are critical to helping FSIs make better decisions.”


Along with embracing AI and machine learning that scale to the unique needs of a bank or credit union, the report also implored the importance of building a compelling digital journey by continually employing state-of-the-art data analytics applications. This approach includes auditing existing technology.


“Many financial services institutions still rely on old technology for their back-end infrastructure that cannot move with the speed and flexibility that modern front-end applications now can. A flexible back end is a prerequisite for creating hyper-personalization, according to our panel of experts, but more work is still needed to accelerate a shift to the cloud,” the report noted.


“Once FSIs have better insights into the customer journey, they need partners to help them bolster their shortcomings. Well-designed and well-executed digital channels deliver more than just visual appeal,” the report continued. “Many professionals in the financial services space agree that they need to work with partners to craft a sophisticated digital interface, similar to e-commerce and consumer media companies. Customers equate a well-designed digital experience with a more secure and trustworthy service.”


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