Banking on a composable future in a mobile-first world

The global lockdown has forced society to rely more heavily than ever on digital channels in 2020. Those who still preferred face-to-face interaction in a branch setting to the convenience of going online have been forced to adapt and learn new habits. In the financial services sector, UK bank Halifax reported seeing the number of online transactions made by over-65’s doubling during the lockdown, giving one clear example of the extent of this impact. This is fundamentally changing the way we consume financial services, and perhaps inevitably, mobile banking has become much more prominent as a result.

Of course, mobile banking was gaining traction well before the lockdown: research from 2019 suggests that 27% of consumers had considered replacing their bank with an online or mobile-only bank. Younger consumers — those aged between 18 and 34 — were even more enthusiastic, with 46% of them considering the switch. However, the lockdown has accelerated this shift dramatically: as much as 12% of the UK’s entire population downloaded a mobile banking app between 14th March and 14th April this year, suggesting the shift away from branch-based banking may be here to stay.

Bumps in the road

Despite its many advantages, mobile banking wasn’t ubiquitous before the lockdown. While younger generations were relatively eager to embrace it, mobile banking hasn’t taken hold to the same extent among some older generations, where individual preferences for face-to-face interactions may be more hardwired. However, even after the lockdown ends, a combination of high demand and continued social distancing measures will make it hard for many banking services to be offered in a branch setting, so the shift towards mobile and other digital channels is unlikely to reverse significantly.

It falls to the banks to find alternative ways of offering the personal touch that some customers prefer through digital channels like mobile. Video-conferencing services, such as Zoom or Skype, can be incorporated into banks’ customer agent applications using the APIs available for them, which is invaluable in enabling face-to-face interaction remotely. Elsewhere, mobile apps could be used to enable critical banking services such as loans and mortgages to be processed without the need for physical interaction and paperwork, via functions such as the digital signature, or digital document capture — embedded in the app through their own APIs. Capabilities like this will go a long way towards making mobile banking more suited to the needs that many customers will have during and after the crisis.

A lifeline for customers

While greater functionality will of course be welcomed, many customers will have more pressing financial needs brought about by the lockdown. The current crisis has caused unemployment rates to soar substantially: in April for example, the US unemployment rate reached a post-WWII high of 14.7%, much higher than the 10.8% reached during the 2008 recession. As we emerge into the next normal, the number of individuals, families, and businesses needing help with their finances will be enormous. Banks have a crucial role to play, but they’re not the only organizations that can help: government, charities, and a range of others including non-bank fintech companies such as credit bureaus will all play a key part in helping people to get back on their feet once the lockdown ends. Customers who may be going through crises of their own will not want the frustration, and the lengthy call center queues, of dealing with these organizations individually. To really help customers, banks can bring these services together and make consuming them as efficient and seamless as possible via their online channels and applications.

This isn’t as far-fetched or unrealistic as some might think; indeed, an open-banking ecosystem is the idea at the heart of the API initiatives banks have been adopting for some time. Until recently, many banks were still unsure of where open banking’s real opportunity lay, and had only taken the idea as far as the regulator compelled them to. Yet if banks and other organizations can expose their various data sources and other digital assets via APIs, they can combine these capabilities to build an integrated experience that meets a whole range of different needs. This is but one way of removing friction and frustration for customers by reducing the necessity of having to deal with multiple organizations and a clear example of where mobile banking apps can become a lifeline for customers.

Leading by example

One bank that has taken steps towards this model is UK banking giant HSBC. The bank created a new mobile app that can directly connect to a customer’s other financial accounts through an API, enabling transactions to be categorised in real-time to offer customers greater control of their spending. APIs have enabled these services by exposing and connecting data from siloed stores, both within the bank and from third-party providers. In this way, HSBC is able to offer customers a ‘one-stop-shop’ experience for their financial needs, removing the need to interact with various providers separately. 

Alongside simplifying the customer experience, this approach has two key benefits for HSBC: not only does it allow the bank to move at speed, it also enables it to scale its offerings quickly, as it essentially composes its solutions from pre-made parts, rather than building them from scratch. By simplifying the way in which customers consume banking services and enabling them to do as much as possible through mobile channels, banks such as HSBC can do their bit to make customer’s lives easier.

Looking to the future, the smart bet for banks is to lean in to greater composability because it’s not just COVID-19 or regulatory impacts that are driving the change:

  • Even with lockdown restrictions starting to lift, it seems unlikely that we can expect a full return to normality in the short term. It’s far more likely that guidelines such as social distancing are here to stay for the foreseeable future. Even if the need for social distancing wanes, new consumer habits have been formed and more resistant populations have a smaller leap to make in embracing new mobile capabilities.
  • Central banks both in the U.S. and the world at large, have been planning and creating ways to improve their core capabilities to be more responsive to the 24/7 real-time world long before COVID was here. It’s important to remember that central banks do a whole lot more than regulate the banks in their purview: they create the monetary ecosystem that consumer and commercial banks operate in. As these types of ecosystem changes manifest for the central banks, the commercial and consumer banking sectors will have a wave of change and possibility roll out to the wider market that represents a large opportunity for new value creation.

As such, we can expect mobile to play an increasingly important role in the way we consume financial services. The lessons that banks have learned from their open banking drive over the last few years have become even more important. In a world where mobile is among the only options customers have available to access critical financial services, banks should take this opportunity to make their mobile services more composable to ensure they’re as supportive as possible. 

If your enterprise is interested in adapting to the new possibilities that are emerging from a composable and real time world, please check out our Accelerator for Banking to find out how MuleSoft can help your organization be a leader in the next normal.



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