Consumer expectations are driving changes across financial services


Our clients’ needs and the needs of their customers, are changing at pace and in material ways. Consumers now demand a swifter, more accessible and friction free experience across many aspects of their lives, whether it’s booking a taxi, checking-in for a flight or shopping online. Consumers now demand a swifter, and friction free experience across many aspects of their lives.

About the author

Andrea Melville

Managing Director of Commercialisation and Propositions, Lloyds Bank

These changing expectations are a key driver of change in financial services and crucially what individuals see and like in their own individual interactions with financial service providers are now increasingly expected in their business lives. Businesses now expect the same, if not greater, levels of control over their business finances. Better visibility, more channel flexibility and choice of payment method are now necessary to help businesses compete effectively and thrive.

With regulation now opening up a new era for payments in the UK, there is a raft of innovation that offers enhanced payments propositions for clients and consumers. New entrants to the market are adding yet another dimension to how financial institutions need to respond to keep up with the ever adapting environment.

Changing Consumer Behaviour

Looking back over the past decade, there has been a huge step forward in terms of how we, as consumers, stay connected. Ten years ago, a business meeting would have had laptops and 2G mobile phones. Today, the vast majority are using tablets, smart phones, smart watches and other wearable devices. Our homes have changed too, with voice controlled smart devices such as Amazon’s Alexa, and Google Home. Social media in particular, is connecting our homes and lives differently.

Just as the demand has increased for consumers to have instant connectivity, so too has the need for payments to adapt. Ten years ago, if we wanted to make a payment, we would be looking to use cash, debit and credit cards and cheques, with Bacs paying our salary in and Direct Debits paying the bills. With Faster Payments, we can now make almost instant payments wherever we are and whenever we want. The choices available to us have also grown to include Android, Apple, and Google Pay, as well as contactless payments. The speed of contactless adoption is evidence of consumers’ valuing ease and convenience with frictionless payments. The emergence of invisible payments in shopping takes this one step further – walk in, choose your items, walk out.

Regulation as a catalyst for change

The role of regulation as a driver for innovation has grown, and has enabled and accelerated change. New regulation including Open Banking and the second Payment Services Directive will have a significant impact on financial services and the propositions available to clients and consumers.

APIs, or Application Programme Interfaces, which enables approved third parties to access information and complete simple actions in the background, may feel new, especially in the world of Banking, but they have been around for a long time and are often used by consumers without realising.

A good example of APIs in action is when you come across a map on a website. Rarely has that website created their own technology and software for this, it simply pulls an API from Google, or a competitor, and the map appears within their webpage. Once that API is made available, it is easy for a Third Party to integrate the particular product, data or service into their own environment. The open availability of APIs, assisted by developer portals with clear documentation and standardised terms of use, mean that individual businesses do not need to form bespoke agreements with providers of APIs (and vice versa).

In January 2018, a series of Open Banking APIs were launched, and are currently expanding to cover savings accounts and cards, creating the ability for new propositions in the market. Lloyds Bank believes there is great potential in using APIs to enhance how we can help our clients and customers bank and manage their finances.

The open availability of APIs, assisted by developer portals with clear documentation and standardised terms of use, mean that individual businesses do not need to form bespoke agreements with providers of APIs (and vice versa).

Andrea Melville, Managing Director, Head of Commercialisation & Propositions, Global Transaction Banking, Lloyds Bank

Creating New Propositions in the Market

Historically, when a consumer has interacted with their finances, for example, to check their balances they came to their bank, they may have entered a branch, called a phone centre, used an app, or visited a website – their bank has been at the centre of that relationship. Going forward, Open Banking places the consumer very much at the heart of that experience allowing them to decide if, and with which Third Party, they want to share that information with. This demonstrates a shift which will shape how financials services change in the near-term.

Since Open Banking launched, we have seen new Third Parties emerge in this market.

  • The first and most common is ‘account aggregation’ provided by Third Parties as Account Information Service Providers (AISP), where consumers are given the ability to see all of their accounts in a single place. Beyond this, Open Banking APIs are helping to create better informed credit decisions.
  • The second client proposition, which is still nascent, is known as ‘payment initiation’, which allows a Third Party to initiate a payment on behalf of the customer (if consent is provided); businesses are now beginning to step into this space, although not yet at scale.
  • Finally, marketplaces and ecosystems are an emerging trend in the financial industry.
    • A marketplace can show customers a full suite of products offered by a variety of manufacturers, with the ability for customers to view of the full or curated market, and sort and chose using different parameters such as price or service.
    • An ecosystem is an emerging customer solution designed to solve multiple needs around a single event – such as buying a house.

Both marketplaces and ecosystems stand to thrive as financial services offer more connectivity through APIs, and the result is that customers are going to have much more choice; choice around the proposition, choice around the providers, and choice around the experience.

Innovation at Lloyds Bank

With APIs proliferating and enabling new propositions and experiences for consumers and merchants, Lloyds Bank is developing its own offering in this area, using client centric methods of design to look at new ways of bringing banking to life for businesses. Lloyds has launched a payables API, which allows our clients to initiative a faster payment from within their own processes, and provide their customers with a frictionless experience.

With a significant amount of innovation taking place, whether in response to regulation, technology or consumer changing expectations, Lloyds Bank is on the forefront of the industry, supported by our core strengths of trust and security. The challenge is staying vigilant of emerging consumer needs, technology and regulation to ensure that we all stay in the race for customer attention.

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