In Banking, the Best Relationships are Open

Mobile and digital banking platforms have revolutionized access to financial services, but why are there issues with technology adoption that could lead to more scalable banking relationships?

This summer, the Consumer Financial Protection Bureau (CFPB) launched an initiative to explore how financial services can return to a “relationship banking” model, one where banks serve customers as individuals, focused on providing personalized help and insights, rather than assembly line style service. As this is core to our mission at MX, we responded to the Bureau’s very timely request for information (RFI).    

A 2020 survey from Salesforce found that 66% of consumers expect their bank or credit union to know, understand, and reward them, but only 34% feel that their provider treats them as an individual. In the same survey, a mere 27% feel the financial services industry is customer centric. And, while 68% of consumers expect their financial institution to demonstrate empathy, only 37% say their provider meets this expectation, according to Salesforce survey of nearly 2,800 leaders across wealth management, insurance and retail banking. These results prove that customers want to believe a bank cares about their financial wellbeing.

Only 27% of consumers feel the financial services industry is customer centric.

The CFPB’s s past examinations have uncovered several customer service issues within financial services such as: 

• Having to repeat information to multiple people
• Long wait times
• Employees who don’t seem knowledgeable about the customer’s situation

MX applauds the Bureau’s efforts to prioritize these issues and submits that modern connectivity, like open banking APIs, can be a critical tool. 

Open banking APIs enable the secure, standardized, permissioned sharing of financial data between providers, based on the consent of their mutual customers. They bridge gaps in legacy technology so that banks can increase operational efficiency and redeploy resources within customer service to provide higher value and personalized engagements to customers. 

Accountability through Visibility

The CFPB endeavors to help institutions foster a relationship banking model “that enables consumers to hold financial institutions accountable when they encounter problems”, yet accountability is impossible without visibility. The minimum customers expect and are entitled to from their financial institution is access to their own financial information and the ability to share it. Section 1033 of the Dodd-Frank Act grants such access. 

MX encourages the Bureau’s rulemaking to include a consumer data right that assigns clear ownership of financial data to the consumer. Only by providing clear ownership of their financial data will consumers have the transparency and power to hold their financial institutions accountable. 

Data Enhancement and Increased Efficiency 

Growing market concentration in financial services leads to challenges in implementing a relationship banking model. The CFPB has noted that rural customers rely on smaller banks or credit unions with local knowledge and long-standing relationships to help maintain the “civic fabric of rural communities”. To compete and survive, smaller financial institutions must: 

• Increase revenue
• Deliver seamless digital experiences and personalization
• Exceed customer expectations 

Data visibility and accessibility through open finance APIs help banks meet these challenges in several ways. 

APIs narrow the technology gap that disproportionately hinders small and medium-sized financial institutions. While legacy systems employed by traditional banks do not communicate well with modern innovations, open finance APIs serve as a common set of functions that translate messages between providers. If financial institutions can integrate external applications for tasks like fraud monitoring, they can redeploy freed resources towards features that consumers say they want, like high-quality human interactions in customer service and digital channels that better facilitate self service. 

MX's data enhancement product helps financial institutions decrease their overhead by reducing call center volume generated by confusing or uninformative statements. API connectivity also lowers servicing costs, as customers need not call customer support for answers they can easily attain through their own information.