From chatbots that answer questions about personal accounts and bill payments to dashboards that display individualized account information and advice on how to better manage money, personalized offerings have become the norm in the financial services space.
Financial institutions (FIs) can no longer afford to offer consumers a set of services designed to meet the needs of many rather than each individual.
These changes are driven by several market forces, according to Rohit Mahna, senior vice president and general manager of financial services at customer service success platform Salesforce. New FinTech challenger competitors are using data to disrupt the industry with personalized offerings, and regulations are forcing larger banks and financial firms to offer customers more transparency into their account information and data.
Mahna has seen the transformation firsthand during his seven years at the company. Salesforce became one of the first to embrace APIs during his time there, debuting its first in 2014 and working to make the technology a central part of its strategy since. It recently doubled down on its API investment, spending $6.5 billion to acquire developer MuleSoft.
According to Mahna, this is a new frontier in financial services.
“It’s become all about digital transformation, about thinking about things through the mind of a customer,” he said. “It’s about figuring out what they want from an experience, and then giving them those services they want in the right way.”
Collecting data is key to servicing these customers in a more personalized way, Mahna added, as is analyzing it properly and putting it into action — all of which is made possible via APIs. PYMNTS recently caught up with him to discuss why APIs are becoming table stakes and how they are reshaping the financial services space.
The Arrival of the API Age
While a push from smaller financial players may seem an unwelcomed challenge to larger players, the trend toward a more personalized financial services industry doesn’t necessarily spell bad news for big banks. That personalization depends on both the data about the needs, wants and goals of individual customers as well as the outcomes. Larger firms have a distinct advantage when it comes to accessing the data and providing individually tailored offerings.
“Bigger banks and financial firms have a lot of data, so much that it’s almost like they’re sitting on a potential unfair advantage,” Mahna said. “They have decades of sitting on core systems, pricing engines, customer profiles, financial planning tools and so many different tools, so it’s about trying to unlock that advantage and that data.”
While banks may have the right data, they often don’t have the technology or infrastructure needed to properly analyze it. That’s where partnering with other firms comes in, particularly those that have developed artificial intelligence (AI) to analyze customer data through information-sharing via APIs. Partnerships can help larger firms reach more customers and offer them better, more attractive offerings.
Salesforce has looked to offer these options to its financial services clients via its Financial Services Cloud API suite. The solution uses its Einstein analytics platform to learn about customers and offer them more personalized services, Mahna said, helping banks take advantage of the data to which they already have access, but cannot properly analyze.
“It’s about finding ways to unlock that data, and to get more intelligence from it,” he added. “Then, most importantly, you need to figure out how to make actions and decisions on that intelligence to drive more personalized interactions and experiences for the customer.”
Pushing the Industry Forward
The push toward a more personalized and open financial services space has come with two challenges: growing competition from FinTech startups and implementation of new regulations.
The second Payment Services Directive (PSD2), which recently took effect in the European Union, forces banks and financial managers to share certain data with customers. Similar regulations are being discussed or put into place worldwide, including in Asia, Australia, Canada and the U.S. These challenges are forcing banks to open up data and share information via APIs, Mahna said. As such, old-school FIs are seeing a competitive advantage in working with digital challengers and are, more than before, inclined to continue or expand their use of the technology.
“Sometimes it’s about competition, sometimes it’s a regulation thing, but we’re really seeing more and more companies [that] truly want to rethink their business processes and models to better incorporate and take real advantage of APIs,” Mahna said. “Every chief digital officer at every bank right now is thinking about APIs, or they should be, because they are realizing that APIs can take even legacy data and make it actionable to the people on the front lines.”
He expects to see APIs’ influence continue to grow in the coming months and years.
“I think APIs are going to drive not only things like Open Banking, but will also change how services are going to be delivered in the coming years,” Mahna said. “The more data you can bring to a financial advisor, the richer the conversation they can have with their clients. Bankers can not only help someone buy a house, but can also help that customer see in terms of how it will help achieve larger goals [he has], and data is the foundation of all that.”
The age of API-driven personalized financial services has arrived. All that remains to be seen is which financial players will be ready to get in the game.
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The B2B API Tracker™ serves as a monthly framework for the space, providing coverage of the most recent news and trends, along with a provider directory highlighting the key players contributing across the segments that comprise the B2B API ecosystem.