Digital Banking

Big Tech’s Big Shadow Over FIs

Consumers cooped up at home by the pandemic have, in many cases, reoriented their entire lives around digital — and in some cases even learned to love the new ways of doing things far more than they liked the old ones.

Prasanna Narayan, head of product at Ondot Systems, told PYMNTS in a Masterclass conversation that means time is officially up for issuers and financial institutions (FIs) to rethink and redesign their customer services around digital.

“The consumer is shifting to virtual and digital in almost all walks of life,” he said. “We believe that banks have completely had to rethink how they are reaching their customers [and] what investments they have made in digital and virtual forms. These investments have to shift toward making more channels easily available … whether it’s app or online or voice or chat-based instruction. They are all digital channels [that companies need] in order to reach the customer for all kinds of services.”

If issuers and banks don’t do that, he said, Apple, Google, Samsung and a whole host of Big Tech players are ready to step in and do so — taking away FI customers in the process. After all, the new era of digital isn’t just about what FIs are offering consumers, but how they offer it to the consumer.

“A key realization in all of this is that consumers are not necessarily attracted to products, they’re actually attracted to experiences,” Narayan said. “It could be big [experiences], but it might be small, and it could even look not very significant. But what we see in our data over and over is that it is the experience of when, where and how it is [that] products are presented to the consumer that they actually become a lot more successful. The experience of the products in the right way is what is really crucial to the consumer.”

How do FIs go about delivering things in the right way? Narayan said it helps to start by picking the right jumping-off point — card relationships.

Perfecting The Card Relationship

Debit and credit cards are critical, Narayan said, because they are today’s key tools of the digital commerce ecosystem. As a result, they’re the most frequent point of interaction between an FI and its customers.

“It’s not a coincidence that Big Tech companies are actually using cards as their point of entrance into the banking arena,” Narayan said. That’s because card experiences “are actually daily, while mobile banking [is] maybe a weekly or a monthly experience. The depth of these experiences available in card management is so robust.”

Or at least those experiences can be robust if expanded on by FIs properly. Narayan said that partly means using some of the best user experience (UX) innovation that tech players have brought to the space.

Good UX can make it possible for consumers to apply, get approved and have a digital card provisioned immediately to their digital wallet of choice. That beats the decades-old system where a consumer applies for a card online and has to wait several days for it to show up in the mail.

Narayan said Ondot tries to help its clients understand that digitization done partially isn’t digitization done properly. He said digital consumers want that instant, seamless digital delivery — and will depart for tech firms that offer it if traditional FIs don’t.

That also means thinking beyond using a one-off mobile-banking app as the storage focus for all of the robust card-management features that users are starting to demand, Narayan said. There’s some logic to wanting to put those tools into mobile-banking apps that customers are already using, he said, given consumers’ reticence around downloading new apps. But Narayan added that overstuffing a single app to the point where all of its wider digital features become hard to find only solves one problem while creating a new one.

“One thing we learned from Big Tech is about building purpose-built apps,” he said. “Look at Google; they have built 30-plus purpose-built apps. They all revolve around your single Google ID, and they provide a very seamless interconnected experience. Consumers actually naturally gravitate to using a tool for a unique experience. And we actually believe cards and how consumers use those cards represent [their] own purpose-built interaction that should be separate, rather than making it into a part of a core mobile-banking function.”

How Banks Can Beat Big Tech

When it comes to competing with the biggest tech names around, it’s unlikely that banks will build tools in-house that will beat Apple or Google, Narayan said. But he added that they don’t have to because banks enjoy two other advantages.

First, they have a major consumer-trust lead over their tech counterparts. And second, banks have a much stronger insight into their customers’ financial lives.

“Big Tech today sits on a huge amount of behavior, data from devices, social channels, search patterns,” Narayan said. “On the other hand, FIs have access to data points of a consumer’s income and spending behavior, and their risks are wholly understood well by banks and credit unions. It’s actually one of the reasons why Big Techs are still partnering with the banks to power that service and manage the risk and liability. So, the banks are significantly advantaged in that context.”

Turning that advantage into more advanced digital services, he said, is all about making the right partnerships with tech providers. He said he believes that’s where firms like Ondot come in.

“Banks will need a strong partner who understands the market and the need to build that digital experience and bring it to the customer quickly and economically,” Narayan said. “The consumers continue to trust the banks — which is really a good thing — [but] the trust has to be substantiated with experiences that the banks have to offer in order to retain those customers.”


New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020 

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.