There’s a revolution happening in banking. Just when we thought the industry couldn’t get any more competitive, the Open Banking Standard is introduced. Set in motion by The Competition and Markets Authority’s (CMA) investigation into the UK banking industry, this legislation will make it easier for customer to compare and contrast products and services. And, perhaps most worrying of all for banks – it will make it simpler to switch providers.

By opening up API networks, the new recommendations break down data barriers, and pave the way for banks to make the whole customer experience more seamless and transparent.

What’s Driving the Change?

 There are two main reasons behind this new legislation; firstly, to accelerate digital innovation on the UK banking scene. And secondly; to stimulate competition between banks and make them work harder to win over customers.

In an industry which has undergone nothing short of a transformation in recent years, this is a new hurdle in the eternal quest to attract customers – and, crucially, keep them loyal. With challenger banks such as Atom aiming to seduce tech-savvy millennials away from the traditional banks, it’s become more important than ever to find a point of difference in a crowded market.

So what can banks do to keep hold of their customers? Is building customer engagement the key?

Become More Important to Customers

Banking is an essential part of everyday life. So perhaps not surprisingly, it’s an industry that enjoys high frequency of interaction from customers; the British Banking Association reported that customers logged on to their banking apps 11 million times in 2015.

There is therefore huge potential for banks to capitalise on this, and make the most of each interaction the customer has with them. This could help banks move from being seen as a functional provider to a meaningful part of a consumer’s life. To do this, they need to find relevant opportunities to enhance the overall customer experience they provide.

Protecting Customers from Cybercrime

 A good example of this is the role banks could play in helping customers protect themselves against the threat of cybersecurity. Identity theft is on the rise – recent figures from fraud prevention agency, Cifas, revealed there were 172,919 incidents of identity fraud in 2016; 88% of which were online.

Customers today are constantly connected to multiple devices and channels, leading to increased potential for sophisticated cybercrime. Although they’re worried about their safety, 49% of consumers exhibit at least one risky behaviour which puts them at higher risk of financial fraud, according to Aite’s Global consumers: losing confidence in the battle against fraud report.

According to our research, The Connected Customer, businesses that offer protection solutions have a more engaged customer base.  People who take out products that help them alleviate their cyber concerns tend to be more engaged and, ultimately, more loyal. As a result, they look to sources they trust for reassurance but also education and guidance in navigating these dangerous waters.

Providing a service outside of a bank’s traditional remit – such as credit score improvement service and fitness offers – can help a banks extend their influence to become a valued, integral part of their customers’ lives.

The Power of the Customer Marketer

 With so much choice available, customers have the freedom to pick and choose between providers, accounts and services. It’s therefore vital that banks understand how important peer-to-peer recommendations are within the overall customer experience.

Our research found that more than half of consumers (55%) follow their parents and other relatives when deciding where to bank. Money matters are extremely sensitive and personal so it makes sense that consumers look to their closest relationships for advice.

And it’s a rewarding cycle; engaged customers are more likely to stay with a brand, spend more and recommend to family and friends. Brand advocacy is not something that any marketing department can buy. But is the most significant in terms of customer value, because it can only come from a customer who is completely happy and immersed in the relationship.

The Future of Customer Engagement

 The rollout of Open Banking is moving fast – banks are required to implement the new measures by early 2018. With competition in the sector hotting up, it’s more important than ever that banks both meet and understand their customers’ desires and expectations – and find new ways to make every interaction valuable.

After all, banks that engage with their customers, and nurture their relationships to the point of advocacy, are more likely to achieve long-term loyalty.

By Karen Wheeler, UK Country Manager, Affinion

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