In an open banking world, consumers will flock to the best apps rather than traditional brands, according to AppDynamics ANZ director Benjamin Weldon, who says the shift is putting growing pressure on industry incumbents.
According to AppDynamics research, in 2017 around one in four consumers reported being more loyal to an app than a brand. By 2019 that had doubled.
Weldon argues consumers’ increasing preference and demand for digital will be better met by smaller financial services players like the host of neobanks which launched last year. Because they will be able to move more quickly than industry incumbents while tapping into the same new sources of data unlocked by the open banking regime, set to begin in July.
“What that research suggests … is that we are less reliant or less focused on the actual brand or the trust of a brand. Rather, our experience and our trust is being established through the application,” Weldon told Which-50.
“So that is absolutely the focal point of naturally a lot of these neobanks. As they emerge, they’re creating more hyper personalised experiences as well as more creative ways to manage your money and manage payments and a number of other functions and activities.”
Industry incumbents can offer similar customer experiences – for example CBA’s award winning banking app – but delivering them is much more challenging because of monolithic tech stacks which were never envisioned to work with APIs.
“If you look at a company like CBA, they’re almost acting in a bimodal fashion. What they’ve done really well is that they’ve mobilised around delivering customer experience while also working on how they modernise a lot of the back end systems.”
Weldon says the bimodal model allows Australia’s largest bank to compartmentalise consumer facing apps and keep pace with rising demand while still upgrading digital infrastructure through a mixture of cloud technologies.
CBA’s consumer app uses software from US vendor Pegasystems to analyse billions of data points from various locations to deliver a personalised app to nearly 6 million users.
But the digital investment has been significant for CBA, which is one year into a five year $5 billion budget to spend on digital technology.
Weldon says digital investment is necessary for large banks to ward off the new digital-only banks, which he says have demonstrated that they can win customers in other more mature open banking markets.
While broader consumer benefits and innovation may take time to flow, Weldon says the switching ability provided by open banking means competition should improve quickly. And with most consumers holding multiple accounts from different providers the differences will stand out quickly, according to Weldon.
“In our App Attention Index 84 per cent of consumers have experienced problems with digital services. Across those, three or four [bank] accounts they’re experiencing that. So where are they getting the greatest experience? Open banking will give them more flexibility to swap those accounts and make that decision easier for them.”