Customer centricity has been top-of-mind for financial services professionals for many years and has been a topic we have frequently covered here at The Banking Scene in the past. But in a world of Embedded Finance, financial institutions have discovered that this is no longer enough and their focus and attention now needs to expand to encompass a much broader range of stakeholders.

I had the opportunity to dig a bit deeper into the impact and implications of this change at The Banking Scene Conference in Amsterdam, where Koen Adolfs, Head of API portfolio, ABN AMRO, Joris Hensen, Founder and Co-Lead API Program, Deutsche Bank, Esther Rodriguez, Innovation Manager KBC Bank and Simon Boonen, Fintech Partnership Lead and Product Manager Payments at ING shared their insights in a panel session I moderated, and during interviews I conducted with them beforehand.

Developer Centricity

In the beginning, it seems most banks viewed APIs and the conversations around them, as falling purely in the technical domain. The thinking was “we have this way to access our data via an API and we will publish the specifications online and people will know what to do”. One of the panellists even mentioned that the business side of the bank assumed that since the bank already had a reputation as an innovator, developers from 3^rdparty organisations would be actively seeking out their APIs and lining up to collaborate with them! (This turned out not to be true.)

One of the others said they went all out and focussed heavily on the developer community from the start by making announcements in tech magazines and developer forums and holding hackathons to raise awareness of their APIs.

All the banks represented on the panel have dedicated developer portals and teams that deal directly with the techies in partner organisations to support integration issues etc. This has required not only extending the capabilities of their own internal technical teams, but also having to learn how to market and communicate to third party developers, which is something I doubt many banks would have needed to do in the past.

However, all the panellists pointed out that the early, technical conversations, rapidly evolved into business conversations and they realised that the product managers in partner organisations were key stakeholders that they needed to cater to.

Partner Centricity

Embedded finance and API conversations are not about technology, they are about business, and that’s ideally where they need to start.

Koen made the comment “the beauty of API’s is that they encourage you to understand the partner’s jobs to be done”, which he used to illustrate an important point. As bankers, we normally structure our teams internally by product, so BNPL, debit (current accounts), credit cards, loans etc would all (logically) be separate teams. But from a merchant perspective, these are all realistically just “a checkout method”. A merchant cares about making a sale, and while the associated merchant fees and conditions are important, they simply don’t care if the customer is taking a loan at the point of checkout, so long as they are getting paid.

Let that sink in ……….

The merchant doesn’t view our products the same way as we do.

This is a fundamental mind shift for banks to make!

Understanding “the partner’s jobs to be done” requires an entirely new skillset for bankers and financial services professionals. They now need to understand the partner’s product manager’s goals and objectives and work with them to achieve the desired outcome. This is very different from simply saying “we can offer your clients a loan at the point of sale – here is our API”, as the response from the partner would be “so what?”.

It was revealed during the panel that it can be difficult for some more established banks, or more specifically, some more established bankers, to make this mind shift from being purely customer centric, to embracing “partner centricity” as a concept – but it is necessary to succeed in a world of embedded finance.

Joris pointed out how being partner centric can help a bank continuously improve its products through “feedback loops”, taking partner feedback and requests and incorporating them into their own product development strategy.

Simon spoke about ING’s collaboration with Amazon to provide SME merchant financing, and how their learnings could be taken into consideration when refining risk models and credit scores using data they previously didn’t have access to, further reinforcing this point.

One of the panel members shared that their dedicated partnership team monitored their partners’ social media accounts, press announcements and online activity, proactively looking for new opportunities for collaboration in the future.

Employee Centricity

When it comes to employees, 2 distinct aspects require attention.

The first has to do with skills.

In the past, bank employees were trained in a specific department or product line, with the end customer in mind. The world of embedded finance requires bankers that understand both the needs of the end customer and the needs of the intermediary / partner organisation, while at the same time having a good grasp of what is and isn’t able to be achieved from a technology perspective.

In short, a new breed of bankers is emerging, and they are in high demand!

The second aspect has to do with cross team collaboration.

The “snowball effect” of embedded finance was mentioned more than once. A success in one department or use case (eg loans), drew the attention of another department (eg insurance), which then compounded the impact of the embedded finance strategy of the bank. It was recognised that the more departments in the bank that knew about the potential of APIs and embedded finance, the greater the uptake and economies of scale would be.

At the same time, it was also recognised that there can be some resistance to an embedded finance strategy that cuts across traditional silos in a bank and that KPIs and incentives need to be adjusted accordingly, in order to encourage people to work together to deliver a positive outcome for all.

Regulatory Body Centricity

While we didn’t get an opportunity to delve deeper into this during the panel, it was a topic that came up during the pre-panel prep interviews. The general feeling is that historically, banks have been on the back foot when it comes to regulation, which has largely been regarded as something “done to them” as opposed to them being involved in shaping the regulation before it becomes legislation.

The point was made that banks should be much more involved with regulatory bodies if they aren’t already, and not only “the financial services regulator” of their region, but to consider getting involved and contributing to industry discussions that their embedded finance partners are involved in too.

Conclusion

In closing, Esther shared a personal vision of a world where APIs enable data to flow (with appropriate permission and security of course) between ALL parties in an ecosystem, bringing about new opportunities for products and services our customers couldn’t even begin to imagine yet.

I have to say that I personally believe the world of banking and financial services has become a whole lot more interesting since the advent of embedded finance, and will get even more exciting as it embraces open finance, open data and who knows what next?

You can read more about embedded finance in our white paper “Unveiling the Future of Finance: A Comprehensive Exploration of Embedded Finance Perspectives”