Banks become part of the customer’s ecosystem

Krista Korelin, Director Digital Retail Banking at OP Financial Group, shares her insights into how banks are impacted by the emerging open platform economy.

How OP Financial Group accelerates digital transformation and leverages ecosystems in banking

The Ross Republic digital banking interviews showcase the work and ideas of digital banking innovators in Europe. Our aim is to represent a diverse set of interviewees and viewpoints and to provide actionable insights into strategy development, industry foresight and tangible use cases.

For this interview, we were joined by Krista Korelin, Director of Digital Retail Banking at OP Financial Group. Krista has over 20 years of digital business experience, worked previously at Google, Nokia, and Nordea and is also a start-up founder and advisor. The key topic of this interview was the impact of open banking and the role of platforms, the need to digitalise product portfolios and the importance of superior customer experiences in retail banking.

Krista, great to have you here. Can you shortly give an introduction to OP and your digital banking activities?

“Sure, thank you for the invitation. OP Financial Group is a cooperative, which means we are co-owned by 143 independent banks. We are the largest financial services group in Finland and have a wide branch network across the country.

Historically our position in the market has been very much about providing all financial services to all customers. We haven’t been selective. But, when it comes to developing new services, we have taken a bit of a leap towards personalization and customization. Already a while back we started micro-targeting our services for certain user groups. We began to target, segment and analyse the user’s needs in a more granular manner. For example, we looked at particular segments, such as self-employed micro-entrepreneurs, who in the traditional banking segmentation would fall somewhere in between consumer and enterprise customers. We started figuring out what did they need that our current service portfolio didn’t offer, used the data we had available and created a financial management service fully tailored for micro-entrepreneurs working in modern day gig-economy.

I think the analogy to develop digital services and products is typically that you are able to be more targeted and personalised and to utilise data to provide the right service to the customer at the right time. Of course, there are plenty of things we are still figuring out related to this but I think that we have understood already a while back that this is where the growth lies.

So, I would say that on the one hand we have a very strong traditional incumbent banking business and then we have on the other hand these new services and products that we pilot and roll out. The growth figures are very promising, and some of the first new initiatives we kicked off are actually currently either profitable or very close to being profitable.”

Could you give some insight into your role as Director of Digital Retail Banking?

“I am heading digital retail banking, so I am the business owner of the digital services and sales. My team is more than 100 people working on both the business side, such as digital sales and or premium APIs, as well as the development side, such as developing and operating mobile or online banking services. It combines business responsibility with digital development in one leadership role, which is really interesting for me.”

What is your favourite project?

“There are plenty. What I am really excited about is the topic of sustainability and how we as a bank can contribute to the wellbeing of the larger society. We have a lot of initiatives, some of them are still work in progress and we will talk more about them in the near future. However, for example, there is a lot of potential when it comes to offsetting carbon footprints for both consumer and corporate customers.

Another one is financial inclusion: how to make banking available not only for those who are financially well off, but also those who are financially unfortunate in our society. Financial inclusion in also about serving users who are not as savvy with digital services or teaching the younger generation to make smart decisions about personal finances, providing tools that you can learn about what is sustainable for personal finances and what is not.

In these areas we can really make a difference beyond just driving the business, which is obviously important as well. But, especially when you work at a large bank in a small country, your footprint in this particular area is actually quite significant. I am really happy that we can contribute to the society and give back.”

Editor’s note: The interview was conducted right before the Covid-19 crisis unfolded in Europe. Krista let us kindly know that as immediate sustainability actions, OP Financial Group is providing its consumer customers who have no income and small-business owners who are forced to shut down the opportunity to postpone monthly loan payments. Additionally, due to Covid-19 and the need to stay home, OP Financial Group has opened a special telephone help line for the elderly population who cannot go their branch office and need hands-on support with digital banking and other customer service needs.

Both sustainability and financial inclusion are quite large-scale, ambitious projects. Does digitalisation help you to drive them forward and do you see any synergies there?

“There are definitely synergies. First, it is not only our team, but these larger topics have input from the whole organisation. If you think about digital capabilities for the elderly, or solutions for those who do not have access to devices, or who might need speech or face recognition, our team is quite involved, because we actually build these services. But as a whole, the organization at large is very much involved.

For us, mobile banking is the most popular way of utilizing financial services, so our team operates and develops the largest customer interface. A lot of the projects that we do at some point manifest themselves at the mobile banking touchpoints. Obviously, we plan projects together, but then when it comes to designing and building these services so that they add value, then we are at the front and centre.”

Open banking has enabled new use cases. It would be nice to hear how you define open banking and how you perceive its impact on the banking business.

“If we start from the very beginning, in the pre-platform era the incumbent banks had a direct access to the consumer, for example via the branch office. Banks usually “pulled” the customers in with an anchor product, like a mortgage or insurance. You had such anchor services that tied the customer to the bank. Afterwards, you would try to increase the lifetime value of that customer by introducing other useful products or services to them, and by offering benefits by having several products from one bank.

That whole model of a product-developing financial service company, which ties the customer in via customer service channels, the whole funnel it creates, is now changing. Due to change in customers demand for more transparency, more choice, more personalization, and the solutions that financial service providers create to match that, from what I personally see so far, we might have the opposite of the old funnel. That means, we will have customers who will pick and choose, customers who have several financial services providers at the same time. Customers who want the change in service provider to be smooth and the modularity of products to be nearly endless. We see that already happening. Beyond that, customers will be part of different digital ecosystems, and we need to be part of the same ecosystems if we as a bank want to continue our operations. It is going to be a crucial success factor to be present where the customer is.”

As the financial services value chain is opening up and banks figure out going beyond the monolithic banking model, we also covered the underlying mind-set shift that now happens at many retail banks.

“There is also a necessary psychological change that as a bank you are not anymore the one who develops services and then sells them on, the one who calls all the shots. We have to respond to the customer. The whole mind-set has to change, which is a really big shift.

Another point is that regulations, like PSD2, are something that obviously benefits the customer. For example, it is clear that there will be more competition because of PSD2, and competition is always beneficial for the customer.

There are a couple of things that banks can now do. First, having the discussion internally and making decisions, such as: Do we want to be a platform or do we want to be part of a platform? You can obviously choose to go on the same way as always, but I think it is clear for everybody that in five or ten years from now it will not be a viable business model anymore. Then, do we have services that can become platforms? If we are part of a larger platform, are we willing to let go of the control? What are we willing to provide in terms of data, operations, revenue share? What kind of partnership model do we create? To most of these questions, the answer depends on several factors: customer segment, product, business model, capabilities, competencies etc. There are no ready-made correct answers and that’s why banks need to have these discussions internally.”

Can you give an example where OP decided to be part of a platform?

“One example of ours is the fully automated invoice credit service for our SME customers who use the financial management tool operated by our partner. We are fully integrated into the tool these customers are already using (“being present where our customers are”) and the experience is really smooth. We also are now integrating a third-party subscription management service into our mobile banking app: Consumer customers can manage their monthly subscriptions fees from the app, as a part of personal financial management. These are examples where we have tried to create a small-scale platform our own and also been a part of an external platform.”

In order to provide such innovative services, banks and involved partners need to manage data efficiently. What are your experiences with that?

“The data question is an interesting, and large one. Traditionally, banks operate on trust, which is the key component of the customer relationship. I think that is why banks are very reluctant to share data and put a price on data. What is the value of the data we can provide to an ecosystem? That is one of the key questions. Here also the nature of partners come into play: who are the partners we as a bank trust? Who has similar kind of approach to their customer data that we have to ours?

Another part of the data questions is the capability side. Most banks probably have a plethora of data. But, is it accessible? Is it in a usable format? Can it be utilized in daily operations, or to run business, or to make decisions regarding the future? That is one part where we still have work to do.”

How do you decide to create or participate in platforms?

“It is actually very much case by case at the moment. It also varies a lot, for example we have some business areas where we have plenty of platform opportunities and available partners, and other areas where it is not that easy.

Something that has proven to be very beneficial for such decisions is to listen to our customers quite carefully. For example, we have a regular tracking study that we do, then we have online behavioural data, open customer feedback and other real-time metrics, which we follow daily.

It especially works well for us to follow the trends of the feedback and data provided by the younger customers, who are around 18 years old. Usually, you can pick up hidden signals: for instance, sustainability was there as a growing trend many years before it became mainstream in business, and also the need to create more gamified saving experiences, similar to the products that Revolut or N26 are advertising at the moment. If you listen to that segment, you get a hunch of what might be coming in the future.”

The initiatives you mention go way beyond PSD2-type of use cases. Several months have passed since PSD2 came into force. APIs were supposed to open up the market and increase competition. However, very little has changed for end-customers. How do you evaluate PSD2 now? Does the bank actually have to be the main driver of open banking innovation?

“I remember prior to the PSD2 deadline last year I was at an API conference and someone said to a room full of bankers that you should not take PSD2 as mandatory regulation but to embrace it as a business opportunity. Everyone was looking at him a bit like, you know, that is exactly what we are doing.

Of course, it was a big chunk of work to be done purely from a regulation point of view. When it comes to the business opportunity, I am sure banks can still very much leverage the existing customer base and the existing trust. For example, if I need to see all my finances from several different service providers in one place and an incumbent bank offers a really good experience for that, leveraging the existing trust, I do not see why that would not be a successful case.

As to other initiatives I’m sure we will see more new products from new players in the field. I believe competition will increase further, and that is beneficial for the customers.”

You mentioned earlier the importance of tailoring products to customer segments. Will banks succeed by providing more contextual banking products to specific segments?

“In the past, the ability to tailor offerings and the automation to do that was not given. Now, banks have the technology and data in place to scale digital services, customer relationship management and communications, to automate real-time decision making and operations. That is definitely the right way forward. Part of this process is to listen to the customers, be mindful about their real needs and then to offer what they need, with a smooth experience, through owned or third-party platforms in a distributed, networked way.”

We’d like to thank Krista Korelin for taking the time to discuss the future of banking with us. You can follow the latest innovations and news from OP Financial Group here. 

About OP Financial Group

OP Financial Group is Finland’s largest financial services group, fully owned by its customers. The Group is made up of 156 independent OP cooperative banks and OP Cooperative which they own, including its subsidiaries and closely related companies. Some 1.9 million owner-customers own the OP cooperative banks and thereby the entire OP Financial Group with a staff of roughly 12,000.

OP’s business consists of the following main three business segments: Banking for private and SME customers, Banking for corporate and institutional customers, and Insurance customers.

Source: https://www.op-year2018.fi/en/