Open banking used to feel like a foreign concept, but with it beginning to be introduced in the UK and having been successful in the US, it seems it may be the future for the financial sector. Open banking removes customer data barriers between financial organisations and connects banks through consumer analytics, helping to improve the customer experience. By working together, financial organisations can learn customer problems and offer intelligent solutions that benefit the consumer. Not only that, but it can improve finance brands’ customer acquisition and build stronger consumer relationships helping to drive revenue and increase value. But how might this affect the financial sector as a whole and what can your finance brand learn?
Open banking is expanding throughout the UK, connecting banks and financial organisations through their personalised services. At its core it connects banks, third parties, and technical providers through the secure sharing of customer data, and to their benefit. Its aim is to encourage collaboration and improve the financial sector by enabling innovation to prosper.
Powered by open API’s (application programming interface), open banking is changing the way the financial sector operates. API’s offer a reliable and secure way to share the consumer data they’re comfortable with, without risking the customer. Asking customers what data they want shared can build strong rapport as your finance brand is seen as safe and trustworthy. This concept of APIs can be integrated into a range of financial institutions, not just banks, providing a needed shift away from other methods of collecting data such as screen scrapers.
This collaboration between financial services is here to stay and if your finance brand isn’t quick to react it could be left behind. In fact, 59% of financial services leaders believe open banking will have a significant impact on their business in the next 5 years.
Open banking is a two-way street
Open banking places the consumer and what they want at the forefront. It encourages healthy and trusting relationships between finance brands and banks as it’s a give and take methodology on both ends.
The open banking model encourages consumers to give up their information in exchange for a greater customer experience and value. And people are receptive to it, with a 2019 study by Deloitte finding 1 in 5 customers believe open banking is valuable. The critical ingredient for success for your finance brand is that you have spent time and resources building trust.
“ A 2019 study by Deloitte found 1 in 5 customers believe open banking is valuable ”
For all types of finance brands it’s important trust is created between your customers and your brand. The success of open banking demonstrates this. However, the 2020 Edelman Trust Barometer has revealed trust with the four sectors they look at – business, government, NGOs and media – is at an all time low. This reveals a prime opportunity for your finance brand to work on building strong and trusting relationships with consumers in order to continue to gain important customer data that can help improve your customer experience and marketing strategy as a whole.
Benefits of open banking
Open banking has a number of benefits for financial services that implement it. While 92% of finance leaders recognise customers are the major beneficiaries, 54% of fintech leaders, 57% of bank leaders and 25% of wealth management firms see themselves as also directly benefiting. Some benefits include:
- Improve customer relationships – Through offering solutions to customers problems finance brands can build stronger customer relationships improving retention and therefore increasing profitability for the long term.
- Collaboration – Collaborating with third service providers offers an opportunity for finance brands to think laterally and offer unique value propositions to customers.
- Better use of data – With more customer data and analytics finance brands can better understand their target audience, empowering them to create a stronger customer experience.
- Expand services – Finance brands can create valuable product offerings for current customers and web visitors through a clearer understanding of what their target audience are looking for.
What open banking can teach finance brands
At its core open banking demonstrates the importance of trust, building relationships between consumers and finance brands, and providing a strong customer experience. Not only that, its success demonstrates the growing demand from consumers to have a digital finance experience and the need for a customer-centric approach to marketing strategy. While open banking is currently focused on the banking sector, all financial services can reap the benefits of collaboration and data sharing.