As Open Banking turns one, we asked our CTO David Tonge, co-chair of the Financial API Working Group at the OpenID Foundation, to take a look at the state of the industry. Below, he examines its repercussions for customers and for financial services, and identifies the challenges and opportunities that are set to define Open Banking in 2019.
What is Open Banking and why does it matter?
Open Banking provides an opportunity to open up the banking industry and ignite innovation. The aim is to ‘open up’ the banking sector and break the monopoly banks have over the UK population.
At the core of the legislation is the aim of giving customers control of their financial data and enabling them to share it with third parties authorised by FCA, bringing forward a wealth of opportunities. Not just for innovation, but for businesses to play a more central role in the relationship between a customer and their finances.
How will Open Banking change alter the banking landscape?
The initial objectives of the Open Banking standards were to increase competition in banking and increase current account switching.
But as the industry becomes more accustomed to the greater level of data available and its potential, this has begun to evolve. We are now seeing the initiative tackle the issues of overdraft fees, customer service, control of data, and financial inclusion.
What will it mean for customers?
Open Banking is an opportunity to make savings and power growth, particularly for those businesses that have a direct to consumer offering.
It should also act as a catalyst for product innovation, as the data that can be utilised by businesses will give unparalleled insight into customer habits and demands. This can help to power products and solutions in-line with businesses’ specific needs.
This also marks a positive shift towards a hyper-personalised and faster service from institutions. Not only will businesses be able to get true view of a customers’ financial lifestyle, habits, and requirements, this can be captured and analysed in real-time, transforming the experience.
Through Moneyhub, businesses can build a holistic financial picture of their customers, including how they manage their money, how much they save and where they save it, what their income is, and where and how they spend it. This greater level of insight will enable a much better service to be provided, the changing needs customers to be anticipated, and create an interaction that builds strong loyalty over time.
Identifying and partnering with regulated third parties is the key to seizing the market opportunity created by the Open Banking revolution.
As a first step, businesses should research the third-party applications being developed specifically for them. I.e. Moneyhub is a financial management platform designed to make it easy to manage every aspect of money in one, simple online hub.