It’s been a long time coming but we are entering an era of greater access and better financial services that will finally put the needs of customers first.
The catalyst of achieving this much needed and long overdue result is the culmination of big debate, endless lobbying and necessary government legislation. All this hard work will bear fruit on January 13th when the law of Open Banking comes into force.
For years banks have sat on the most valuable asset to any business: the infinite transactional and financial data of customers that essentially define individual’s tastes, preferences, budgets and - crucially - their requirements for building and planning their lives.
High street banks - reluctant to share their oligarchy of power, held on tightly to this data - unwilling to share it with others - or use it to enrich their consumer experience and put them at the heart of their business model.
With open banking, this power will be wrestled from the big incumbents and data will be available to third parties, SMEs and new digital players. This will lead to a better future for financial services, one that increases competition and creates a greater consumer experience. More businesses will finally have a shot at delivering services that are tailored and relevant to individual customers.
Open Banking will also strengthen the role and influence of FinTech companies that have the agility and open APIs to make data sharing possible and to disrupt the status quo. We have already seen new banks like Starling Bank taking the lead, by creating partnerships with other FinTechs to create a customer rich ‘Amazon of Banking’ experience.
Together with multiple significant other sources of data being made available with consent and through API format, this will finally deliver financial products in a simple and meaningful manner, with automated prompts as companies or market products change, resulting in data innovation and improved financial outcomes, as well as removing the hassle for enterprises, saving time and money.
Key to this is delivering analytics in an easily understandable form without overwhelming businesses - leveraging the rapidly advancing data science technologies, machine learning and AI, as well as outstanding design and user experience is part of the market change we are moving towards. While the UK and EU lead the way, there are early sprigs of global growth for international solutions.
Incumbents are not resting on their laurels. Many banks and financial institutions that make up the global sector are making impressive strides to capitalise on open banking, while also exploring valuable collaborations with new innovators that can help them harness the immense value of their data.
A great example is BBVA, which has embraced the digital movement and has set itself apart from other global offerings and is putting the client front and centre. The Spanish bank has nurtured the development of impressive FinTech firms – such as the digital ID startup Covault- while also making some canny acquisitions to keep it at the forefront of innovation that resonates with a new generation of consumers and keeps them agile and technology focused. This includes the purchase of digital bank Simple.
Open banking also presents some challenges. Exposing large quantities of personal consumer data could increase the risk of cyber-attacks, hacking and identify-theft. The possible reluctance of customers to share their personal data could also derail the initiative. Educating consumers and gaining their trust around data sharing will therefore be crucial to the success of this initiative. So too the need for businesses to share information within a secure platform and for online payment providers to be scrutinised by the rigorous laws in place.
If all goes well, the developments of open banking – and the opportunities they bring to consumers– cannot be overstated. Banks will get another chance at creating better value-added services, while SMEs will finally have the access they need to deliver what their customers truly want and ultimately transform their consumer experience. Additionally, corporates are also now included in the scope of Open banking, increasing pressure on banks to deliver improved services to the neglected business market.
We only hope that customers will see the value of it all to willingly share their data and banks will leverage their relationships of trust to deliver solutions of value to their commercial client base. With their consent, the blueprint for a better future for finance can be mapped out for generations to come.