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Open Banking – Embracing change in Financial Services


The arrival of Open Banking next year will require the financial services industry to become more focused on the needs of the customer. This isn’t a bad thing. Quite the contrary, it offers financial organisations the opportunity to revise their customer strategies to gain a competitive advantage.

Open Banking should therefore be perceived as an opportunity to embrace change for the benefit of future growth.

Open Banking, and its counterpart PSD2, presents an opportunity to drive innovation in interactions between customers and financial service organisations as new developments in payment technology and the sharing of data are brought forward.

The Open Banking model moves financial services into a model similar to insurers – where aggregators and comparison sites are used by customers to research and purchase products and services. This model provides an easy way for customers to understand more about a product, its value and its relevance to them. It will also openly showcase competitiveness by comparing products in a transparent manner.

In a market where the customer is offered greater choice, competition could be fierce – switching and the transparency of product value are at the core of Open Banking.

A focus on developing meaningful customer experiences is one way organisations can gain a competitive advantage.

There are two primary ways in which the competitive advantage could be redeemed:

  1. Retention of existing customers – financial services organisations need a winning digital proposition to retain customers.
  2. Acquisition of new customers – providers need to understand how new customers can be acquired through aggregator sites and what appeals to those in the market to switch.

To support this, financial service organisations also need to ensure they have the right technologies built into their customer-facing platforms to attract and then quickly respond to consumers. This way they can be presented with offers tailored to their specific requirements.

If providers can get these things right, then the arrival of Open Banking may present a valuable opportunity.

But, how do organisations focus their evolution with so many differing priorities?

1. Customers expect a single customer view from their financial service providers

It’s not uncommon for customers to receive multiple engagements through uncoordinated channels. For example, a customer opens a new credit card, only to receive a promotional letter the next month trying to encourage them to open the same new credit card.

Customers aren’t aware that different departments have different processes, different data and differing objectives. They expect a single interaction that is consistent and linked. They expect to be treated as an individual and to be engaged with in the same manner – whoever they speak to. On this point, the customer is ahead of the market.

With a joined-up view of a customer, where all their data is pinned into a single ‘persona’, all departments can make decisions at the customer level. When an individual’s circumstances are factored in, products and services can be tailored accordingly (for example, based on what they can afford to purchase).

Not only will a system like this help improve customer relationships, it will help financial organisations to align their decision-making, align the technology used to inform those decisions, and help increase consistency. This will develop a consolidated, company-wide approach to the administration of services.

2. Understanding customer data

Borrowers today access credit in much the same way as the previous generation did. But this traditional model is under threat from changes in the credit market. Customers expect tailored services.

A typical household today is likely to hold current accounts, loans, and perhaps even credit cards. But, in the future this is likely to change as the lines between financial products become blurred. This future is likely to be highly technical, nuanced, and administered by machines. As such, how are financial organisations going to position themselves to deliver such a different offering?

Each organisation should understand its own appetite for risk and credit. Once this has been established, you will then be able to think about the services you are prepared to offer. These services can be presented to the audience based on relevance, propensity and the risk policies.

To optimise this new opportunity, organisations need to think about customers as a single individual.

Thankfully, tools exist to help you establish a single view of a customer. (Such as Experian’s renowned ExPin). Internal data sources can be combined into a single view and then matched to information from external sources. This gives a much more robust, granular level of data that is both fast and easy to interpret and use.

A combination of data, good analytics, and modelling can help you understand your individual customers and therefore help you to be successful in an Open Banking environment.

3. Customers want value-added digital services

Customers don’t distinguish between providers. Whether they’re buying clothes, chatting on social sites, or accessing credit, the expectation is that all brands should work in a similarly seamless and joined-up fashion. Convenience is key.

In the marketplace, if a customer can’t obtain a suitable level of service from an existing financial provider, they’re likely to find a brand that can. Their attention is likely to be moved towards a service that offers more value to them personally.

The opportunity is to uncover the areas of friction, discover ways of improving engagement, and to reduce drop-off.

Watch our video on creating a friction free journey:

One of the ways providers can engage new customers is through the use of real time event decisioning technology built into their platforms. Real time decisioning helps providers make informed decisions and create offers based on individual customer behaviour. It also allows you to make tailored and appropriate credit decisions that are not time-consuming or onerous on the customer – or you.

All these ‘value-adds’ rely on automated digital systems. The systems allow providers to set flexible yet robust rules. Make changes quickly and easily, and deploy decisions about credit and borrowing to multiple customers. All in the speed it takes to click a button.

“Developments now mean decisions can be made in a fraction of the time, instantly. In a Millisecond.”

Tom Blacksell [Watch Tom’s take on a data powered future]

4. In uncertain times, assessing customer behaviour is crucial

The economy in the UK is changing. How can financial service providers balance economic uncertainty against the opportunities presented by changing customer behaviour and a shifting customer market?

Micro and macro factors always affect the risk appetite of financial service organisations. By understanding more about customer behaviour, businesses can build up a clearer picture of where the risks and rewards lie.

So, how do you do this?

Here are a few basic questions that should be considered:

  • Who are your customers? What type of customers are you trying to attract?
  • What level of risk can be accepted?
  • What are the different strategies that can be applied to each customer group?
  • And, what type of behaviour will the customers display?

Organisations don’t have to rely solely on their own data for the answers. Organisations can use tools to help them establish a broader picture of their customers. This leads to a richer understanding of a customer’s affordability and allows for greater personalisation based on the sociological, geographical, and economic make-up.

What’s more, organisations can take what they know about their customers and apply indexing and scoring to deliver income and affordability estimations that will help them work out their overall strategy for the medium and longer term.

In short, regulation is changing the credit landscape and is undoubtedly focused on the needs of the customer. This opens a wealth of opportunities for businesses to gain a competitive advantage and remain successful in the future. Now is the time to embrace change for the benefit of sustainable, future growth.

Match customer data with confidence using Expin, find out more

This article is about: Digital customer journey, Financial Services, innovation, Open Banking, regulation