Business models are shifting and new technical challenges lie ahead with the implementation of Open Banking. Open Banking will provide a much deeper understanding of your customer through the sharing of transactional data. Now is the time to prepare your business to meet these new changes to regulation.
As we move towards using more accessible transactional information, you will get an enhanced view of your customer’s income and expenditure that was only previously available to the account holding bank. This insight will provide many teams in your business with a new source of data that is not only accurate but available to them whenever they want it – in real-time. Watch our video with Rob Haslingden as he discusses how data sharing can enhance credit risk modelling.
Here are 6 steps to help you think about how to prepare your business for Open Banking:
1) Co-create services with customers and your employees
In the new Open Banking world, traditional banking services may not be enough to attract and retain customers. People and their behaviours are changing. They are consuming products and services digitally which has influenced this change.
To be successful in the new world of Open Banking, you’ll need to ensure you put the customer at the heart of everything your business does. To create services that are relevant to them.
While 6 out of 10 customers are still utilising banks as their primary source of financial services1, new market entrants are starting to attract customers with more innovative, and more personalised services.
These agile platforms are being built from scratch with little, if any, legacy systems to update or replace.
How can you modernise your systems and use it as a strategic growth tool for your business? There are lots of ways you can develop service capabilities in the run up to Open Banking which can increase the amount of interaction and products/services a customer has with you.
Consider innovating with your customers and your employees. This is a great way to add value to your customers through a more aligned strategy, as well as building brand advocacy through your employee network.
2) Adding value – understand your customer ‘moments’
Transactional data can give you a better picture of your customer’s affordability, matching their credit information with transactional data, savings and pension data. This could help you minimise the risk associated with a mortgage or credit card for example.
Transactional data gives you a picture of the customer at that specific point in their life which will help you to understand what they need now and form a better view of what they may need in the future. For example, a customer with their first child is likely to make certain purchases which will be reflected in their transactional data. This could help you with providing an opportunity to connect with your customer and help them think about planning for the future. What assistance would they need to support a family? What bearing will this have on their finances?
This insight could also help you create new partnerships with retailers – for example discounts or cash back incentives. This could strengthen your relationship by demonstrating how you understand their needs and wants.
But, this data is someone’s personal data and using it appropriately is essential. Whilst it will soon be available to all, (with an Open Banking licence), you need to ensure any use of it is done with due care. You don’t want to appear to infringe on their privacy. There’s a careful line between benefit and intrusive. Most importantly you need to build trust and confidence and be transparent.
3) You have a history of being secure and trustworthy, use it
Customer trust and confidence are part of the foundations of Open Banking. Gaining consent from the customer to use their data and demonstrating how you can add value to their lives will become increasingly important. The question is; ‘how do I reassure my customers that their data will always be managed properly and shared responsibly?’ Equally, how will you protect and secure it?
Established banks have an advantage as there is a history of being secure and trustworthy. It can be more of a challenge for new market entrants and challenger banks who need to establish credibility with customers before they are willing to share their data.
You need to be upfront about how customer data will be used, shared and protected. Being open and honest in your engagement and communications with customers, and educating them of the benefits of data sharing will help to gain their trust. As a result, they are more likely to share their data with you.
Customer loyalty and advocacy will be a key factor that will enable customers to share their data. Experian research shows that brand is the single biggest factor for gaining trust and confidence among younger customers. While service is most important in older generations2.
Use your knowledge of how your customers interact with your brand and identify those key moments in the customer journey that enable you to reinforce the strength of your brand. In addition, there are many points where they will continue to engage, or do so more deeply. For example, when they apply for a product, during or after a product is purchased. Service and account communications too. Make every interaction count.
4) Now is the time to educate your customers
At present, it is very unlikely that customers will have any knowledge of Open Banking and its implications, making data sharing conversations challenging. They may also never know it as Open Banking – and this is not a bad thing. To them, they will likely see it as a simple upgrade to new, better services.
But, you still need to explain your reasons. This is an opportunity for you to initiate and start educating your customers about how their data is going to be securely shared and protected and the value of doing so. Education will also help your customers understand the benefits of Open Banking. Demonstrating how allowing their data to be shared with third parties will increase their choice within the market for better value products and services.
5) Build infrastructure that will support your growth
To prepare for Open Banking, you’ll need to consider the type of technology needed to support data-sharing activities, such as the use of Application Programming Interfaces (APIs). The API market is expected to grow 300% by 2020, transforming legacy systems into more flexible and responsive platforms that can enable change3.
APIs will sit at the heart of Open Banking and facilitate secure data sharing mandated by PSD2 (Payment Services Directive 2). However, you also need data management systems that are capable of monitoring, controlling and storing (recording) the use of the data for specific purposes such as customer consent. Data sharing is consent driven. Customers need the ability to control their data that they share. Governing the length of time it is shared and who with.
You will need to deploy tools that empower customers to manage their own data and permissions 24 hours a day. This level of control is an essential requirement for Open Banking compliance and for building lasting trusted relationships.
6) Get governance right, be there when you’re needed
Customers need to know who they can turn to when things go wrong. For this reason, every organisation in the data sharing ecosystem needs to have clear, effective and fast processes for resolving customer complaints.
By starting to develop your Open Banking customer service model now, you can plan effectively for managing and resolving complaints. Your response times and customer care commitments will likely be the key differentiators for you.
We understand that no one can predict the future and Open Banking strategies will continue to evolve. However, there are changes you can start to make today to pave the way for data sharing and smooth your transition to Open Banking in 2018.
You may also find the following of interest:
1 Source: EY, Bank Relevance Index 2016
2 Experian commissioned research with Consumer Intelligence, October 2016
3 Forrester.com. (2016). Forrester Research API Management Solutions Forecast,
2015 To 2020 (US).