Open banking; who to choose
The question is… who will the customer choose to be their banking confidant in this new, open connected banking marketplace starting from January? The answer is the one you trust the most with your money and data.
This is transformational and the first region is the UK. The total number of UK current accounts is 80 million, with 65 million active accounts generating £8.1 billion per year. Nine banks have 1 million accounts or more with the top 4 banks having a 77% market share. The next areas with pending Open Banking regulations are Europe and Australia.
Open banking means that the potential new owners of your trust will be able to see all your financial details. They can add this to any social media. By combining data, the third party can create ‘something of value’ for you and a margin for them.
So, who should be your confidant?
- Banks
- Fintech
- The new digital companies Amazon, Apple, PayPal
Historically and in most opinion polls, banks are trusted. Banks are also highly regulated and offer clients protection should they fail. Banks must be compliant and otherwise face penalties which can include going to prison.
Banks need to up their game to what of the new digital companies are providing to their retail and business customers. This service includes providing customers with end-to-end processes in seconds, instead of days, and being responsive: knowing who the customer is and resolving errors quickly. What brings further trust to Open Banking are:
- Providing an auditable record of the third-party providers selected by and what transactions they can perform on the client’s behalf
- Informing clients each time a request comes from the third parties and before the transaction is made
Now this is not easy for the banking industry as 92% of the core technology is batch based. The true balance in the account is usually not known until the next day. Your data is replicated multiple times as banks often have independent product sets: current accounts, mortgages, loans, investments, cards and trade finance that you may be using.
Fintech and digital companies can provide services to you through the banks. The legislators have made certain that the banking community itself is open by insisting on standard connectivity between banks, third party providers and the customer. (APIs)
Ultimately the customer, instead of receiving a monthly paper bank statement, will have an on-going electronic combined financial and personal data statement. The combined statement will show:
- Full financial activities across multiple parties
- Permissions and activities given and allowed by the third party
- Full information held for that customer
This combined statement is easily accessible, changeable and transferrable by the customer and supported by a self-service intelligent platform.
Open Banking brings transparency and trust. Having instant insights and live data is a game changer. After a short time, this will be the norm for business and customer to bank.
