Financial services companies which do not wake up to the open banking revolution could face a long and painful death by failing to recognise the customer insights it brings, fuelling the emergence of a dual speed data economy of the haves and the have-nots.
On the eve of the launch of open banking, Callcredit Information Group predicts a chasm will emerge between those businesses that are willing and able to harness the additional analytics and those that fail to recognise the value open banking can provide.
Britain’s nine largest lenders have developed application programme interfaces (APIs) that allow third parties to access their customers’ data, with permission. Customers will be able to control how this information is shared digitally and provide a deeper picture of the way they manage their money.
Instead of doing all their banking through one or two companies, customers could have their current account with one provider and then add on other financial services, like an insurance policy, ISA, mortgage and investments through separate providers, all under one interface.
Callcredit chief technology officer David Ross said: “Open banking has been designed to empower the consumer. Through the sharing of information, consumers will be given, and expect, a more tailored product and service offering and businesses will be able to develop more bespoke customer experiences, journeys and products. Those organisations that fail to adopt technology that enables them to access open banking information will be left behind.”
Last year, a study by Callcredit and business consultancy Ctrl-Shift, which interviewed leading figures from traditional banks, challenger banks and the wider industry, claimed that traditional firms which do not enhance their services could need a Government bailout in the next five to seven years.
Ross continued: “We’ve been working with a number of clients against the backdrop of open banking and have gained some real insights from speaking to them and wider market participants. It’s clear some see the technology, data and analytics implications associated with open banking as a barrier.”
Unlike other legislative changes, open banking will likely see a phased adoption by parties using the data. Banks will make APIs available but the number of businesses able to access and utilise these will grow slowly over time, with most observers not expecting real change until 2022 at the earliest, meaning there is still time to get onboard.
But those businesses that have a heightened consumer focus and identify the opportunities earlier, will be the winners, Callcredit claims, as others wrestle to implement the changes needed to utilise this new source of insight.
Ross concluded: “As consumers, we all expect ever improving levels and speed of service. Open Banking will facilitate another step change in business’s ability to do this. Those that embrace these changes will be the ones with higher customer satisfaction and ultimately a stronger business model. The age of the empowered consumer has firmly arrived and businesses should adapt to this new environment or risk failure.”
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