Open Banking opportunities and benefits
What Open Banking could mean for your business
Juliet Rogan, Co-Head of High-Growth and Entrepreneurs, looks at some of the opportunities that Open Banking could create for high-growth businesses.
The introduction of Open Banking will give customers of UK banks unprecedented control over their personal data and who can use it. In 2018, as Open Banking becomes the new norm, customers will have the option to give their permission to share their account transaction data with, or make payments through, other companies.
New rules now require banks, credit card companies and other financial institutions to let customers share this data securely with third party providers, including FinTechs, that comply with certain regulatory requirements. Underpinning the exchange of all this financial data is a set of computer programming rules called Application Programming Interfaces (APIs), which will ensure these new financial services can ‘talk’ to each other easily.
But why is Open Banking being introduced? The aim is to increase competition and innovation in financial products.
As the sharing of information is encouraged, the expectation is that banking data can be utilised by FinTechs to create new financial products – like funding platforms, supplier payment services, credit checks or insurance – that are more competitively priced or better suited to customers’ needs.
Access to a person’s or company’s financial data should also greatly reduce the time it takes for financial services to be set-up; for example, providers may be able to approve loans much more quickly, as well as linking transactional information to accounting software.
But the impact of these changes may go even further than this. Open Banking is a huge opportunity for all sorts of tech companies to introduce previously unimagined products and services.
Opportunities for innovators
It’s hard to predict exactly what the Open Banking revolution will bring, as it is likely that there will be many opportunities to create new services. The legislation has created a new foundation for what is possible, and it is up to innovators in the market to establish the art of the possible.
And it’s not just financial services that could use this data to improve services. With information now more available than ever before, we might see other industries looking to utilise this data to improve their services and offerings for clients. In recent years, we’ve already seen the introductions of APIs change the face of the travel sector. Imagine how similar technology and a greater data source could impact the scope of traditional industries – from supermarkets and online retailers, to leisure companies and insurers.
The changes should also be a boost to the likes of price comparison websites, with the combination of open customer and financial product data providing much easier assessment of complex products. This could lead to a number of new FinTechs built on a comparison-site model that weigh up the merits of different types of account – a powerful tool for customers.
One thing is certain though: the most successful early adopters of Open Banking will be those that can best communicate with individuals around the benefits of sharing personal data. What is more, they will need to integrate this message with a great customer experience, if they expect mass uptake.
So potentially radical are the Open Banking changes that the speed of take-up is hard to predict. But if the explosion in the use of social media is anything to go by, customers may come to see sharing their financial information as the norm, as they become more comfortable and knowledgeable about the benefits.
What we’re doing
With our customers’ and clients’ permission, we’re already looking at how we can best use these technological developments to improve the products and services that we offer to businesses. One such development is SmartBusiness Dashboard, which uses API technology to bring a company’s favourite business apps into one single dashboard1.
We’re also working with innovations charity Nesta and all of the major UK banks to support a challenge for UK FinTechs and app developers, who will utilise Open Banking. The aim is to produce comparison tools and services that will help SMEs in the future.
In a fast moving world, it’s important to embrace the competition and innovation that Open Banking will bring. We’re keen to help customers and clients navigate this new environment and make sure they understand what’s involved before authorising the use of their data. Find out more about how our High-Growth and Entrepreneurs team can support you here.