Open banking has certainly opened the doorway to fintech and start-up banks stealing customers from competent ones. For example, budgeting apps like Yolt and Chip give customers advice and recommend product offers from other providers. They threaten not just to seize market share from more established providers, but retaining them through greater customer loyalty thanks to their ability to deliver more relevant, personalised services.
Challenger brands shouldn't be too cocksure, though. The big banks are fighting back and using their large revenues to develop or upgrade their services to capitalise around the open banking opportunity. They previously own the customer relationship and have huge amounts of data on which to draw; open banking can be the way to maintaining their privileged position, for instance through providing an aggregated view of all accounts in their branded app.
While open banking promises to throw open the doors of banks' data repositories making customer information available to all, it is important that financial services providers may use this data effectively. The real “lightbulb moment” for open banking is going to be when institutions can use huge volumes of data to deliver experiences and services that are relevant to “markets of one” – individual consumers.
Whereas banks have traditionally centered on broad demographics, in the era of open banking they will need to have personal relationships with every and every customer. Traditional analytics, using their focus on identifying the past to calculate trends, is no longer enough. Banks need to gather data from the large number of different touchpoints through which customers engage with them, from phone calls, emails, and texts to social networking and chat. Only then can they deliver relevant experiences (including, but by no means limited to marketing) to individual consumers based on a thorough knowledge of their “customer DNA”.
Customers turn up the heat on complacent providers
Like businesses in other customer support industries, banks must move to a process which combines long-term historical insights with up-to-the-minute processing of real-time behavioural data. Understanding each customer's “DNA” will enable banks to determine which products or services they are interested in, and also to create a personalised experience where content, products and/or services are presented to customers before they even realise they needed them.
As consumer expectations grow – not least from their experience of similar services from retailers yet others – having a 'customer 360 view' will become absolutely crucial for banks. With no centralised and real-time view of each and every customer, they will not be able to provide a great customer experience, or a tailored set of services.
The commitment of open banking is that it will democratise the by enabling financial institutions to provide the type of personalised services that used simply to be provided for higher net worth customers. To this extent, it doesn't really matter what point a bank starts from: major high-street banks and fintech start-ups alike can only triumph in this new era by undertaking a fundamental shift towards the customer-centric model of business.
The vital moment for open banking, just like any new standard in technology, will be reaching a critical mass of adoption. Banking institutions, whatever their size and method of business, need to get a handle on their data assets now to be ready to compete as the banking landscape shifts in reaction to increasing awareness. The regulator may have introduced open banking, but it is down to individual institutions to really make it work for them – and ultimately their clients, if they want to keep them.