The emergence of Open Banking and also the opening up of APIs to third-party providers is paving the way in which for innovation and collaboration to challenge traditional processes – according to research from CACI, mobile banking transactions will a lot more than double over the next 4 years. While the rise of Open Banking represents a huge opportunity to banks and Payment Providers (PSPs), it also poses challenges. It's easier than ever to change banking providers, and opening APIs to 3rd parties means areas that have traditionally been dominated by banks are actually far more competitive. Accountancy firm PwC has predicted Open Banking sector could be worth lb2.8bn by the end of the year, and lb7.2bn by 2022.
Customers now have enhanced digital services because of Open Banking, giving them far greater
choice and adaptability in the ways they manage their money. We've already seen the growth of digital channels encourage dramatic shifts in other industries, like retail, in which the high-street is struggling to fend off the convenience of online shopping. These expectations have permeated into the banking sector. In fact, based on Forrester research, “Thirty-four percent of European online adults are now using a smartphone app and/or their bank's mobile website for banking activities a minimum of monthly.” (The State Of Digital Banking, 2021, Forrester Research, Inc., February 7, 2021) – several expected to rise as bank branches continue to close across the UK.
Further to that particular, 64% of adults are expected to consider Open Banking in the next 4 years, creating another channel for banking and financial services for connecting with their audience, while providing the opportunity for the sector to integrate new third-party services, allowing banks to innovate even faster. This provides a competitive edge and enables banking institutions to launch apps and other innovative services to create 'wow' moments for customers, improving the overall open banking experience.
The potential of connected money
Leading global banks including Lloyds, RBS, HSBC and NatWest have previously made inroads into Open Banking. For instance, HSBC released an app in May, Connected Money, that allows customers to see a single view of all their UK current and savings accounts, mortgages, loans, and cards held across 21 banks – including Santander, Lloyds, and Barclays – all in one app. The result of a $2 billion investment in technology, the app provides consumers having a better understanding of their money as well as creates scope to attract customers from other providers. The potential of Connected Money is further amplified as the app uses Open Banking APIs for any feature that actively makes information on where consumers can cut day-to-day costs, saving users money and enhancing their customer experience.
Connected Money not only enables HSBC to provide an enhanced and much more convenient user experience, but it also better positions the financial institution to take on emerging fintechs and challenger banks, including Monzo, which saw its user base grow by 300% to 450,000 in only nine months last year because of its appeal amongst tech-savvy millennials and its concentrate on customer experience.
Adding value with personalised marketing
When utilizing a retailer's app, users may be window shopping. But when it comes to finances, users in many cases are more task-focused and tend to be looking for specific information, meaning they're highly engaged.
By adding value through timely and relevant messages, banking institutions can use their apps as another method of communication for customers. For example, using location-targeting, financial institutions can determine their user does lots of travelling and that they might be interested to see a bank or provider's forex rates or travel insurance offers. Timely and personalised in-app notifications and messaging around relevant content can delight the customer by adding real-time value and result in additional services being used, making an effect on the bottom line. Likewise, fraudulent activity can be identified using both physical and digital data points, and customers can be immediately notified through all opted-in channels (SMS, email, push notification, in-app message).
Why data is your friend
By 2021, mobile interactions will outnumber interactions by other channels 10 to 1. Actually, according to a recent survey, marketing executives' number one challenge today is understanding these behaviours and reaching individuals the right moment. Financial institutions should be making the most of real-time data to orchestrate marketing messages that relevantly and helpfully serve customers in their exact moments of need, as well as on every level.
There are typically big milestones in a banking customer's journey – starting a household, buying a first home, getting a loan to start a business – and banks have become more aware of customers' situations and introducing innovations to assist them to prepare. For instance, Cleo, which is referred to as an “AI friend” monitors customers' spending habits and alerts them whenever a particular purchase is likely to bring them over their monthly budgets. The AI-driven chatbot interacts with customers, without unnecessary jargon, giving them helpful advice on managing their money.
Open Banking represents a great opportunity for banks and fintech companies to boost their app or service, by giving customers with improved functionality to assist their financial management. Further to that particular, on a more personal level, it can help customers to set targets and get life goals; giving the financial services industry the opportunity to exceed consumer's expectations.