By Andries Smit, CEO and Founder of Upside Saving
The future of finance is an open one, that much is clear. Already transforming the way we control our finances and pay for products and services, Open Banking shows great potential to disrupt financial services while creating a prominent market opportunity.
Open Banking allows consumers to share their spend data. Everything from individual bank transactions, to regular payments they make and companies they buy from, can be shared with authorised providers. Budgeting apps are one example of Open Banking where consumers share their spending data in exchange for a summary of where they spend their money, gaining value from the data exchange. Open Banking is undoubtedly revolutionising the banking and finance industry, but why should retailers care?
An even better example of using Open Banking to unlock value for consumers would be the voluntary exchange of spending data for cashback as they spend with specific retailers. Insights obtained from this spend data are a game changer for the retail industry. Access to the spend data insights from individual and collective customers provides numerous opportunities for retailers, such as competitive advantages, prospects for strategic business development and cost savings.
Another point of relevance for retailers in regards to Open Banking is the increasing awareness among customers of the value it adds to their retail experiences. You would be right in thinking that, up until recently, consumers don’t care about Open Banking, as according to a report from pwc, only 18% of consumers are currently aware of what Open Banking means for them. However, the report suggests this figure is expected to increase exponentially to 64% by 2022. This suggests that if retailers wanted to remain competitive, retaining and gaining customers, Open Banking is something they can’t afford to ignore.
The rapid development of innovative options for consumers is the main driver behind this anticipated increase in awareness, as the benefits of data sharing increasingly outweigh privacy concerns. While Open Banking continues to evolve so too do the innovations driving it, creating an ever-progressive circle of growth. Already, finance applications such as Request to Pay are rising in popularity and Open Banking it is tipped to be on the verge of replacing BACS payments, due to its simpler and more effective payment options. Looking further ahead, real-time payments will be gradually improved to enable instantaneous transactions for e-commerce, an area where retailers are always looking for new methods to provide frictionless payments and reduce costs created by errors in the cash handling process.
The future of retail looks fast, convenient and increasingly personalised and the demand for more won’t stop there. Growing expectations from consumers and the market mean these innovations will be constantly challenged and pushed for improvement driving ever more rapid advances in the way we manage finances. The good news is Open Banking, is already providing the basic payments infrastructure needed on which to build this innovation in the future.
Of course, Open Banking can only advance so much before it becomes something else entirely. Some evidence of this is already being seen with the slow emergence of ‘Open Finance’, an idea that is building on the solid framework of open banking that would allow financial services to provide better access and services to consumers and businesses. Recent feedback from The FCA’s Call for Input on Open Finance shows it has the potential to unlock meaningful value for consumers, including increased competition, improved advice and greater access to a wider and more innovative range of financial products and services.
Increased use of open finance services has the potential to provide vast opportunities for the retail industry, driving innovation forward even further and encouraging growth for the market. Access to an individual’s entire financial footprint, including pensions, mortgages, savings, insurance and credit will provide a great holistic views of consumers, which in turn allows for more tailored and personalised services to add value to customer experience.
Open Banking is still in its youth and has many places in which to develop and growth. Nevertheless, it has arguably kick started the beginning of a total transformation of financial services. Because of this, retailers would be wise to keep one ear to the ground to ensure they remain at the forefront of delivering on shifting consumer demands and meeting their needs. As Open Banking is so broad in it’s scope, retailers must focus on the capabilities that add the most value to their business. Developing integrated and safe ecommerce platforms, being open to partnerships and the opportunities they provide, as well as utilising in-depth customer data analytics as part of a personalised marketing approach are all key characteristics retailers should be strategically adopting in order to make the best of what Open Banking has to offer in the future.