The truth about Open Banking: why tech and regulation alone can’t create a customer experience revolution

By Andrew Stevens, Principal, Banking and Financial Services at Quadient

Over two million customers are now using products powered by Open Banking. Thanks to PSD2 and the Open Banking regulations, financial providers can now use customer data to provide services such as multi-account visibility, debt management, and microtransaction investment. However, many argue that Open Banking still isn’t living up to its initial hype. When first introduced, Open Banking was tipped to revolutionise the customer experience, improve customers’ control of their data and force huge industry-wide change. Many argued it would displace industry incumbents and pave the way for a future led by digital challengers – a problem many consumers didn’t even know they had. Perhaps it’s time to move beyond the grandiose claims of the industry commentary and go back to the original wording of the Open Banking rules: the intention was simply to level the playing field of the financial industry.

Bemoaning the regulations and claiming they haven’t lived up to the hype is an understandable argument. However, Open Banking has delivered by enabling digital challengers to make some great strides; roundup accounts and the exact products offered by micro-investment apps like MoneyBox wouldn’t have existed without it. While traditional banks have naturally seen less need for Open Banking, with the Big 4 still managing over 75% of UK current accounts, there is an opportunity to learn from how challengers have harnessed their new access to data to personalise the customer experience – something that 80% of organisations say is important to their customer strategy. However, a cultural shift is just as crucial to improving customer experience as any technological advancements or regulatory changes.

Lessons to be learned

Open Banking regulations alone have not created the services that have propelled customer experience forward. However, they have democratised customer data, which has led to huge advancements in the back-end of applications. This in turn has helped create new functionality like intuitive microtransactions, one-click top-up payments between different accounts, and the ability to deliver investing or concierge services through challenger banking apps.

There are lessons to be learned here for traditional banks – Open Banking can be used to give consumers what they want. But what actually is that? Statistics show that 40% of consumers want personalised guidance to help them manage their money better, and 82% of people who use Open Banking-enabled apps have seen improved money management. So why are traditional banks still lagging slightly behind in delivering these types of services to their customers?

New technology is not enough

Perhaps because major banks continue to focus efforts on fighting for a larger share of the customer’s wallet. Despite industry experts affirming that the UK Big 4 still reign supreme, there is high industry anxiety around digital challengers. Banks instead need to learn to coexist with these newer banks, and see how their services can complement each other. Banks could integrate their offering, delivering useful advice or tips on budgeting based on data from Monzo or Revolut, or provide investment options for customers with a hefty lump sum in their MoneyBox account.

However, using new technology to do this isn’t enough. It’s also important to abandon the idea of ‘the mass market customer’. By embracing the fact that each customer has a different set of needs, traditional banks can truly tailor the customer experience and orchestrate it at the individual level. This is far more likely to please customers, 90% of whom now expect businesses to anticipate their needs and act accordingly. Banks could harness Open Banking to see a customer’s whole financial picture, using that as a basis to predict which additional services could be offered that will suit their specific habits.

The great differentiator

Whether you’re a traditional or a challenger bank, delivering the best possible customer experience is a key priority. Today’s customer wants their life and financial position to be enhanced by their bank. While Open Banking alone cannot deliver this, the regulations have certainly enabled challenger banks to provide the new services that consumers want. It’s important for traditional banks to not only learn from this, but embrace the fact that customers have multiple different accounts with other providers. This mindset shift will enable traditional banks to begin building and offering more personalised services to their customers, and compete in the rapidly changing financial market.