November 22, 2020

Open Banking Today: Boosting Customer Adoption by Taking Banks Beyond Their Traditional Boundaries

Open Banking can deliver unparalleled value to customers and ROI for banks. What can banks do to overcome the hurdles limiting its potential, and what would the banking experience look like for customers in a more open financial ecosystem?

Where does Open Banking Stand Today?

The philosophy of Open Banking centers around customers. As owners of their data, customers should have access to the most complete picture of their finances, and to products and services that empower them to make smarter financial action. Part of a global movement and government regulation toward more connected services, Open Banking gives banks the opportunity to become their customers’ trusted advisors and offer value far beyond a ‘virtual safe deposit’. By allowing them to link external accounts, customers can consolidate transaction activity across accounts and receive a comprehensive synthesis and unified spending analysis.

With revenue expected to reach over $9.3B by 2022, Open Banking has boomed in Europe since regulations went into effect that enabled customers to securely share financial data with banks and third parties. The U.S. lags behind, but Open Banking is well on its way to becoming the global standard, with 64% of retail clients and 71% of Small Business owners expected to use Open Banking platforms and services by 2022. The door is open for banks to take their place in this evolving industry and proactively engage customers with clear tangible offerings that will impact the bank’s bottom line.

To Gain Customer Trust, Demonstrate Value

To use Open Banking applications, customers need to agree to share data from their other accounts with their bank – and many are reluctant to do so. Why? Because banks have yet to prove the added value in Open Banking. That is holistic, smart insights worth customers’ data, rather than an analytics dashboard that leaves them unsure how to act. Customers do not want to analyze their own financial data – they want a person or computer to aggregate and analyze it for them, and then empower them with data-driven suggestions aligned with their financial behaviors and needs.

Beyond educating customers about the value of Open Banking, banks must also address privacy and security concerns. Banks sell trust, so it is crucial they communicate that Open Banking applications like Personetics are compliant with GDPR and other privacy regulations.

The Opportunity in Open Banking

Banks that successfully demonstrate the value of Open Banking stand to deliver an impactful experience for their customers and gain new revenue sources. How can banks seize the opportunity in Open Banking, and what does an open world look like for the customer?

Build Trust by Starting Small

Access to even one external customer account can provide personalized, real-time insights and establish trust. For example, if a Chase customer grants the bank access to their Santander account, Chase’s Open Banking application can alert the customer when the account balance is low and suggest transferring funds from Santander to avoid an overdraft. The customer, benefiting from very real value, is now more likely to share financial data from additional accounts, which in turn increases the bank’s opportunity to supply even more valuable offerings.

Help Customers Live More, Bank Less

DBS Singapore’s slogan is “Live More, Bank Less”, signaling the immense in Open Banking. Banks can tailor experiences for their customers while requiring very little in return. With a full picture of customers’ financials and behaviors, banks can offer a variety of tailored products, services, insights, and advice. Banks can help customers reach their financial goals and manage their financial lives by shifting from a passive approach to a proactive, smart and hyper-personalized engagement journey.

Offer Empowering Products that Deliver ROI

Customers hold a tremendous opportunity to receive quality products and services from their bank, all in one connected place. But Open Banking can also deliver significant ROI for banks. Banks can transform themselves into the center of their customers’ financial ecosystem, establishing partnerships that allow them to offer products and services from other banks, and strengthening customer loyalty.

Ally Bank is a flagship example. Ally suggests that its customers opt into an auto-savings program offered by Personetics. Its Surprise Savings program aggregates external funds, leveraging Open Banking to link customer accounts to external accounts, and drawing from those external accounts into a savings program in-house. Ally offers a strong and useful product that empowers its customers while increasing its wallet share.

Unleashing the Potential of Open Banking

When banks overcome customers’, and their own, concerns around Open Banking, and capitalize on the opportunities it presents, they hold the potential to become ecosystem leaders in a more open and connected financial world – a world banks and customers alike stand to benefit from.