I’ve been working with a client on their PSD2 / Open Banking project for over a year now as a Fraud SME, and despite the recent announcement by the FCA delaying enforcement of the regulation, things will undoubtedly improve in a couple of ways following implementation;
- Reduced online fraud
- Increased competition through sharing of bank data, given the low levels of current account switching.
What has left me more intrigued however is how it will be embraced by the general public?
Having all your accounts with different providers in one place isn’t a new concept, and the extra layer of security that Open Banking will provide will get a few more people on board, but what will be the watershed use for Open Banking? What will be the Killer App?
Below are some thoughts on a potential future but please feel free to agree or disagree and engage with this post.
There are good use cases for age verification and affordability assessment, but compliance tends to be imposed onto a business rather than embraced by them.
To consider the future for Open Banking first consider how you save the consumer money. The rise of aggregators such as Moneysupermarket demonstrates the appetite from customers to change providers to save money. From my experience, I tend to receive weekly emails from them with top 10 offers followed by increased activity around known renewal dates and preapproved/ high chance of being accepted offers. These all rely on the customer realising they are paying to much and acting accordingly, and people do it in their droves.
Now imagine you could outsource all of that by letting someone else interrogate your data? Savings rates you’re getting compared to best in the market. Changes in payment amounts on credit cards showing your promo rate has just finished. Knowing insurance payment data. Bring all this together and you could get marketing from these companies which will be specific to how much they can save you, guaranteed. From a GDPR perspective Open Banking will need to convince both us, and the authorities that personal data is being managed and protected appropriately, with increased protections versus the current being a game changer for many.
Great for consumers, but what will that mean for the providers?
Some will bury their heads in the sand, pat their acquisition teams on the back as they see their market share soar via competitive advantage, but at what cost? Customer behaviour will undoubtably change suggesting those accounts will be less profitable than forecast, in all likelihood being unprofitable. This will mean a contraction of the market in terms of teaser rates and potentially a reduction in switching due to price. So where might we end up? More aligned deals for new and existing customers? More of a focus on customer experience to retain business? We’ll soon see.
Andy Brock is an Associate with Merlin Consultancy with over 15 years experience of retail banking experience, with particular specialism in fraud.