Grasping the business opportunity of Open Banking through data modernisation

Open banking reached a milestone last month of seven million users. While this is certainly encouraging progress, the numbers at this stage have the potential to be significantly higher – particularly in the banking arena.

Seven million milestone - link

Open banking creates opportunities for transformation but adoption is still lagging. This is primarily due to the challenges around harnessing the vast amounts of customer information that sits beyond the transaction data that banks hold. Without data modernisation, they will be unable to fully capitalise on the promise of open banking.

Currently, when a consumer makes a purchase, the bank comes in at the far end of that decision process just to complete the transaction. It builds a profile of the customer based on a limited selection of data and does not necessarily have access to the full context and events that contributed to the transaction. At the point of sale the data it retains is limited and, in this scenario, it is impossible for the bank to generate tailored recommendations of where to shop or eat next.

With new generation payment providers and fintechs coming in, banks’ core role has been challenged, and advances in technology have reshaped the expectations of customers, who want to be advised based on their preferences both within and outside of the realm of financial services. The key to better customer experience is a deeper understanding of the customer. For that, they need to gather more in-depth data as the context of the transaction becomes more important than the transaction itself.

Modernising the data ecosystem

Once they attain a fuller picture of the customer and their preferences, banks can start delivering greater value to that customer by making personalised, proactive suggestions based on that, as well as business value to their own and others’ operations. In effect, they become a platform for all kinds of services and merchants – but this level of aggregation remains far off. While many have set up big data lakes and brought in innovative platforms with high expense ratios, some continue to store the same transaction slips and information as before.

Using open banking APIs, it is relatively quick to gather all the information the customer gives permission to share between banks and authorised third party providers, leading the way to innovative new services, products and revenue streams. And the regulatory landscape is increasingly evolving to make secure data sharing more hassle-free, such as with the recent reintroduction of the Data Protection and Digital Information Bill which promises to “remove barriers to trade” and save around £4 billion for the UK’s economy in the coming ten years.

Where data modernisation is essential is in its ability to help facilitate that consolidation of data across all the different touch points of the customer’s life. The business that becomes the default place to go to for the customer becomes the most successful business in the digital world. Some digitally native companies have the capabilities built in for that, but one thing that puts traditional banks ahead is that that they already have visibility of both sides of a transaction and hold extensive customer relationships, making a higher level of aggregation much easier for them. It is time that banks start playing to that strength.

Mphasis is hosting a webinar with UK Finance on 23 March on ‘The value of customer data and how to realise it’. Find out more and register here.