Change Mindsets and Win with Open Banking

Open Banking may be a legal and technological change, but the opportunities can only seized if the financial industry adopts a change in mindset. By embracing innovation and adopting a customer-centric approach, early adopters can transform the perceptions of a sector not renowned for being forward thinking or challenging the status quo.

At the moment there is absolutely all to play for in building demand and winning the argument. According to a recent survey by the Unlimited Group 91% of consumers were unaware of Open Banking. The first stage is to educate the consumer on the benefits of open banking — why they should consider it; what it’s in it for them and that their data is secure. For those who do see the value and benefits of sharing their data and trusting organisations to view it, their expectations of them will increase dramatically.

The ways to win (by gaining significant market share of customers) are therefore likely to come down to branding and the associated perceptions of status and trust (‘my data is secure and will not be lost or sold’), marketing (awareness of the service), positioning with customers (is everyone going after 20-something singles?), speed to market and perceived level of innovation or benefit of choosing a specific app.

The danger of not winning is that somebody else has the key relationship with your customers and understands them better than you. The bank becomes, at best, a service provider easily replaced in the areas that drive the most profitability (mortgage, credit cards, loans, insurance, etc.).

One key part of the innovation benefit and a significant point of differentiation could be the advice and offers that customers go on to receive through personal finance apps. Offer too many or the wrong ones (by just selling access to the highest bidder or by only offering your most profitable products) and customers will get annoyed and simply move apps — a process that is much simpler than switching bank accounts. Offer the right ones and you have a point of differentiation that is much more difficult to copy, especially as you gain greater market share.

At the moment, banks seem to be fixated on spotting customers that are going through specific life stages — saving up for a particular event, about to buy a house, about to have a baby — and using this to offer their own existing products (savings account, mortgage, etc.).

Winning will come down to who can:

1. Best use the data to understand the nuances of customer motivations and needs (by classifying merchants and by having a big enough base of customers to spot differences in behaviour).

2. Use that understanding, plus the volume of customers, to get the best advice/most exclusive offers from all potential service providers (e.g. best mortgage provider, best savings account, best utility deal, niche offers linked to what customers truly love or need).

3. Balance what is best for customers with what is most profitable for the bank.

4. Innovate at speed and get out of their own way (the challenges of innovation in large financial organisations with a product vs customer mentality).

Those Financial Services companies that will succeed in the future will be those that truly understand their customers and offer advice and recommendations of real value. The winners will be ones that change their thinking and adopt a truly customer centric approach.

This piece was devised and written by Jonathan Burston, Client Director at Starcount, and originally appeared on LinkedIn.