Open Banking is fast approaching- Will banks seize the opportunities?

Open Banking is fast approaching- Will banks seize the opportunities?

Most banks are pre-occupied with implementing operational and IT infrastructure changes to deliver compliance with PSD II and CMA regulations in January 2018.

Open banking & PSD II will ensure that customers are more informed on managing their accounts and that banks will need to work harder at retaining customers, protecting income and finding new revenue streams.

The need to focus resources and efforts on becoming compliant detracts banks from looking at, and benefiting from, further customer advantages to be derived from the regulation. PSD II and CMA Open Banking will inevitably force banks to become more open and collaborative, with the expected result being an improvement in customer experience – which is something that banks are endeavouring to provide. However, there is a conflict in that it will come at a price to banks, namely in the form of lost non-interest income. For example:

  • Money management tools and alerts will provide customers with more timely information to manage their money
  • This will result in fewer unauthorised transactions, resulting is less non-interest fee revenue (overdraft fees)
  • New technology (i.e. Blockchain) will enable faster and more transparent international payments
  • Traditional FX charges and merchant fees are bypassed

To overcome this conflict, current accounts should form a pivotal part of a strategy that leverages open banking and PSD II to pursue activities and initiatives that retain customers, identify new revenue streams and counter emerging competition in the market. Activities could include:

  • Accessing and analysing an abundance of current account data to spot trends in demand and justify any business case for growth through new products and services.
  • Improve on-boarding through leveraging existing current account customer data, facilitating KYC and quicker access to new products and services.
  • Protect business and retain customers with an increase in ‘at point of sale’ interactions which could push ‘real time’ product placement options to customers (i.e. a new channel to push contextual offers) and adhering to Treating Customers Fairly (TCF) principles.
  • Facilitate data sharing through identifying and collaborating with key partners focusing on shared ‘commercial’ objectives or ideas. For example, banks and fintech providers can partner with each other to offer innovative new services. Larger banks may need to become more open to sharing data and insights with fintech companies and look at the idea of implementing innovative technologies that will make them more agile.

Axis works with financial institutions to help to deliver their regulation, transformation and innovation agenda. We have helped clients to prepare for regulatory compliance, transform their business and operating models, and deliver new products and services to market. This often starts with just a meeting and a simple conversation with you. If you are facing similar challenges or perhaps you’re are losing patience with the traditional approaches from the market, we´d be delighted to help stimulate some ideas and support your business priorities to achieve the right business and customer outcomes in the face of the upcoming CMA and PSD II regulations.

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