What word would you use to describe the design of open banking? Is convergence an appropriate descriptor which is the melding together of different data sources? How about assimilation, which is the acquisition and use of data within a provider’s application? Or, how about divergence with traditional financial services in one corner and fintech providers in the other? What if I told you that it didn’t matter? Consumers want the ability to integrate data from external sources into an application that increases their efficiency in managing their finances while offering personalized (relevant) suggestions to improve their financial well-being. How willing are consumers to use open banking? The numbers speak for themselves. 52%
want more control over their finances, 38%
want a 360-degree view of their spending, and 34%
want suggestions for better money management. Those are compelling statistics!
Designed by the user.
Our previous blog covered the technical and user controls of open banking, but let’s get down to the meat and potatoes. Consumers (your members and potential members) are looking for the most efficient way to manage their finances. This may include the macro and micro views. A consumer may want to see all their financial relationships in one place or may want to see a specific product relationship they have among their financial services providers. For example, they may only want to see their checking relationships among their various providers to monitor their payments. Savers may only want to see their certificates so they can track maturity dates and rollover grace periods. Investors may want to see their investments and deposit accounts in one place. The point is that consumers can use open banking to customize what information they want to manage.
One-to-One Offers. Finally.
But wait, there’s more. Consumers selecting the data they want to share within their specific models refines the offers presented to them. Consumers who use open banking at the product level only receive offers based on those products. Returning to our previous examples, an open banking checking model may receive financial wellness suggestions on how to avoid future check returns due to insufficient funds or enrolling in a service that offers merchant rebates by using their debit card. These offers are targeted because the consumer’s data shows that they have had prior check returns and are not enrolled in services that can save them money through rebates, both, of which can improve their financial well-being. A consumer who has created a model to monitor their certificate balances and maturity dates may be presented with a money market offer, but not checking account offers. The money market account pays higher interest rates than traditional savings accounts. It enables consumers to “park” their funds from cashed-out certificates while deciding where to invest their funds in the future. The consumer may have never considered the liquid aspect of a high-rate interest savings account without the personalized offer. And investors will not be presented with credit card offers. Personalized offers remove the frustration consumers feel from disassociated offers.
Open banking, undoubtedly, offers tremendous value to the consumer. But how do you derive value from it? What differentiates you from your competition so the consumer will create their model(s) with you? The answer is experience. Have you ever made a request to a voice assistant, and it has botched the result? How many times will you ask the same question and receive the wrong answer before you give up in frustration? Voice assistants are supposed to increase efficiency by providing information that would have taken longer to get using a search engine. The operative phrase is “supposed to” or, to put it quite simply, is expected to. The ability to efficiently import the data is only part of the equation. It is the ability to present the data in a pleasing experience that will win the business. If a consumer has difficulty creating their model(s) or managing them, they will create those models elsewhere. And, without the ability to drive revenue from offers or create a greater share of wallet by deepening product relationships, your institution becomes a holding account bearing the associated account management expenses while other institutions earn the revenue. That is why your digital experience is critical. Can the consumer easily set up their model(s) on your digital banking platform? Are their personalized offers presented in a way that they can conveniently see them and act? Does the digital solution offer the ability to send real-time alerts? If you apply the 80/20 rule to open banking, 80% is the presentation and usability of the open banking information, with the other 20% being all the processes involved in transferring the data.
It's Not Just a Phrase.
Do you remember the phrases “omnichannel,” “paradigm shift,” and “level set”? Two people would probably have different perspectives on what they mean. And that is the case with open banking. Is it the consumer being able to control their data? Is it about safely transferring the data between parties? Is it the ability for consumers to create model(s) and efficiently manage their product usage among their various providers? Is it sending the consumer personalized offers based on the open banking model(s) they have created? Is it about offering a digital platform where consumers can conveniently access and use their data? The answer to all these questions is yes. But keep in mind that experience is the most critical component. The sum really is greater than the parts.