How Open Banking has shifted the goalposts
Before I begin I want to make it clear that I'm no Martin Lewis. I'm no financial services maven. I am however, very good at drinking coffee, eating biscuits and chatting with people who do know what they're talking about.
We've seen for ourselves how the opening up of competition laws has rocked the energy market, forcing businesses that have had monopoly for decades to think again about what they do and how they can best serve their customers.
Well, there's a grenade about to go off in the financial services industry called Open Banking that's already being felt and will have far reaching implications. Here it is in "regular person speak" followed by something I copied and pasted from Wikipedia.
Every morning you go to your local coffee kiosk on the way to work. The coffee is fine, service is ok-ish, but it's convenient and it's local - so you buy.
Imagine however, if you choose any coffee from any kiosk you like, any time you want- and guess what - they know exactly how you like it because they have access to all your previous coffee orders.
No-one has you over a barrel anymore because all coffee can be bought anywhere and all your previous purchasing information is available to make you the best choco-moca-coffee-latte with extra semi-froth and shot of caramel.
Disclaimer: this analogy sounded a lot better in my head.
The proper explanation of Open Banking is an emerging term in financial services / financial technology that refers to:
- The use of Open APIs that enable third party developers to build applications and services around the financial institution.
- Greater financial transparency options for account holders ranging from Open Data to private data.
- The use of open source technology to achieve the above.
This means that banks are no longer the guardians of your financial health. They risk losing their influence in their customer's lives - losing out to the smaller more nimble players who can respond quickly to emerging human needs.
Based on numerous coffees, teas, cakes and biscuits with folk from BlackRock, LBG, HSBC and RBS - here's three ways in which the industry is preparing and bracing itself for the change.
- Compete on your own terms. Rather than trying to out agile the small start-ups, that can turn on the head of a pin, businesses are asking themselves how they can use their existing resources to create competitive advantage. You may not be able to knock a new release of your digital platform every week like "TrendyBank" can, but you do have advisers (human beings) in physical spaces that your customers can have a coffee with.
- New ways of working. The free flow of customer information, aggregated form multiple sources will give new players in the market an unprecedented amount of data with which to offer relevant products and services. This means that financial services businesses need to be able to move faster and respond more readily to customer needs. The traditional product release cycle will mean that banks will constantly arrive at the party too late. More flexible (agile) ways of working are already being embedded, as well as the emergence of new user experience and dedicated service design teams.
- Focus on culture and behaviours. In the new world innovative and creative characteristics are becoming highly prized. However, traditional financial services culture do not provide this type of talent with an environment in which they can thrive. Many institutions are asking themselves how they can attract and hold on to the right people. The fall back on ping pong tables, funky lighting and standing desks are not really cutting the mustard. There are some fundamental questions these businesses need to ask about the values and the behaviours that are rewarded.
Well, there you have it. That's my perspective as a financial services "outsider". If you have any thoughts, I'd love to hear them.
Oh, and if you want meet up over a coffee, mine is a choco-moca-coffee-latte with extra semi-froth and shot of caramel. It's what they're all having in Shoreditch nowadays.