13th January 2018 heralded the dawn of a new era with the arrival of Open Banking. It was supposedly going to change the world, a financial services revolution was now underway, and things would never be the same again. Well, two years on and where are we? There has certainly been a lot of talk about what “could be done” however the changes have hardly been dramatic, despite what certain commentators and consultancies would have had people believe. Despite the hype (and hysteria), outside the world of the financial services and payments bubble the world has carried on with people continuing to use tried and trusted well established solutions.
Open Banking is an important step forward in the world of banking, payments and finance. However, it is just a technological advance, an enabler for industry participants to use. There were similar “change the world” proclamations in the mobile telephony world when 3G launched, however it was also met with similar customer “so what” apathy.
Customers are ambivalent that the “behind the scenes” plumbing has now changed. However, they will take notice that:
· A mortgage application can be completed entirely online
· There is no need for copies of bank statements to be provided
· A decision takes hours instead of days
Will consumers understand or care that this smoother and slicker application process is due to Open Banking? It is highly unlikely they will appreciate there is new industry plumbing, their satisfaction is that they have received their mortgage offer in a far more timely and efficient manner.
Open Banking loosens a banks relationship with their customers and enables third parties to become the daily point of contact. Numerous solutions have begun to emerge which offer customers the ability to manage their money and finances free of charge. However, the real challenge and interesting conundrum is whether consumers will be prepared to actually pay for the privilege to use these services. The UK has “free banking” and the public has become accustomed to “getting more for less”. Convincing the freemium generation that services have real value and that they are worth paying for is the intriguing battleground.
If consumers are unwilling to pay it is unclear how these fintech innovators will establish a viable business model, as they have costly regulatory overheads to maintain. However, as the established tech giants have proven, the real value is in the customer data (not the services) and they are large enough to take advantage of this wealth of data. Are the financial services businesses of the future subsidiaries of technology companies, rather than pure standalone financial companies.
Time will tell