Open banking has the potential to drive greater financial transparency and presents an opportunity to create better banking products. Here’s a view on why the guiding principles of open banking are instructive for businesses looking to step up their offerings.
The past 12 months have seen a confluence of events that caused purse strings to tighten and people to rethink how they handle their finances. While mass migration to digital platforms has changed the way consumers interact with their finances.
Collectively these events have led to a shifting of gears in the financial world. Greater transparency and a frictionless customer journey have become priorities for both consumers and businesses.
It was these considerations that were integral to the arrival of open banking in Australia last year. This open banking system allows customers to share their personal financial information through API’s with third-party providers. These providers then have direct access to customer’s account information, providing opportunities for new products to be built that cater to changing customer needs.
Looking into the near future, the reimagination of financial products and services will likely centre on putting consumers squarely at the heart of the experience. Key to this will be the individual consumer’s right to choose how they use their financial data.
In February, the Big Four banks across Australia began to share transaction data with a growing list of accredited providers. And customers will be able to share their data with third-party FinTech platforms of their choosing.
This is a timely development as many consumers introduce budgetary measures and focus closely on their finances in the wake of the economic pressures of 2020.
Accordingly, new mortgage lending apps, spending apps that manage split bills, and investment apps are emerging to help people with these challenges.
One example is the financial service app Frollo, an Australian-owned app that helps consumers track and manage their money through open banking. Frollo, incidentally, was the first FinTech in Australia to become an Accredited Data Recipient under open banking regulations1 .
Others are following Frollo’s lead in developing platforms that empower consumers. New Zealand-founded investment app Sharesies (launching in Australia this year), aims to give its users the power to run and manage their own investments. Solutions such as these are a catalyst for the wider exploration of trading and investment opportunities.
It all makes good sense too – helping consumers throughout uncertain times is a well-trodden path in building brand loyalty.
Putting the customer first
Let’s return to the key principle of open banking: empowering the end-user and giving them the smoothest, most transparent customer experience.
With transparency in mind, it is paramount that businesses make the effort to communicate these consumer-centric features to customers in a way that clearly highlights their value. If consumers get frustrated or don’t trust the system, they can abandon their efforts to learn what these changes will mean for them, and won’t implement them on their own.
Accordingly, education around advantages and safety will prepare most consumers for an experience that provides day-to-day convenience, much as open banking is set to do.
Such frictionless experiences that zero in on the customer are well understood at Facebook. Services like Messenger, for example, provide a direct connection between business and consumers which not only humanises brands but allows the business to provide support and education when needed.
Customer-centricity shouldn’t just be considered a philosophy to get ahead either. It’s also worth considering what’s at stake by providing a sub-par experience in a world of increasingly digitally-savvy consumers.
Resources like the Zero Friction Solutions Guide help businesses understand the full impact of friction and how to transform the way they create seamless human experiences. As financial services businesses continue to embrace trends like these and develop products around them, consumers will ultimately become more engaged and ‘sticky’.
That’s why open banking is a welcome development. At heart, it is another step to meet the growing expectations consumers have for frictionless and personalised experiences.
Adhering to a customer-centric view – a core tenet of open banking – means developing products that solve consumers’ problems efficiently, or partnering with those who already have them. And we’re sure to soon see more of this from the industry’s genuine visionaries.
By Nick Tubb, Head of Financial Services, Facebook ANZ
- Frollo, frollo.com.au/open-banking/frollo-first-fintech-to-become-adr, Frollo announced as the first FinTech to become an Accredited Data Recipient; published 05/2020.