The marketing opportunity in Open Banking

There has been a lot of conversation – including on this blog – about the potential impact of Open Banking on everyone from energy suppliers to debt advisers to FinTech start-ups, to banks themselves.

One group often overlooked are marketers. But the potential for marketers in open banking is profound.
In today’s marketing industry, data is a golden commodity, as it allows advertisers to reach their intended audiences more accurately.

The rise of the internet and the ability to collect and house vast troves of data has seen a massive shift towards online advertising, and marketing budgets have become increasingly concentrated on smaller and more defined audiences.

Consider the search engine model. Customers use a search tool that is free at the point of use, and that helps them access and manage all kinds of information. In return – implicitly the price that they are paying for this valuable service – they are served highly-targeted advertising, based on the data the search engine collects. The same model, more or less, is used for free email services, social networking and much more.

Most advertisers are already using the data generated by the internet to target customers better. Consequently, companies are actively looking for new sources of data to not only reach their audiences better and faster than their competitors, but to do so in ever more targeted ways.

So the data in customer current accounts – that Open Banking offers access to – is a potential treasure trove. While data profiling based on online behaviours has some purchase information buried within, much of the data is about consumer interest and intention, rather than consumer action. Banking transactional data is all about knowing where and when consumers have taken a purchasing decision.

So, yes, with the consumers’ consent and by meeting a number of hurdles (which we touch on below), Open Banking could give advertisers even more data to send us more ads.

However, Open Banking, combined with General Data Protection Regulation (GDPR), also promises a world in which data is more clearly owned by consumers.

As consumers become more familiar with having control of their own data, new business models could emerge in which they are more directly ‘paid’ to authorise access to their banking data – in part or in aggregate – to advertisers. This contrasts with current practice, where aggregate data about certain aspects of individuals (e.g. that they are customers of a certain business) are traded en masse, often without the customer knowing, let alone being reimbursed.

Consumers could be paid in a number of different ways.

Firstly, they could simply be paid a fee for access to their data. A company would pay a customer a certain amount to authorise access to the customer’s banking data, and the company could then sell that data to multiple advertisers. For this model to go mainstream, we’d first have to see a significant shift in consumer attitudes to data privacy and ownership.

A second option might be to pay customers in the form of rewards. Imagine a digital members’ club for which the entry fee is bank data access authorisation. By joining the club you would become eligible for rewards relevant to your transactional history. Perhaps a free coffee from your local cafe, or early access to new fashion lines from your favourite clothes store.

A third option might be to bring marketing competition into the rewards structure. Instead of being offered a free coffee at your local cafe, you could be offered a free coffee from a competitor that you haven’t tried before. That has the potential to be highly-efficient marketing.

Now even the potential to do this is a considerable way off and the hurdles are not easy to ignore. For starters, any company looking to use customer banking data to produce targeted marketing would first need authorisation from the Financial Conduct Authority (FCA). Then they’d need to inform the Information Commissioner’s Office and be mindful of their responsibilities under GDPR and the FCA’s guidance around fairness, balance and need for important warnings. Next, customer authorisation would have to be gained, and finally they’d need to build the infrastructure to process this data in accordance with data protection requirements.

So while this might not be an immediate part of the API economy, consumers providing their banking transaction data to companies in exchange for some kind of reward could be a potential, yet unintended outcome of these regulatory initiatives. More significantly, they might just propagate a mini-revolution in marketing and the relationship the consumer has with their advertiser.