‘Open Banking’ regulation to herald consumer finance revolution

• ‘Marketplace banking’ gives customers access to financial products from multiple providers through a single banking app
• Tech companies, retailers and price comparison websites could become major banking brands
• 43% of consumers who are already using mobile banking would trust a traditional retailer to provide this kind of interface

Rapid technology advancements, regulatory change and consumer demand will result in a dramatic overhaul of traditional banking models in the next decade, according to new research from Deloitte, the business advisory firm. Customers’ experience of banking will move from a ‘closed’ model where most or all services are provided by a single institution, to an ‘open’ model where they will be able to access multiple products and services from potentially dozens of providers via a trusted banking brand.

New British and European open banking rules which come into effect in January 2018 will give new market entrants, such as challenger banks and FinTechs, access to the same data as incumbents. This will level the playing field when it comes to making investment and lending decisions. These regulations coincide with the development of new technology that allows developers to incorporate third-party data and services into their applications.

However, it is consumer appetite for such services that will ultimately determine the level of disruption to the banking industry. Our research suggests this appetite exists. 58% of consumers with mobile banking say being able to complete more banking-related actions through their app would be an important factor in persuading them to switch to a mobile-only bank. 49% would trust a mobile app from a digital payments provider for managing their financial accounts and services, while 43% would trust a mobile app from a traditional retailer.

Neil Tomlinson, head of UK banking at Deloitte, commented: “A range of FinTech and non-bank entrants are already offering services that directly compete with incumbents. Open Banking could ultimately challenge who owns the primary customer relationship. Competition is also raised when personalised comparisons between providers are made clearer. However, whilst the threats are greater than ever for banks, so too are the opportunities.”

Tomlinson continues, “Banks will undoubtedly be considering the opportunities presented by Open Banking. Those that embrace it have the potential to create new sources of revenue and new, highly tailored products, services and solutions. It is this personalisation that will create a deeper and more engaged customer relationship that banks hold the key to. Incumbents are starting from a position of strength with their established household brands, existing access to current customers and expertise, which provides a significant advantage.”

With increasing smart phone ownership, and evident appetite for more app-based banking services, traditional services are set for radical evolution as data is shared. At its simplest, new products such as bespoke money-management tools, could offer personalised rewards for customers. At its most ambitious, it could potentially make the app-based process of house purchasing possible, for example.

“In the run up to January 1^st 2018, there will be a number of considerations for banks to make. Most importantly, banks will need to ensure they can optimise their use of proprietary and external data. Those that successfully partner with FinTechs to analyse and exploit this data are set to deliver the greatest improvement in their service to customers,” concludes Tomlinson.

End

Notes to editors

All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 2,050 adults. Fieldwork was undertaken between 17th - 18th October 2016. The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18+).

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The information contained in this press release is correct at the time of going to press.

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