Open Banking Race - Road

On your marks, get set…go? Has the Open Banking race started yet?

Banks should not see PSD2 as a threat from disruptors. Rather, they should see third-party collaboration as integral to shaping their digital strategies. Banks have an opportunity to extend their own reach and value by integrating third-party propositions into their online banking platforms. But, are they prepared for the regulatory change? Are their strategies fit for the Open Banking race?

It was not the intention of regulators but the advantage in the post-regulation marketplace will lie with established banks. With strong brand equity, scale and a universal service proposition, incumbents already have a notable head start on new market entrants. Start-ups and challenger banks, looking to make an impact on market share, will face a great challenge. Even if open APIs enable them to provide more bespoke services.

Preparing for a change in regulation…

With just over a month to go until PSD2 comes into effect, some banks and challengers are outlining their digital strategies. Mapa has recorded two recent updates within the mobile banking space, in our most recent Mobile Banking Monitor.

First Direct announced a new partnership with Bud, the money management and aggregation platform, in November. If the initial trial goes well, the bank’s customers will be able to access all their financial data, including information held with any external providers, as well as personal financial management (PFM) tools, within the First Direct app.

By partnering with Bud and integrating the software into their own platform, First Direct will be able to keep the primary relationship with the customer even when they are managing finances within the app that are not held with the bank. While users can see financial information from other banks, it’s PFM tools and money management features that they will engage with, when tracking their finances.

New banks are also identifying the incoming regulation as a possibility to broaden their service propositions and tackle a key disadvantage they have against the banks, scale.

In October, Starling announced it would be integrating with money management app, Yolt. The new partnership will enable its customers to aggregate their account information, in Yolt’s app, to acquire an overview of their financial position across accounts.

Starling Yolt Integration

Could slow starters take the lead?

The most interesting developments, in preparation for Open Banking, are in the business banking space. Market players are looking to extend their services beyond a simple partnership model. The objective is to create online business ecosystems, which reach beyond the financial elements of the customer relationship to include business management features.

Barclays Business Dashboard, launched earlier this year, is integrated with the online business banking platform. It connects a range of different business services within a single online hub, via an API marketplace. Within the dashboard, users can browse the store to view the multiple services that they can connect and integrate into the platform.

The Business Dashboard homepage displays a snapshot of key business insights from the services the customer has connected to the platform. It’s an easy-to-digest overview of key business performance indicators.

Barclays Business Dashboard

By integrating data from third-party apps and services such as accountancy software, HR software, CRM systems and marketing services, the bank extends their relationship with the customer beyond financial products. The online ecosystem becomes the central hub of managing a business both financially and administratively.

Barclays Business Dashboard store

With this much data, banks can then work with the customer to effectively meet and understand the customers’ business goals. This way, the bank expands its role as a service provider and becomes a trusted partner.

It is important to start implementing post-regulation strategies as soon as possible. Banks have real potential to offer customers additional value financially, via improved money management facilities, and non-financially, through the creation of online and bespoke customer ecosystems. The market leaders and differentiators will not only use this opportunity to collect customer data more effectively but they will be able to extend their customer relationships, to become more than a supplier of financial products. Complacency will be dangerous, understanding the customer will be vital. Let the Open Banking race commence…

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