Roger Vincent, Head of Innovation, Equifax
How will the increased use of open APIs shape the financial services market, and how will it impact different market players in both the short- and long-term?
Whilst implementation of APIs is driven by government policy, innovation within banks is fuelled by increasing pressure from competitors, meaning traditional banks have to up their game. FinTechs are likely to be the early adopters of open banking APIs, which is why Equifax & big banks are already building partnerships with them and starting to integrate functions such as account aggregation.
Implementation of open APIs among payment service providers are likely is likely to lower the cost of transactions as a result of increased competition too. But there are much bigger fish lurking just around the corner in the form of the big four global tech giants.
Which activities should banks be prioritising in the wake of open banking?
Banks need to start with compliance to provide guidance on continued development of regulations (PSD2, GDPR etc.) before involving legal teams to sign-off revised consents needed when processing requests. It will be important to overcome these issues before looking to provide greater clarity on product integration and the customer experience.
They need to assess the time/cost of digital teams involvement to provide resources needed to deploy solutions or whether outsourcing these capabilities to existing suppliers like Equifax might provide more value, working with banks to provide agile end-to- end solutions by connecting with key FinTech partners to help implement Open Banking routes for banks digital customers.
Alongside, product owners need to consider how they start to make use of data that might be available from their competitors and how this may impact their ability to construct new products and services whilst Operations & Services need to support the preparation of FAQs to process a potential increase in customer requests or complaints.
What opportunities does Open Banking present, and which commercial strategies will thrive in the new environment?
Equifax has been working with a number of banks to explore how regulatory compliance can quickly be turned into competitive advantage to commercialise Open Banking.
The first area we typically explore is cost-cutting, by turning a bank into a leaner organisation with optimised processes. The first large bank to create a true culture of cost-cutting through new enabling technologies will be well on its way to “commercialising” Open Banking. In April 2018, HSBC and Equifax alongside a number of FinTech partners enabled the UK’s first successful loan application using Open Banking which is a small step on a journey to digitising and optimising all aspects of its currently manual underwriting function.
How can firms overcome the security and privacy concerns associated with data sharing?
Past experience shows us no company is immune from cyberattacks. And the recent news surrounding Facebook, only adds to privacy concerns consumers are likely to have over this sort of direct access to their financial data.
The implementation of GDPR, could help as all companies take stock of their security and data is no longer shared without correct permissions. Open Banking APIs sit neatly within these data rules.
Privacy concerns in the banking industry are not a new phenomenon. You only have to look back a couple of years to observe the impact contactless payments have had on that sector. We should expect a similar journey with Open Banking. In the short-term, there is likely to be a slow-burn in take up of Open Banking, as customers need to be able to trust the technology will keep their data secure.
What are the best strategies to encourage customer engagement?
The use of Open Banking provides an opportunity to banks to strengthen their engagement, by offering digital services which seek to improve customer experiences and not solely focusing on generating new revenues. By building platforms that deliver a range of services, banks have a better chance of tapping into what their customers want, in the short and long term.
Challenger banks are leading the way in ‘market-place’ banking, by integrating third-party apps that benefits the user experience. And bigger banks enriching their customer experience with banks like HSBC going live with their Connected Money app, allowing customers a complete view of their finances.
Banks will realise more customer benefits to Open Banking and Equifax we are well-placed to help banks make the most of Open Banking opportunities through using in-depth profiling and categorisation engines, to offer actionable insights which will allow banks to more broadly engage customer.
Open Banking Summit
25 April 2018 London
Roger Vincent will be joining us for the Open Banking Summit. This high-level, interactive forum will bring together senior-level professionals from all corners of the open banking space.
CONTACT US to secure your place