Every time an individual or a business opens a bank account and uses it for transactions of any kind, data on how much was spent and who received the cash is generated.
Designed by the Competition and Markets Authority to give consumers more control of what they do with the masses of information they produce, Open Banking is an important facet of a revolution in financial institutions. Here’s how it could change the financial landscape – and who might be affected.
From the consumer’s point of view, Open Banking is a key way to open up better budget management tools. Apps which connect a customer’s bank account to a budget management app or other tool are popular already, but they are likely to grow in popularity as time goes on and as more and more financial institutions comply with Open Banking rules.
But it’s also the case that Open Banking can help an organisation’s budgets, too. Software packages which automatically extract data and then analyse everything from the health of the balance sheet to the chances of key revenue flows growing or contracting further down the line are perfect for strategic thinking, and Open Banking is likely to make this easier.
And there are also likely to be impacts on consumer choice, too. If you work in a sector where switching between one provider and another is not very common, it’s probable that this won’t affect you too much. But if you work in the finance team of a bank, an energy company or a consumer provider of some other sort, you could well be about to face a revolution.
Open Banking will make it easier for consumers to connect their bank accounts to price comparison sites and apps, which can analyse how much they have spent on their bills and suggest alternatives which might be more cost-effective for the consumer.
For that reason, it’s sensible to start investing in departments such as marketing which can emphasise to audiences your unique selling points. Starting earlier is a good idea here, as if the predicted rise in the use of price comparison sites does actually occur when Open Banking is fully implemented then your competitors will certainly be thinking along the same lines. And by running financial models which can show in stark, accurate reality what an Open Banking-fuelled rise in consumer choice could look like, you’ll always be prepared.
Open Banking is designed to make life easier for consumers and firms who want to make the most of the many options out there for budget maximisation and reductions in inefficiencies. And for a firm with an interest on the other side of the table, it’s important to prepare for the arrival of Open Banking and make sure that you are as competitive as you can possibly be.