Open banking definitely puts an end to the status quo that prevailed in the financial services sector. Why?
Because it challenges the monopoly held by the big old-fashioned banks on their customers' data and initiates, in the meantime, a revolutionary period for the sector that will radically improve the customers' banking experience.
By freeing up the use of customers’ data, open banking is breaking up monopolies
Open banking is a direct consequence of PSD2's enforcement. Thanks to it, all authorised third-party financial services providers (TPPs) can access their customers' data collected by all financial institutions.
A monopoly falls: customers are now the sole owners of their data, and no longer the banks.
To comply with this obligation, companies in the sector had to develop connectivity infrastructures, the banking APIs, that allow instant and perfectly secure data transfers. Thanks to them, third-party providers can themselves collect any regulatory document or information they need to identify a customer.
Switching banks or occasionally subscribing to a third-party service will become easier than ever. With one major consequence: a renewed competition on the banking market.
Open banking will thus benefit the market challengers (mostly fintech companies) in two ways: their services will become more easily accessible and their customer information will be improved. This very point is crucial in banking, an industry where customer knowledge allows you both to manage your own business risk and design the most appropriate offers.
Open banking is revolutionising customer experience
Customer experience is where the full scope of open banking comes into play. From now on, innovative players capable of rethinking the banking experience have the tools to reveal their full potential. First of all: access to their customers’ banking data. It is not trivial.
Thanks to this data, a great leap forward is made possible, particularly in customer relationship. Highly relevant customer calls, tailor-made and predictive offers, etc.: marketing will experience a new golden age.
Thanks to this data, virtual advisors will finally be able to enjoy a real boom and offer a digitalised consulting offer with self-learning pieces of software that can adapt to all situations and not only predefined scenarios. Based on Machine Learning, third-party providers can now focus on truly automating customer recommendations.
With open banking, a virtuous circle is now underway in the financial services sector. The entire market will have to adapt to the most suitable solutions for customer use. Gradually, the best banking experience and seamless services will become new market standards. The revolution in data is announcing a big bang in the financial services market.
And it’s only the beginning.
CEO & founder of iBanFirst