On 29 June, I joined peers from Mastercard and Standard Chartered at London’s Banking Transformation Summit to discuss how financial firms can plan the next steps in their digital transformation. This discussion focused on the potential of open finance and how it impacts choices for firms and customers.
Open finance allows data sharing between providers to increase competition and benefit consumers. It has advanced rapidly - in the UK, for example, over 3 million people now use it only a few years after the open banking regulations came into force.
The Open Banking Implementation Entity (OBIE) recently published its final roadmap for open banking, which should help reduce the regulatory burden for firms. The debate is not how to do the bare minimum to comply, but how to identify and make the best use of open finance enabled propositions.
Open finance has, and will continue to, transform the way we engage with financial services. From simple accounting apps to buy-now-pay-later retail options, consumers are using open finance powered products without realising it.
Vast potential benefits and uses
From my experience at major global banks, there is a host of uses to consider. From account aggregation services to personal finance advice, credit rating, and payment initiation services - uses are only limited by your imagination.
With clever design, firms can tailor products and services to enhance customer experience. And as more open information becomes available, providers can use it to strengthen sustainability and financial inclusion. For example, lenders can use it to reinvent affordability models.
How to start or scale your transformation
The case for change is compelling. Any company choosing to stay out of the open finance movement must make that decision through deep insight and consideration, rather than oversight and omission.
As customers become more informed and access a wider range of tailored products, they will no longer be wowed by open finance products but expect them.
Those starting or scaling their transformation should consider the following.
New level of customer needs
Much is said about starting with customers’ needs. However, open finance redefines and elevates the importance of the customer to a new level.
There are often several supply layers in open finance such as developers, platforms, and producers. Providers must study the value chain from end-to-end to ensure they meet this new level of customer importance.
Reuse components so you can focus on key differentiators
As banks can no longer build everything in their entire value chain, we at Delta Capita strongly recommend they focus on their key differentiators. We have made it our purpose to reinvent the financial services value chain to enable firms to do this.
For example, most providers who want to use open finance to embed their products into platforms should not need to start from scratch and build their own application program interfaces (APIs). They should be able to reuse components, and we can help you design and deliver your strategy.
Find synergies in your operating model
Open finance has enabled multiple permutations and combinations of how products and propositions can reach end customers. Traditional operating models and siloed product pillars will become expensive and inefficient. Firms will have to be creative in how they eek out synergies, while still enabling teams to play to their strengths.
How to differentiate in the Open Finance landscape
Open finance is here to stay. It promises tremendous benefits for the end customer. It can help firms reach greater mass via network effects, and grow customer numbers and wallet share.
The regulatory burden may have eased, and the benefits are still not always clear. But open finance will become ever more entrenched in how customers behave. The debate isn’t whether to adopt open finance, but what is your strategy for using it to best effect across products, propositions and platforms. Firms must do this to remain relevant.
While open finance enabled propositions might seem a differentiator now, they will become a basic function. Differentiation will then be about how well you incorporate it into your end-to-end value chain, while remaining focused on key differentiators such as customer experience.
How Delta Capita can help
You may be midway through your digital transformation and need help prioritising projects and getting back on track. Or you might be starting and need to create your roadmap. Either way, Delta Capita can help you achieve your goals. Get in touch today.
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