Stuart Simmons, Sales Director, Banking and Finance at Denodo
As Open Banking approaches its sixth anniversary in the UK, many businesses within the financial sector, both traditional and challenger, are weighing up their previous expectations with how the technology has impacted their organisation. And the results haven’t been as expected. After the technology promised an out-and-out revolution by giving customers greater power and control over their financial data, adoption has been slow, falling short of its huge potential. Despite Britain leading the pack when it comes to Open Banking, active users currently sit at around 7 million, far less than expected considering the technology’s potential to reshape the way we interact with financial services.
Exploring the delivery of Open Banking
In a dynamic landscape, where consumer expectations are constantly evolving and banks need to maintain a competitive edge, rolling out personalised solutions at speed is vital. Whilst personalisation may be the key to deeper customer engagement and innovation in a competitive landscape, while both traditional and challenger banks have access to the data they need to personalise the customer journey, this data is often kept in domain silos, unable to be unified without huge investments in revenue and time. This makes personalisation feel like an impossible task for traditional banks, who need to aggregate risk data, commercial data, credit card data, and more in order to make Open Banking feasible.
The implementation of Open Banking within financial institutions has been hugely inconsistent. Many have been slow to leverage the value of Open Banking data because of costs, skills gaps, and the need for upgrades – challenges that have only been magnified due to the economic uncertainty that has arisen in the past year. And with banking regulations in the UK constantly evolving, ensuring Open Banking compliance is time-consuming and resource intensive. The inability to access all data within a bank ultimately undermines the value of Open Banking data, so consumers see little differentiation between products, having less incentive to move from one to another.
The impact on developing personalised financial products
In 2024, to stay relevant and ahead of the innovation curve, banks should be seizing the potential of Open Banking data by unifying it with their existing data sources to offer real-time value to customers. One strategy for creating instantaneous views of disparate data, without replication, is data virtualisation. By providing a single, logical view of all data, no matter its format or where it resides, data virtualisation offers greater visibility of information in real time.
This enables the creation of logical data models at increased speed, which provides a detailed view of the data available and how it can be personalised or tailored to different use cases. This can power the development of more efficient and innovative products, for example, blending mortgage details with insurance data, car loans, and crime rates to build a unified, comprehensive product for customers looking to buy a house. By helping redistribute resources, underpinned by a more agile data architecture, data virtualisation allows teams to do more, with less people, quicker than ever before.
Staying customer-centric
Financial services providers cannot lose sight of what’s most important: the customer. Harnessing a 360-degree view of the consumer will ultimately enable a more convenient, engaging, and personalised experience, with Open Banking-enabled products that meet the demands of a digital-first world. And this cannot be activated without unifying and converging data to generate real-time insights. While there is still a lot of work to do, a shift is happening within the UK financial market, with more players leveraging the value of their data to create differentiated products. Only by maintaining this momentum can the industry start to realise the promise of Open Banking, and traditional retail banks can start to differentiate their service from the competition.
Clearly there are other factors at play here. Trust is an absolute in the banking industry, as customers expect banks and their regulators to be constantly enforcing policies that establish this trust. Given the limited general awareness around Open Banking in the UK, users remain trepidatious around its effect on their data privacy, particularly given the stories of data breaches, scams, and insecure payment processes that regularly hit the headlines. However, once banks begin to unify their data and provide the value we are looking for, trust will grow and the benefits of Open Banking will be realised.
