By Andries Smit, CEO and Founder of Upside Saving
The future of finance is open, that much is clear. Open banking is already changing the way we control our finances and pay for products and services. It shows great potential to disrupt financial services while creating an outstanding market opportunity.
Open banking enables consumers to share their spending data. From individual banking transactions to regular payments to companies they shop with, everything can be shared with authorized vendors. Budgeting apps are an example of open banking, where consumers share their spending data to get a summary of where they are spending their money to add value from the data exchange. Open banking is undoubtedly revolutionizing the banking and finance industries, but why should retailers care?
An even better example of using open banking to unlock value for consumers would be the voluntary exchange of spending data for cashback when issued at certain retailers. The insights gained from this spending data are critical to the retail industry. Accessing the expense data insights of individual and collective customers gives retailers a wide range of options, including: B. Competitive advantages, prospects for strategic business development and cost savings.
Another point that is relevant to retailers in relation to open banking is the growing awareness of customers of the value it brings to their retail experience. You would rightly think that until recently consumers were not interested in open banking, as only 18% of consumers currently know what open banking means to them, according to a report by pwc. However, the report predicts that number will grow exponentially to 64% by 2022. This suggests that open banking is something they cannot afford if retailers want to stay competitive, retain customers, and win.
The rapid development of innovative options for consumers is the primary driver of this anticipated awareness-raising as the benefits of data sharing increasingly outweigh privacy concerns. As Open Banking evolves, so do innovations and create a steadily growing growth cycle. Financial applications like Request to Pay are already growing in popularity, and Open Banking is on the verge of replacing BACS payments because of its simpler and more effective payment options. Looking to the future, real-time payments will gradually be improved to enable instant transactions for e-commerce. In this area, retailers are always looking for new ways to enable smooth payments and reduce costs caused by mistakes in the cash handling process.
The future of retail looks fast, convenient, and increasingly personalized, and the demand for more won’t stop there. Growing consumer and market expectations mean these innovations are constantly being challenged and pushed for improvement, leading to ever faster advances in how we manage our finances. The good news is that Open Banking already provides the basic payments infrastructure on which this innovation can build in the future.
Of course, open banking can only get so far until it becomes something completely different. Some evidence of this can already be seen in the slow emergence of “open finance,” an idea that builds on the solid framework of open banking that would allow financial services to be better accessible and serviced for consumers and businesses. Recent feedback from the FCA’s Call for Input on Open Finance shows that they have the potential to unleash significant value for consumers, including increased competition, improved advice and better access to a wider and more innovative range of financial products and services. Services.
The increased use of open financial services offers the retail industry enormous opportunities, drives innovation forward and promotes the growth of the market. Access to an individual’s entire financial footprint, including pensions, mortgages, savings, insurance and loans, provides a holistic view of the consumer, which in turn enables tailored and personalized services to enhance the customer experience.
Open banking is still in its youth and has plenty of places to develop and grow. Nevertheless, it has arguably ushered in the beginning of a total transformation in financial services. For this reason, it would be wise for retailers to keep an ear to the ground to ensure they stay on top when it comes to meeting changing consumer demands and meeting their needs. Because open banking is so broad, retailers need to focus on the features that add the most value to their business. Developing integrated and secure e-commerce platforms, being open to partnerships and the opportunities that come with it, and leveraging in-depth customer data analytics as part of a personalized marketing approach are key features retailers should strategically apply to get the most out of what open banking is in Future has to offer.