Unlocking the value of open banking
During 2022 we have been engaging with decision makers and opinion leaders across Europe to get a better sense of attitudes to open banking, the value it is unlocking, and how best to work together to accelerate its uptake.
Through these discussions, we have seen a clear consensus emerging. Many in the ecosystem are confident that open banking is gathering real momentum, especially in the UK and the Nordics. One way to accelerate uptake is to convince more consumers and small businesses to provide access to their banking data. But they are also adamant that clear, active, and informed consent must be baked-in – consent, they say, should never take the form of a box that is inadvertently ticked, or a pre-populated pop-up that is immediately dismissed.
For our part, we believe this question of consent should never be a barrier. Instead, it ought to be an enabler – intrinsic to the value proposition.
For example, our wider experience shows us that, when consumers know they are participating in a clear value exchange, consumers and small businesses alike will routinely provide access to their data. To register for airport Wi-Fi, for example, or get the results from a price comparison site, or download a whitepaper from LinkedIn, we know that people, in their droves, will make the trade.
Experience with open banking has also demonstrated that, when the value is compelling and the trade is clear, the impact can be transformative. For a small business, when using a cloud-based accounting platform, hours of tedium can be avoided by channelling data directly from your bank account to your books. Similarly, with some new buy now pay later solutions, credit decisioning can be simple, immediate, and non-intrusive. And, with the new generation of financial management services, adopting better financial habits can suddenly become simple, desirable, and even fun.
Consumers and small businesses alike can benefit from the value these services bring, combined with the pain-free delivery of that value and the backing of a trusted brand. If these three components are present – the clear value, plus the pain-free delivery, plus the trusted brand – success is more likely to follow.
When judged against these three components, we can better see how open banking solutions have matured over time. With some first-generation personal financial management services, for example, there were plenty of pretty graphs but not enough value. By contrast, some new solutions go one step beyond – showing you how to act on the analysis and making it easy for you to follow-through.
Also, when we focus on the three components, the actual concept of open banking becomes less of a preoccupation. It recedes into the background, assuming its rightful status as something technical that happens behind the scenes, like the transmission on your car, or the plumbing of your house. You know it’s there, you are reassured it’s working and safe, you have a vague idea of what it does. But, beyond that, you neither know nor care.
It is also important to recognise that, today, as our world faces up to the reality of a deep cost-of-living crisis, the type of value that open banking ought to bring has never been more relevant or more precious. With a 360-degree view of someone’s income and outgoings, there is an opportunity to provide a whole new dimension of support – anticipating issues before they escalate into crises, and offering achievable, actionable advice, like “Here’s how you could manage your subscriptions,” or “Don’t forget about next week’s direct debit from your energy company,” or “Why not set aside some money now, while there’s some slack, for September’s car tax and insurance?”
By delivering the type of value that can be unlocked with open banking (and, in truth, we are only just scratching at the surface), we also set the example, lay the groundwork, and establish the appetite to go progressively further – into open finance and, ultimately, into open data economies.
The fact is, for most people, banking is not something that is distinct from their wider lives or livelihoods. Instead, it is woven into their wider financial lives, encompassing investments, insurance, and retirement planning. It is also an expression of and/or an influence on their wider life circumstances. By recognising this interconnectivity, think of how many more ways there could be to unlock real value. And, rather than bemoaning its success, let’s think of open banking as a critical step – first to embedded finance, then all the way to open data economies, unlocking value across every industry, and making all manner of services more efficient and relevant.
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