LONDON: Open Banking could deliver the greatest shake up to the financial services sector in living memory, an industry figure has argued, leading to innovative partnerships between the traditional banking sector and a new wave of digital challengers.

Writing for WARC, Jem Fawcus, owner and group CEO of Firefish, explains how the revised Payment Services Directive (PSD2) has the potential to not only revolutionise the relationship between an individual and their money – how they understand it, manage it and use it – but also transform the relationship people have with their data and digital identity.

In Open Banking: the challenges and opportunities, he also notes the findings of a global Firefish study which showed how people have a “consistent desire for greater transparency, control, and fairness” in their dealings with financial services.

“These are the human needs that drive the desire for change which Open Banking has been conceived to address,” he states.

The basis of the concept is that data ownership will transfer from banks to customers, with consumers able to then allow businesses other than banks to access their financial data. The end objective is to drive competition in the market and to deliver better outcomes for customers.

“This can only happen with the customer’s permission and only regulated companies will then be allowed access,” Fawcus makes clear.

But beyond the technical aspects of handling such data, there are emotional barriers to overcome, since more than half the respondents to a survey by The Numbers Lab indicated they wouldn’t share such information even if it meant better products, services and experiences became available to them.

People “need some more tangible evidence that they are in an equitable value exchange to promote engagement with Open Banking,” Fawcus says.

That could include, for example, money management apps that give tips and advice, or analysis of spending patterns with recommendations of products such as cheaper overdrafts or better credit cards.

Given a wealth of data, fintech companies will be able to innovate with traditional banks at risk of being reduced to a commodity product providers. The latter may look to leverage their advantages of established trust and understanding of existing customers to strike partnerships with fintech companies to the benefit of both parties and consumers.

“Creating the right emotional brand footprint needs to be a high priority in order to ensure brands thrive in the new environment,” Fawcus says.

Sourced from WARC