Open Banking has been hailed as the revolution in financial services which will create more tailored, more personalised and more suitable products. However, consumers only stand to benefit if the new standards and technologies truly serve them.
A report published today draws on new analysis of the FCA’s Financial Lives Survey and the development of a model to measure the potential value of Open Banking. It identifies the needs of and opportunities for consumers across five distinct segments – of people and small business – and illustrates these through ten rich pen portraits. It finds that small business stands to gain a potential £6bn. People, as a whole, could benefit by £12bn annually, or £230 per consumer, but their needs and the potential opportunities that Open Banking affords them vary considerably.
Among people, ‘over-stretched’ consumers stand to benefit a potential £287 each and a collective £2.7bn from Open Banking. Relevant interventions to this segment include: access to better deals on overdrafts; support in making balance transfers; and Personal Financial Management platforms which respond flexibly to consumers’ income and expenditure patterns to integrate other services. A significant minority of people who the report defines as ‘on the margins’ need help with: solving the identity challenge, controlling and sharing money; bridging the digital divide; and making money go further. This, often overlooked, segment stands to gain £72 each – significant given their typically lower incomes – from innovations such as: biometrically-authenticated digital identity; pre-paid cards and simple products; bill-sharing; real-time balances; and flexible payment options.
The report identifies key gaps in Open Banking provision which represent significant potential value to consumers. These include: current account comparison aids; unbundled, third party alternatives to traditional overdrafts; automatic current account balance sweeping to optimise cash flow and increase savings returns; support managing credit card balance transfers; recommendations on better deals on household bills; and lower costs for international payments.
The report also makes a number of evidence-based recommendations for this new Open Banking era, and calls for firms to find new ways of working which shape themselves better around the needs of consumers which are convenient and secure.
Access the full report here and find out more from the Open Banking website.