The personalized, connected dialogue that digitization is bringing about in all aspects of life will give customers a better-informed perspective on their financial ambitions, taking the leg-work out of ‘shopping around’.
Automation of service selection and delivery through open banking will create rate comparison services and shift financial services toward a benefit-driven marketplace. In China, self-service life insurance products have already upended the ‘agent’ model. The China market grew by 350% in the first half of 2015 to take 3.5% of market share.
Brands that promote the benefits and convenience of open banking may be in a stronger position to overcome concerns about security. After all, consumers in China don’t talk about open banking, they simply love what brands like Alipay and Tencent do for them.
For business customers, especially small businesses lacking a separate finance function, those benefits could be around integration with accounting platforms. Digitally advised platforms could review cashflow, not only identifying issues but also spotting opportunities, such as around insurance for a new property purchase or the right timing for a loan.
Beyond benefits for businesses alone, such platforms could bring wider gains not necessarily driven by business demand, for example, ease of digital tax filing through integration of banking data with account and tax-filing apps. This will create efficiency savings for governments and transparency benefits for wider society.
Similarly for consumers, convenience is not the only advantage. Digitized know-your-customer security developed in response to the open banking ecosystem, such as database-assisted photo-ID recognition, will allow individuals who don’t hold a passport or other current photo ID to access banking and transactional services.
While expensive, these measures significantly advance financial inclusion. ‘Unbanked’ small- to medium-sized businesses represent a significant growth opportunity for financial service providers in emerging economies, where 40% of financially excluded companies struggle to secure financing.
Currency digitization in locations such has India is rapidly encouraging previously unbanked consumers to adopt open banking-supported products such as insurance where state support is not available.
Such far-reaching benefits may support long-established financial services brands’ transition toward a stronger position of trust within more mature markets as they pursue growth elsewhere. Others may choose to reposition more directly, launching spin-out brands, such as already seen in the utilities sector with British Gas’ Hive, which offers smart, connected home products and services, and is focused on benefits rather than products.