The Competition and Marketing Authority’s "Open Banking Remedy" and the European Directive 2 require banking organisations to open customer transactional financial data with third-parties via APIs. These regulations, which are designed to encourage innovation and boost competition in the sector, should be a wake-up call to brands in all industries.
Letting innovation in
In our digital world, where new businesses can create innovative customer experiences and new digital products and services at pace, access to data has been one of the last big barriers to entry, and has protected the big banks from the world of Fintech start-ups.
But in an environment where access to that data (with the customer’s permission) is no longer a barrier, who’s better placed to capitalise on the opportunity to create new remarkable human experiences? Is it the banks that have been notoriously slow to launch new products, or the Fintechs that can go to market in weeks and iterate quickly based on user feedback?
The impact of open data isn’t limited to the financial sector. The big utility companies in the UK have long benefitted from the revenues delivered by disengaged customers sitting on profitable standard variable rate tariffs. However, regulators are attempting to force these customer data sets into a space where start-ups and competitors can engage, activate and ultimately capture these customers while offering them better tariffs and differentiated services.
The push for transparency
Even within industries without regulatory pressures, the first-party customer data that has provided an edge in capturing and retaining valuable customers, is being supplemented or usurped by new data sets available to all, and an increasing demand for transparency.
Insurers, for example, have seen their customer relationships eroded and their prices slashed by increased product transparency driven by the comparison sites. Some insurers have taken the view that if they can’t beat them, join them; launching comparison websites themselves and generating new revenue streams through affiliation.
Whether it’s the advanced profiling and targeting offered by the big social networking and search providers, or new and unique profiling tools that generate unimaginable levels of insight, how businesses use open data is going to be a key battle ground for future success. With a few simple user permissions, for instance, a brand can analyse all images on a user’s mobile phone to profile the individual and predict with high accuracy a life event such as moving home. The first business to capitalise upon this insight and reach customers before their competitors will win.
The connected home represents another significant battleground for open data. Traditionally, individual providers have been focused on creating closed environments where data is only shared within the platform of choice. However, customers are wising up and demanding interoperability between devices. The battle is no longer to own the connected home, but how to be a key collaborator in a complex mixed-device, mixed-provider ecosystem, unique to each consumer.
The key to success
The direction of travel is clear: Increasingly open data and API integration opportunities across all industries are being driven by regulation, third-party data sets and consumer expectations for interoperability. The companies that will win are those who understand their role in the ‘human experiences’ desired by their customers, combined with an ability to expose, integrate with and collaborate in open environments at pace.
If big businesses across any sector are to survive their own "open-banking" revolution-they must understand the opportunities this new level of openness offers to both their business and their competitors both large and small. They must seize the initiative and create new remarkable experiences that embrace open data and partnerships. Those that don’t will watch others drive a wedge between their services and their customers through better-integrated experiences and propositions, leaving traditional businesses as little more than the commodity players.