By: Andries Smit, CEO of Upside Saving

• The benefits of open banking for non-bank businesses, such as retailers
• What the latest digital innovations in open banking means for banks and non-banks
• To what extent are end-consumers seeing the value of open banking options provided by non-banks? How does this fintech benefit banks?
• Is open finance the next evolutionary step in open banking? What could this mean for bank and finance?

The future of finance is open and integrated, that much is clear. Innovations like Open Banking are already transforming the way we manage our finances, pay for products and services and just generally engage with the financial industry day to day. Undoubtedly Open Banking is showing great potential to disrupt financial services and to do it fast, as innovation in this area is rapidly advancing.

Allowing consumers to share their invaluable spend data – something that previously banks could only guess at – in exchange for a summary of where they spend their money unlocks significant value for banks. Yet already advancements in this technology means Open Banking is evolving to benefit more than just banks. In fact, non-bank businesses are increasingly recognising the value of Openn Banking and jumping on board. But why should banks care about this?

Open Banking for Non-Banks
A good example of using Open Banking to unlock value for consumers in a non-bank industry would be the voluntary exchange of spending data for cashback as they shop with specific retailers. Insights obtained from this spend data are a game changer for the retail industry. Access to these data insights from individual and collective customers provides numerous opportunities for retailers, such as competitive advantages, prospects for strategic business development and cost savings. For banks, the expansion of Open Banking into non-bank industries drives new innovations and creates new areas of competition between banks and non-banks.

Another point of relevance for retailers in regards to Open Banking, but also for banks and other non-bank industries too, is the increasing awareness among customers of the value it adds for them.  Until recently, consumers didn’t really care about Open Banking, as according to a report from pwc, only 18% of consumers are currently aware of what Open Banking means for them. However, the report suggests this figure is expected to increase exponentially to 64% by 2022. What this means for banks and non-banks alike is that the demand for Open Banking services are on the rise and therefore end users are going to increasingly expect this from brands they engage with. Those that fail to meet that expectation will suddenly find themselves at a competitive disadvantage.

Open Banking Innovations
The main driver being this anticipated increase in awareness is the rapid development of new innovative options for consumers. Not to mention, the benefits of data sharing increasingly outweigh consumer privacy concerns, so while Open Banking continues to increase in popularity the innovations behind it also continue to grow.

Already, finance applications such as Request to Pay are rising in demand and Open Banking is tipped to be on the verge of replacing BACS payments, due to its simpler and more effective payment options. Looking further ahead, real-time payments will be gradually improved to enable instantaneous transactions for e-commerce, benefitting both banks and retailers by reducing human error and transaction delay costs. Banks also gain full control over the various services their customers need, making financial services far more streamlined and efficient. Everything from advice, loans, transfers, and financing under a single administration will save time and reduce costs for businesses and improve the consumers financial experience.

Is Open Banking Evolving to Open Finance?
It stands to reason that Open Banking can only evolve so much before it becomes something else entirely and some evidence of this is already being seen. The slow emergence of ‘Open Finance’, an idea expanding on the framework of open banking, would allow financial services to provide better access and services to consumers and businesses. In fact its more than just a futuristic concept, as recent feedback from The FCA’s Call for Input on Open Finance shows it has the potential to unlock meaningful value for consumers. This would include increased competition, improved advice and greater access to a wider and more innovative range of financial products and services.

Increasingly, use of open finance services will provide numerous opportunities for financial services, spurring ever-greater innovations and encouraging growth for banks and non-banks alike. Being granted permission to access an individual’s entire financial footprint, including pensions, mortgages, savings, insurance and credit will provide an invaluable holistic views of consumers. In turn this enables business to provide more tailored and personalised services which add value to customer experience in any industry.

Though still in its youth, Open Banking has many places to grow. It has kick started the beginning of a total transformation of financial services and because of this non-bank businesses are able to expand their services to consumers as well. As Open Banking is so broad in its scope, businesses must focus on the capabilities that add the most value.

Developing integrated and safe API platforms, being open to partnerships and the opportunities they provide, as well as utilising in-depth open banking data analytics to benefit the end consumer should all be strategically adopted in order to make the best of what Open Banking has to offer in the future.