What is Open Banking?
Open Banking is has been received with some mixed messages despite being supported by the Competition Markets Authority and HM Treasury.
Open Banking is about making improving the customer’s banking experience. It aims to do this by harmonising the processes like sharing information with several banks, and building on initiatives that banks already have to attract new customers.
What does Open Banking mean for the customer?
More competition should mean lower prices and better service. They will also try and use their data so they can add further products to benefit the customer and make sure they are doing everything to address the needs to the customer.
However, one of the downsides is that the customer will have to disclose data in spending habits and income, and negotiate additional services. This means the customer might not be as selective as they once were.
What doe Open Banking means for a business?
Open Banking will mean that more real time information will be sent directly to the HMRC and other statutory authorities.
It will also be easier for businesspeople to manage their affairs via their mobile devices. This is a positive, however, it can pose some problems as well. For example, information on mobile devices can be given to third parties. So data security in Open Banking has to be carefully looked at.
Therefore, the nature of Open Banking can provide opportunities as well as consequences. But there are a lot of innovations in Fintech to address these issues.
The bigger picture
Open Banking can provide information on compliance and tax services as well as better advice. We have already seen this in accountancy, as the profession moves towards open book and distributed ledger technology.
As I said before, data will be key. I think it won’t be long before banks decide to use this information to create income and expenditure accounts on a personal level as well as perhaps developing profit and loss statements for their corporate customers.
Then, due to the sharing of data, your bank will become your trusted friend and will be better placed to let you know what you are spending money on, advise you on goods and services you want to buy, and how to run your business. For example, the bank could calculate a loss on your business, but a chat bot could advise you on a plan so you can recoup the losses.
But on the other hand, getting close to a customer might be dangerous. For example, they may be waiting on a payment from a large supplier which is overdue, and banks with several banks. This means there might be a conflict of interest. It will also create more responsibility for the banks, and not less.
Open Banking will deliver what we have been piloting for a long time. It will democratise capabilities, and capitalise on the deployment of these great financial services.
In terms of accounting, while open book may seem the way forward, the way that a bank will soon process data may make this field redundant.
Data is essential to banks and due to the analysis of the customer, banks may require to re-assess the profiles for each customer so they have a better ‘balanced view’ on assets and ‘liabilities’ so they can be more informed about their decisions.
Overall, Open Banking is a great idea and transparency and real time information appears to be the order of the day. Open Banking is sure to further innovate the financial sector in the future.
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