Originally published in BSA Society Matters magazine

By Simon Lyons, Head of Ecosystem Engagement, Open Banking Implementation Entity​

Open banking is changing the way we engage with financial institutions: lowering the barrier between building societies and their members.  While large corporates benefitted from high-end, complex solutions that enabled tailored advancements, customers did not qualify for this privilege.  Now, they can.

Sector relevance is crucial when considering open banking. Building societies trade on the strong and trusted relationship with their members. Open banking improves the interaction between those two parties to the benefit of both. Simple premises were always the most challenging to implement. Can my customer see my savings product alongside their current account? Can I improve the quality of data that my customer submits in a payment? Can I use my customer’s banking data to help them improve their financial health and tailor my offerings? All of these statements are now possible.

Joining open banking – either directly or through a third party – can allow building societies to have the same visibility as a high street bank. Cost-effective APIs can increase customers’ access to societies’ accounts or products without the high overhead of new digital channels. As customers’ financial lives extend securely into a broad ecosystem of apps and services, open banking removes the need for new, onerous authentication methods.

The benefits are two-fold. Societies gain new methods of collecting payments and engaging with customers on-demand, rather than in the batched cycles of today. Customers benefit through instruments and products that are no longer siloed or seen as separate to their own daily banking and financial needs.

Collections

A building society can now contact a customer via text, email, or other digital channel, requesting that they submit a prepared payment. The message is hard coded with the correct reference and amount – solving the issue of incorrect reference on the payment. No more suspense accounts.

Withdrawals

Society accounts generally see large value withdrawals compared to banks – the impact of abuse is high. Open banking-enabled account identification reduces time consuming paperwork or the need for customers’ hard details. Mitigating this beneficiary fraud risk has a high impact.

Affordability

Open banking data can enhance credit files with recent spending behaviour, supporting suitability assessments for lending instruments. Finally: accurate Income/ Expenditure Statements that can be as up to date as this morning. As Covid-19 progresses and unemployment sadly increases, assessing members on real behavioural data will be key.

As open banking evolves into open finance, the argument for leveraging technology to bring members closer has never been clearer. Moving engagement from monthly or quarterly, to an inclusive customer-supplier relationship enhanced by digital means.

Many sectors are benefiting from open banking, including financial services, government, and industry.

Developing relationships that building societies have always strived for, with minimal internal change and maximum customer impact. Societies’ unique advantage is trust – matched only by Credit Unions in terms of their common bond.

Naming individual sectors as ‘having the most to gain’ from open banking can appear arbitrary – but when it’s an accurate, credible assessment, it becomes worthwhile. And while the precise sub-sector of financial services that will get the most from open banking may be arguable, it’s no doubt that building societies are close to topping the list.

More information at openbanking.org.uk