Despite some delays in its early formation, the adoption of Open Banking has finally seen significant growth in 2020.
The use of Open Banking technology has doubled since January as more than two million individuals and small businesses are now using Open Banking-enabled applications across the UK.
Research from Nesta also shows that 25% of people have used Open Banking enabled apps to manage their finances during the pandemic, increasing to 46% among 25-34-year-olds.
The technology has even reached the oldest generations as 99-year-old Captain Tom Moore’s Just Giving fundraising page was one of the largest tests of a new Open Banking payment system.
As sharing account data becomes normal for an increasing number of people, Open Banking is turning into an essential feature of various retail banking applications.
Following this success, regulators in different sectors are now examining opportunities to allow people to share their Smart Data in exchange for more personalised services. In this blog, we’ll look at three of the significant Smart Data initiatives which could transform the services which our fintech partners could provide to their consumers.
Open Finance is set to be the clearest evolution of Open Banking. This new initiative led by the Financial Conduct Authority would extend the Open Banking principles to give consumers control over a wider range of their financial data relating to savings, insurance, mortgages, investments and pensions. It has the potential to deliver huge benefits for both consumers and fintechs.
When rolled out, Open Finance could allow the creation of real-time money management dashboards which consolidate data to offer a complete picture of a customer’s finances. These dashboards could help thousands of people who struggle to fully understand and engage with their finances.
The data could also enable fintechs to offer simpler and easier switching services for savings, investments, pensions or insurance. These services could potentially save consumers thousands of pounds each year by ending the consumer loyalty trap for these verticals.
Another benefit of Open Finance is that it could allow consumers to receive even more accurate and faster financial advice or credit assessments. By sharing real-time data beyond their current account information, consumers would make it much easier for lenders or financial advisers to analyse their finances and offer relevant services.
Taken together, these benefits should also incentivise further market innovation and encourage competition throughout financial services.
Similar to Open Finance, Ofcom has recently undertaken a consultation looking at how sharing Smart Data could allow companies to provide innovative services for mobile and broadband consumers. Open Communications would allow consumers to select and compare personalised offers much more easily.
Open Communications data could enable fintechs to provide customers with the latest information on their mobile and broadband usage and accurately track their spending on these services.
Using this data, fintechs would enable users to search for better deals, see personalised product comparisons and switch based on their needs. The data could also be used to notify consumers about the best times to look for new deals. Ofcom estimates regular switching could save consumers £120 per year if their contract period has already ended.
By encouraging more regular consumer switching, Open Communications should also encourage more competition and innovation from broadband suppliers.
This may benefit consumers through lower bills, larger data allowances or more generous bundle deals for combined phone, broadband and television packages.
Energy is another sector which could potentially introduce a new way for consumers to share their Smart Data (incl. smart meter data) to make the market more efficient.
Like the other regulators, Ofgem has been looking into efficient data sharing through its Midata in energy project. This project aims to ensure there is a standardised way for energy data to be shared with third parties.
Again, this data could enable fintechs to develop new services such as faster, more accurate tariff comparisons. It could also allow customers to use precise half-hourly energy consumption data when looking to estimate the savings possible by switching suppliers. In addition, consumers wouldn’t need to use energy bills or login to online accounts to monitor their energy use or compare suppliers.
If consumers gave ongoing consent to regularly access data, fintechs could routinely check their energy deal is the cheapest and most suitable deal for their needs
As part of the Midata project, Ofgem hosted a series of consumer panels to gauge consumer opinion on sharing Smart Data. The results were generally positive as the majority of panellists favoured sharing energy data with third parties such as fintechs in exchange for new services.
Many panellists, particularly those already engaged with switching, thought a quicker process would encourage them to compare prices and change more frequently.
Encouragingly, Ofgem also found most panellists were open to the idea of repeated access to their energy usage to provide more personalised and accurate offers and to send prompts when better deals were available.
These findings suggest there is generally widespread public support for the continued development of Open Data services.