The 4 things U.K. banks must do to embrace open banking

Britain's financial institutions are ready to move open banking forward. Here’s what must happen next. 

It’s been nearly two years since the U.K. government made the country’s banks adopt open banking, which involves the sharing of once-proprietary customer information between banks, fintechs and other firms. Adoption has been slow, with many banks not wanting to give up client data that they had worked so hard to obtain. 

But over the last few months, attitudes around open banking among financial institutions appear to have changed. According to Business Insider Intelligence, 73% of U.K. financial institutions held positive attitudes toward the open banking movement in 2020, compared to 48% a year prior. As well, more than 2 million U.K. consumers now use open banking-related products. 

These numbers suggest that financial institutions are beginning to see the benefits of working with fintechs to create better banking experiences. And that is the promise of open banking – by allowing other companies to access client data via application programming interfaces (APIs), banks can make it much easier for people to open bank accounts, for businesses to quickly pay vendors, to see a company’s entire financial picture and much more. 

“Most (financial institutions) see an opportunity to leverage technology and fintech partnerships to build a more comprehensive view of their customers’ data across various accounts, and through this, deliver more personalized financial products and drive uptake,” write the authors of Business Insider’s report.

But feeling positive about open banking and adopting it are two different things. Many banks are still behind when it comes to ensuring they have the right technology and proper approach to make open banking work for them and their customers. 

Now’s the time to act – wait too long and other banks and startups will deliver improved banking experiences to your clients before you do. Here’s what you need to do to move your bank to the next level. 

Invest in digital transformation 

The biggest barrier to open banking is the legacy systems that financial institutions have spent years building, but that are no longer compatible in today’s more digital world. Open banking requires companies to share information quickly and efficiently, to create a technology ecosystem that incorporates numerous APIs and fintech-developed programs into the customer experience, and to constantly update programs and processes. Getting to this point will require some sort of digital transformation, which must involve a full embrace of cloud computing. Why the cloud? Because most of the programs the bank will need to interact with, whether that’s a consumer app or enterprise resource management software for business, now operate and interact in a virtual environment. 

Focus on the customer 

Open banking is all about improving the customer experience. The institutions that do this best are the ones that put their customers front and centre. Business banking clients now expect much more from the companies they deal with around customer service and user experience. Everyone’s familiar with the ease of Uber or Airbnb and they want that same easy experience with business banking technology. For instance, the number one ask we get from Treasurers, Controllers and CFOs across organizations of all sizes, is that they want to know what their cash position is in real time in the applications that they already use to manage and predict their cash. They want reconciliation to be intuitive, they want to stay current with their vendors, and to have good internal controls.

The banks that aren’t customer-first will lose clients to digital upstarts, which is already happening. According to Finder, the number of Britons who have a digital-only bank has increased by 165% in 2019, with 23% of U.K. adults now having this kind of account.

Partner with fintechs

One of the reasons why the U.K. government had to mandate open banking was because many financial institutions weren’t keen on partnering with fintechs. The future of finance, though, requires collaboration – it would take far too long and cost way too much for banks to give customers all the things they want themselves. Open banking makes it easy for banks to provide new experiences without having to build the technology themselves. Instead, they should find a partner to work with and deploy that company’s platforms to the bank’s customers. For instance, FISPAN is helping banks develop corporate-focused APIs that can connect the institution’s system – both legacy and digital – to existing ERP programs. It’s also assisting financial institutions in creating more embedded and contextual banking experiences, where clients can make use of services and products that suit their individual needs. 

Sort out security 

Another reason why banks are holding back is because of security. There’s still concern around how data is being used and how clients feel about their information being shared with other businesses. Banks should ensure that they’re upgrading security protocols and talking to the fintechs they may want to partner with about establishing security measures that allow customer information to be shared in a safe way. 

The banks that take these ideas to heart will be the ones that set themselves up for open banking success. However, it’s important to act now or risk being left behind. 

Download our whitepaper to find out more about open banking in the U.K.