On the 13th January 2018, Open Banking officially came into effect in the UK. This means that all regulated banks are now required to let customers share their financial data with authorised third-party providers through API’s.
Essentially, the wider aim is to make financial services more innovative and competitive, as well as make banking an all-round better experience for customers.
But, how will it actually impact UX? Here’s a general summary.
Greater freedom and choice
Opening up a new bank account or switching services can be a notoriously lengthy procedure, marred (or typically put off) by the need to fill in long or dull forms. Open Banking will make onboarding much more simple. Users will no longer need to provide this kind of information – instead they will just need to allow access to their financial data, which services can immediately access and use.
This might also transform traditional processes such as mortgage applications, with users able to apply on the basis of open data rather than lengthy processes.
Access to all accounts in one place
Open Banking will also lead to the introduction of Account Information Service Providers (AISPs), which will join up customer account data from various banks. This means that, if you happen to have multiple accounts with different banks, you will be able to access all this information from a single service rather than log into each bank separately.
One of the biggest benefits of this is that it will allow customers to manage money much easier, with the ability to see their entire financial set-up at one time. Naturally, this will present greater opportunities for banks and fintech companies.
Challenger banks like Monzo and Atom already offer users greater visibility within apps, breaking down user payments into categories like ‘groceries’ and ‘bills’. From now on, this is likely to expand further, with more companies likely to focus on a bigger and more complete picture of personal finance.
Another benefit of Open Banking is that it will allow banks to utilise machine learning to offer more compelling, relevant, and personal experiences across the board. With the ability to see how a customer manages their money – let’s say, if they have recently booked a holiday – banks will be able to deliver more contextual offers and communication (such as travel insurance). It also means that banks can pre-empt customer needs to offer related and relevant products or services.
Again, this will lead to more flexibility for users, with the rise of aggregators allowing customers to choose financial services in relation to real-time need.
Another way personalisation will come to the forefront is due to the emergence of competitors offering personalised services to niche markets, i.e. in areas that large banks are thought to typically underserve customers. Open Banking will essentially create more of a level playing field, allowing small or challenger companies the chance to break through.
— Atom bank (@atom_bank) June 30, 2017
The concept of Open Banking has brought up natural concern about safety and data protection. However, it is important to stress that the new rules are actually aiming to enhance customer safety – not damage it. This is because data-sharing will always be optional, as banks can only share your data with third-party providers if you offer consent. You can also determine the amount or specifics of what data you share.
Meanwhile, it will be the Financial Conduct Authority’s (FCA) job to regulate and authorise third-party companies, and only then will they be able to access banking APIs.
Another reason safety might increase is new legislation will take away the need for screen scraping, which involved third parties collecting a user’s banking credentials and using them to login and retrieve data. Last year, the European Banking Federation (EBF) called for a ban on screen scraping due to the risks of fraud.
Paying vendors directly
Paying for something online might feel like a seamless experience for users, but beyond this it requires quite a complex series of actions, one that has previously been reliant on providers integrating with bank infrastructure.
To buy something on ASOS, for example, the retailer would be required to access a secure payment service (such as Visa), who would then contact your bank in order to take the payment.
Now with Open Banking, you would instead give ASOS direct permission to access your bank account. The resulting user experience could then be similar to social login, where you access third-party sites with your Twitter or Facebook account.
More or less loyalty?
Open Banking will undoubtedly lead to more competition within the market, meaning banks must step up their focus on UX in order to hold on to customers.
Consequently, while loyalty might be harder to achieve, it could ultimately become stronger in the long-term if banks are able to deliver. Then again, with the ability to switch now being easier than ever before, it remains to be seen whether customers will hold on to their loyalty in the long-term.