open banking

Where data is standardised and portable, it becomes much easier to collaborate. Banks are separating their distribution channels (mostly in the form of current account customers) from their revenue generating products and in doing so they are creating whole new species of experience for their customers.

Take, for example, the collaboration between Starling and Habito that allows customers to connect to a digital mortgage broker from inside their bank app, or First Direct’s work with Wealthify that brings customers’ investment accounts into their main bank experience. They are both examples of distribution and product providers working together in a mutually beneficial collaboration to create an improved experience for their customers.

This model has parallels in media businesses. They are comparatively rare but in the context of rising customer expectations, improved technological capability and regulation that better protects customers it is likely that they will proliferate.

Seen through this lens, recent developments, particularly in social media take on new significance. Twitter’s latest campaign against fake followers is a good example. In a purely competitive context, fake followers are good. Of course Twitter didn’t want to get rid of them, they generate engagement and impressions which was the main product that Twitter sold. But look at it from the perspective of a collaborative attempt to create customer value and the equation flips. The user wants to get the best experience possible, the advertiser wants to build a trusted brand and the platform wants to help both achieve their goals. The fake followers distort that experience for all three players and clearly, they have to go. The competitive tension between Twitter and its advertisers didn’t help customers, a collaborative approach does.

Sure, SEO has to a large extent moved on, but historically this model has had the same problems – one where the goals of the distribution provider (Google) and the product providers (SEO agencies) were misaligned. I shudder to think of the creative talent and time that was wasted by agencies trying to game Google’s algorithm when a genuinely customer centric view point should have made it clear that this was never a good idea

There is a surprising similarity between banking and media as a business model. The key players create a free value store (content / transactional capabilities) and they extract a multiple of that value from the people using it (in advertising / product sales). Both models have the same fundamental problem where the value chains are not aligned, but whereas open banking is seeking to align the revenue generation and value creation elements of the business, most media models do not.

It’s early days for open banking but it would be well worth keeping an eye on its development. Entrenched players are being forced to rethink the relationship between distribution and product and customers are being empowered as a result. If the financial services sector can get to the point where generating revenue and creating customer value are the same thing, then we’ll all have a few lessons to learn. 

More on Open Banking:

Speakers from financial brands such as HSBC will be taking part in the Festival of Marketing 2018. See the lineup.