8 minutes to read With insights from... Dan Klein Former Global Chief of Data & AI A problem shared may be a problem halved, but data shared is often a problem solved. That’s a truism that spans industries. Whenever datasets are shared openly as part of an overarching ecosystem, new solutions are made possible and new customer value is realised. The financial sector is no different here. When banks move from open banking to truly open financial models, the industry will unlock untold business and customer benefits. But how do we get there? And what does that opportunity look like to the end consumer? Together with our friends at Bud, we’ve been exploring what’s coming for the future of banking… The open banking opportunity The opportunities presented by truly open banking are the same as in any other industry: innovation, efficiency, and – ultimately – creating new business and customer value. Much progress has been made, but there’s still much to do to realise these opportunities. Right now, the use case for open banking that most people are probably familiar with is allowing third-party budgeting tools to access our account information to help categorise our spending. Bud, for example, works with banks to build better and more personalised apps that increase engagement and product upsell, as well as in the lending space where they use data to process applications faster and help banks serve a wider range of customers. But that’s just the beginning of what an open banking ecosystem could achieve. Today’s initiatives are still largely business-driven and relatively siloed, but there’s a need to think possibility-first, and to understand the why driving the open data movement. ‘Today’s open banking initiatives are relatively siloed. For the real magic to happen, we need to make data widely and freely... ‘Today’s open banking initiatives are relatively siloed. For the real magic to happen, we need to make data widely and freely available’. That’s because data ecosystems require business and architectural foundations that go beyond where our current banking capabilities lie before they can work their magic. As with any data ecosystem, open finance is an enabling technology, rather than the product or service that delivers value in and of itself. But where things get tricky is that you can’t provide those value-filled innovations without making data available to a wide range of bodies – and to do so without charge. That may sound like a good way to lose out on a short-term revenue stream, but it’s the core requirement at the heart of any true data ecosystem. It’s what separates them from data marketplaces: unfettered access to data that can then enable business models, rather than revolving the business model around selling data. Get that right, and we’re off to the races. The real-world benefit of data sharing in banking So what exactly do those races look like? Where might banking end up if the key players shift towards more open data sharing? The tough, short answer is: we don’t know until we do. It’s fundamentally impossible to invent the solutions an innovation ecosystem creates without the ecosystem in place. But the longer answer involves less crystal ball gazing than it does some simple extrapolation of what’s already possible. A key role data ecosystems can play in the day-to-day lives of banking customers is in helping to automate the full gamut of financial interactions – and in using data to provide advice. Datasets that are shared back and forth across businesses and sectors could help banks automatically detect when a customer is or isn’t safe to take on more debt, for instance, without them having to fill out a single form or gather any past payslips together. But the opportunity here runs deeper than that. Imagine tools that automatically can detect when a customer has savings in inefficient places and proactively recommend a better portfolio. Or a price comparison site that can see when your utility bills are increasing and proactively suggest a better deal from a different provider – pre-approved based on your information. ‘Data ecosystems can enable banks to provide proactive, personalised financial advice that can genuinely enhance a customer’s... ‘Data ecosystems can enable banks to provide proactive, personalised financial advice that can genuinely enhance a customer’s lifestyle’. That kind of proactive personalisation could lead to financial insight that goes way beyond simple regulatory advice, but it could also use data from other sources to enable tools that provide a more holistic view of how to eat healthier, how to travel more, and how to enjoy life with fewer barriers. People who are new to the country or have inconsistent income, for example, might rightly feel like the current financial system is set up to block them from success. But what if open banking data could offer banks a clearer, real-time view of their current finances and actions, rather than their past difficulties? Credit scores that understand the context bubbling underneath multiple datasets could sit alongside tools that offer real, practical advice about account activity that might affect their affordability – and the lifestyle changes they could make. At Bud, there’s already a version of this transactional-level intelligence in place – called ‘portfolio monitoring’. It helps Bud’s clients know more about their customer base as a whole, and power new insights. If, for example, a bank is only looking at its product performance, then adding wider transactional and behavioural data would help them unearth extra information. Maybe a given group of customers aren’t engaging with a service, and they're also renters, which means maybe they need a bespoke approach when it comes to offering mortgages. ‘When you open up data fully across sector borders, you create chances for game-changing innovation’. ‘When you open up data fully across sector borders, you create chances for game-changing innovation’. And then there are the more left-field prospects. The stuff no one sees coming. When you open up data fully – in a way that multiple sectors can access – you create chances for game-changing innovation that can impact society in brand-new ways. To get a good idea of where this might lead, we can look at Imperial College London’s recent study on loyalty card data, in which almost 300 women opted into sharing their shopping data to help researchers identify possible patterns that can flag ovarian cancer symptoms sooner. The study was able to uncover a strong link between women purchasing Gaviscon for indigestion pain and subsequent ovarian cancer diagnoses: ‘Using shopping data’, says Dr. James Flanagan, ‘our study found a noticeable increase in purchases of pain and indigestion medications among women with ovarian cancer up to eight months before diagnosis’. The research findings could help to identify people who may have ovarian cancer at an earlier stage, which is one of the most effective ways to improve survival. That’s just one study, but it paints a picture of the power that financial and spending data currently have locked away – and which regulated, ethical, and secure data governance and sharing could help to unlock. Put simply: with access to broader, tangential datasets, businesses can be more predictive than reactive, which will only make them better able to serve customers, and much quicker to innovate. How do we get there? The catch here is that all the above requires sharing and accessing data without any upfront cost. A data marketplace, by its definition, assumes that the data being made available has a certain intrinsic financial value at the point of accessing it – and charges for that fact. On the other hand, a data ecosystem opens data out freely, and organisations in the ecosystem only pay for the points they’ve used once viable services are built on the back of them. Think of it like a pick ‘n’ mix bag of sweets; you can see everything on offer from the start and only pay for what you take, rather than paying upfront for a bag without seeing the goods. That mindset shift is a tough sell for any data-centric organisation, let alone financial institutions, but it’s a necessary one if they want to be able to provide the best service. If not, they run the risk of acting as nothing more than transactional agents in a race to the bottom. ‘Financial institutions need to change outwards and inwards, innovating and sharing data beyond internal and external boundaries... ‘Financial institutions need to change outwards and inwards, innovating and sharing data beyond internal and external boundaries to uncover new value’. So it’s important that banks have more aspirational societal goals when it comes to data use. The ethos needs to become one of ‘we're in the business of bettering society’, rather than being in the business of making money – on the understanding that the money will flow if they find new ways to innovate. In other words: financial institutions should start proactively working with tangential providers – and with a broader range of datasets – and then question where they could collaborate for the greater good. Regulatory changes may help us get there, but this change needs to come from all directions – outwards and inwards. After all, before you can open your bank to data sharing beyond company borders, you need to overcome your own data silos and start connecting internal disparate datasets. Do that, and you’ll develop an in-house capability for turning data into valuable and actionable real-time business knowledge. Which, really, is step one on the road to a true financial data ecosystem. Discover how our multidisciplinary teams and partners enable banks and other financial organisations to drive early and ongoing value through co-innovation, modern technology, and impactful AI solutions. Contact person for Switzerland Sebastian Schweitzer Lead Data Consultant Sebastian Schweitzer has been an important member of the Zühlke team as Lead Data Consultant since February 2023, ensuring that the company stays up-to-date with the latest technology trends. He is a true expert in developing data strategies, data products and implementing complex analytics, reporting and AI applications. In the past, he has successfully supported many large corporations, SMEs and startups in defining and implementing strategic IT and data initiatives. With over 7 years of experience, he is the perfect candidate for demanding projects. Contact sebastian.schweitzer@zuehlke.com +41432166604 Your message to us You must have JavaScript enabled to use this form. First Name Surname Email Phone Message Send message Leave this field blank Your message to us Thank you for your message.
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