The Future for Open Banking
This year’s MBA Business Awareness Week (which forms part of their practically orientated Business in Action module) had a strong focus on the financial industry and emerging trends within the sector. Shaun Boyle, a current student on the MBA cohort, shares his insight on Open Banking and the challenges it presents for financial services.
Open banking regulation came into play in January this year. The concept enables customers to authorise their banks to share their data to approved entities, which are other banks and eventually non-financial 3rd parties. The aim is that this will be better for the end customer, products can be recommended based on transactional data, with a greater emphasis on individual needs.
However, it seems that the industry is struggling to come to terms with what this means exactly. The industry is more used to receiving regulation that locks down data, rather than opening it up for others to see. The security implications are a prominent issue and while this is possibly one of the obvious challenges for the banks, the other is how does anyone actually take advantage of this?
More specifically, how do the banks take advantage of this? It is hard to see, with increased competition, how banks will benefit from sharing this precious information. Or is it a 3rd party that will really monetise this concept? It offers similarity to the business model, used by Uber, the biggest cab company in the world that own no cabs. Will everyone soon run their personal banking through an application that is not actually a bank? As a consumer, I do wonder if I would trust a bank to offer me the best products available on the market, surely, they want to look after their own revenue stream.
Whatever the future for open banking, it will undoubtedly be interesting with possibly more questions at the moment than answers. Although the way that the legislation is structured clearly throws the balance of power back into the hands of the consumer, but when this will happen? This remains to be seen.