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Since the announcement of UK Open Banking Regulation, the concept of a more open, internationally friendly financial services market has been touted as a banking revolution; one that has the capacity to disrupt the status quo and open a brave new world for innovators. In 2016, our hypothesis was clear: Open Banking was going to change the game, and to make the most of it, companies needed to act now.

Kin + Carta Create has been maximising the opportunity of Open Banking, while being mindful of PSD2 compliance, for numerous FS institutions both new and established. Along the way, we have written extensively on where we thought the key challenges and opportunities were, and what the impact would be. Working with incumbents, ventures, and start-ups in the three years since the initial regulation announcement, we thought we’d re-assess some of our claims against the current reality: what’s actually become the ‘new normal’, what’s flopped, and what do we think is still to come...

Aggregators will build the experience layer that sits on top of banks infrastructure, owning the customer relationship and reducing banks to a utility function.

There has been a surge of challengers and intermediary services, and they have made some headway as additional services that consumers access and find comfort in. Examples like ING Yolt were developed in partnership with Kin + Carta Create and now boast over 1,000,000 users. In terms of narrower aggregators, the “wallet”, both in its payment and loyalty linked-forms like Starbucks Wallet, have started to shift the method through which customer relationships are formed.

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That’s not to say that incumbent banks have been usurped completely as experience providers for their customers - we’ve not seen banks lose out on customer relationships and loyalty to the extent we predicted.

We are, however, seeing an increase in consumer demands for a seamless, accessible, and personalised experience when accessing their financial information. A lot of our omnichannel financial services work over the past three years has been driven by these desired outcomes, balanced with the requirements of PSD2.

It transpires that consumers don’t mind checking multiple apps for their different bank accounts and banking relationships. At Kin + Carta Create, we work in alignment with the Jobs-To-Be-Done framework, that consumer behaviour and product uptake is driven by identifying the specific outcomes that consumers want to achieve given the specific situations, contexts and struggles that they find themselves in. One banking application per financial institution gives consumers what they need, at least for the time being.

Looking to 2020, it will be interesting to see what the next iteration of mobile wallets will be, and how this will impact financial institution relationship ownership. Broad wallet providers like Apple and Android Pay could optimise and enrich their experiences with merchant loyalty schemes and financial institutions to further decentralise the experience of seeing and spending your money from the experience of a bank.

Open banking and PSD2 will lower the barrier to entry so new and non-financial players will enter the market and launch their own financial products

Recent announcements from “Big Tech” companies are certainly beginning to deliver on this assertion. Google announced its upcoming offer of checking accounts in 2020 this November, the Apple Card was announced in April 2019, and Facebook not only launched their equivalent to Apple or Android Pay, but also its own currency - Libra. Amazon has a pipeline of products that are aiming to reduce friction and increase both supply (of merchants) and demand (from consumers) for their services.

It’s unsurprising that these plays are being made by companies who are insistent on becoming the centre of their users’ lives. However, at this stage it’s hard to see these moves as anything beyond an enabler to their core business, for the consumer who buys into the “ease” of holding funds with an organisation that already provides an experience, product or service to them.

It’s debatable whether customers will leave their current banking relationships and see any of these services as a comprehensive replacement, however they may well go there to purchase specific financial products relating to their existing relationships with those brands.

The growth of Monzo, Starling, and other tech-enabled disruptors is proof that digital-only money propositions are possible, and deliver real value to consumers in terms of frictionless peer-to-peer payments and access to products. Importantly, consumers switch to these brands because of the value of their offer - be that money management, transparency, ease of access or personalised offers or incentives.

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Incumbents are not out of the game here: many banks have reinvented their propositions, repurposed their branches, and developed user-centric deals, offers and services to deepen customer relationships.

The key to change here is trust. Trust in banks and financial services firms is on the up, and so change really has to be on a values basis. How companies join the dots to create the efficiency and seamlessness consumers are seeking will be instrumental for the winners here in 2020 and beyond.

A new ecosystem of platforms, vendors and partners will emerge offering a breed of services that can be plugged in and ready to go

The “build or buy” question pops up often when organisations are looking at their value proposition and areas for growth. Platforms and partners provide best of breed services in their specialism, while the bank can concentrates on its core value.

Partnerships, loyalty schemes, cross-vendor incentives and creating an ecosystem around your brand are not trends exclusive to banking, and many consumers are seeking joined up experiences that integrate how they navigate the world in general, especially when enabled by digital.

Integrated service provision is not new to the banking game - insurance products, or certain types of financing being white labelled and sold alongside premium banking offers are commonplace, and have been for some time. What’s been lacking to date is the ability to effectively enable those additional purchases or engagements in an intelligent and personalised way. Making a service feel tailored rather than marketed is a unilateral consumer driver across all brand experiences.

Open Banking has opened the door to enablement partners, who can deliver fast value to banks to help them effectively cross-sell services and understand their customers better. Progress here is slow but coming: the regulation surrounding financial services is intricate and varies hugely by jurisdiction, so enablement partners don’t have an easy job to get to market. This one is only a matter of time though - banks aren’t experts in AI or marketing, and tech-savvy partners will benefit incumbents and challengers alike.

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Though not all our Open Banking dreams have come true (yet), it’s clear the principles underpinning Open Banking are here to stay. The wider regulatory landscape is erring towards similar themes: connectivity, transparency, usability, and customer safety. Alongside this, the user experience imperative for connected, seamless experiences is more embedded than ever.

Our work with clients to prepare for and maximise the opportunities created by the combination of Open Banking and PSD2 is likely one of the reasons why some of our claims have not come to fruition. The ability to adapt, capitalise, and roll out solutions at scale has played into the hands of the incumbents, though they’ve not escaped unscathed. New propositions that are nimbler are also able to more readily adopt a “build or buy” mentality can spread rapidly and capture new users or convert existing ones.

Change takes time, and perhaps a three-year retrospective is slightly short-termist to fully assess a system dating back 4,000 years. We’re confident that the pace of change will never be slower than it is today, though - regulation or no regulation. At Kin + Carta Create, we continue our commitment to helping our clients accurately understand the implications of Open banking for their customers and their business. The key question for the future of banking remains - can incumbents deliver innovation at scale faster than disruptors gain market share and distribution?

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