How fintechs can secure consumer trust post-Open Banking

By Samantha Seaton, CEO, Moneyhub.

Technology is revolutionising the way in which we interact with our finances, driven by the sharing and analysis of data. The implementation of Open Banking in January has given more power back to the consumer, putting them in control of exactly who is seeing their data and where it is being shared. While fintechs have the upper hand when it comes to speed, agility and an incentive to deliver innovation, one of the advantages that more established financial institutions have is a legacy of trust.

With new financial products appearing left, right and centre, there is an abundance of choice in the market. But for those dynamic and innovative firms looking to challenge the industry norms, the bar for trust is higher than just providing new products to meet market demand. Using data to provide a more tailored customer experience, creating dynamic partnerships with trusted institutions, communicating clearly with customers, and demonstrating reliability, fintechs can close that trust gap.

Problem solving and innovation

The real in-roads for fintechs can be made by finding the problems that older financial institutions are unable or unwilling to resolve due to their legacy systems and rigid institutional mind-set.

The Open Banking reforms free up consumer data, enabling fintechs to build a holistic financial picture of consumers and better solve their unmet needs. The data can reveal how they manage their money, how much they save and where they save it, what their income is, and where and how they spend it. Such insight will help the development of a much better service and create interaction that builds loyalty and trust over time.

A better customer experience

Securing and building trust also requires great customer service. This means developing and implementing well thought out and broad mechanisms to interact with customers and enhance their experience. While this can take the shape of dynamic and speedy communications, such as in-app messages, video calls and reviews, it also means clearly demonstrating the benefits of data sharing to consumers. This could include demonstrating convenience and cost saving, offering discounts on rates or collecting reward points, for example.

Open Banking provides a real opportunity to streamline financial processes, which can have a tangible impact on the lives of consumers. For example, opting in to share data means that consumers could have their tax return completed and filed automatically and structured in the most tax efficient manner, or that they could be automatically switched to the most cost-effective energy tariff on offer with no interruption to service. As fintechs demonstrate their worth, confidence amongst potential customers will rise further and businesses will reap the benefits as a result.

Greater security

There has been some unease around the ‘opening up’ of financial data and around which third parties can gain access. At the core of Open Banking sits data security, with the new protocols accompanying it meaning that the sharing of financial data is more secure than ever. And in order to be given access to consumer data, fintechs need to communicate the safety of data sharing to their customers.

The Open Banking initiative sees the Financial Conduct Authority (FCA) impose a regulatory framework, which makes it harder for data to be shared without the owner’s consent. Institutions are not only required to get FCA authorisation to capitalise on Open Banking but they must also hold the right level of insurance, fully protecting the customer at all times.

The reforms also enable consumers to be very specific around the data that they are looking to share, and to give approval for the details of just one account rather than having to share their entire online banking portfolio. Consumers are then able to revoke access to their data at any time, and those businesses granted access must seek reauthorisation from the individual every ninety days. Fintechs can therefore reassure their customers that their data is not only safer, but that they retain control over it once access has been granted.

Valued partnerships

While data management is one important aspect of building consumers’ trust, so is building partnerships to secure third party endorsement. For new fintechs on the block, partnerships with larger companies that hold similar values or are committed to the same vision is a smart step towards helping earn customers’ trust.

Moneyhub partnered with Lloyds Banking Group as part of the first Open Banking hackathon. Lloyds has been one of the traditional banks leading the way in data sharing through engaging and collaborating with partners in an ‘API-enabled ecosystem’. Recognising that Open Banking has the potential to provide a huge amount of benefit to both individuals and businesses, Lloyds tasked participants in the hackathon with demonstrating how open banking can help solve customer problems.

The prize was ultimately won by Moneyhub through the development of a machine-learning algorithm analysing a user’s financial accounts and transactions. This discover intelligent actionable insights that help make customers feel more empowered and helped them make better financial decisions. Moneyhub used a logical, strategic development from Lloyd’s current proposition, highlighting how fintechs and institutions can work together as trusted partners to benefit the end user through data innovation.

A bright future

As a greater number of financial institutions adopt Open Banking, consumers will become more familiar with the benefits of opting in to share their data. The key aspect in the transition to wider data sharing is to make sure that consumers feel at ease and safe when opting in.

To truly win trust, it is imperative that fintechs create an effective two way conversation. Key to succeeding will be educating consumers on the safeguards in place to protect their data. They also need to be made aware of the exciting benefits they can unlock through opting in to data sharing, enjoying enhanced services and more personalised product offerings. Businesses who do this will have a greater opportunity to build credibility, as well as to develop deeper customer loyalty through utilising the data insight they get back from customers.

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