We have partnered with financial inclusion technology company Inbest, to integrate their Benefits Calculator into our Personal Financial Management platform.
Many people will turn to credit to get through the winter. Many more will review existing credit arrangements to make ends meet. Those already struggling to make their repayments will be looking to their lenders for support. Is the industry ready to respond?
Based on two reports issued by the FCA in November, it appears not.
Open Finance builds on the foundation and legacy of Open Banking, which has shaken up the world of current accounts and payments by opening up data for regulated providers, like Moneyhub, to access and share data, subject to customer consent. Open Finance extends those data-sharing principles to a consumer’s entire financial footprint, including their mortgages, savings, pensions, insurances, investments and more.
There are few areas of the financial services industry that haven’t been touched by Open Banking. Open Banking is when people give consent to third parties like Moneyhub, to access their banking data to benefit from smarter and more tailored products and solutions.
VRPs allow customers to connect authorised Payment Initiation Service Providers (PISPs) such as Moneyhub to their bank account to automatically transfer, or ‘sweep,’ money between a customer’s own accounts within agreed parameters. It sounds simple enough, but the impact on financial health could be immense.
Whitecap Consulting, in partnership with the Building Societies Association (BSA), recently published a report analysing the competitive landscape for the building society sector. The Whitecap team is summarising the key findings in a series of blogs.
In this article, Julian Wells, Director at Whitecap Consulting, reflects on the findings of the research in relation to one of the hottest topics in FinTech – Open Banking.
In the online survey conducted during the research, we asked respondents about Open Banking, finding it to be perceived as an opportunity for building societies by 65% of survey respondents. We also found the largest opportunity from Open Banking is considered to lie with enhancing customer experience/ engagement (60%) and data connectivity (51%).
There is no doubt that building societies are acutely aware of the development of the increasingly prominent role APIs are playing in modernising the financial sector, fuelled by the continued and growing success of FinTech and Open Banking. At the same time, we found that while Open Banking is an area of strong interest for societies, it does not currently feature in their immediate priorities, with most CEOs adopting a ‘watch and see’ approach.
This may be a reflection of the fact that only 10% of building society survey respondents consider Open Banking to be a threat for the sector. We also found building society respondents were twice as likely to suggest that they had not fully assessed Open Banking’s potential (35%) over non-building society respondents (14%).
“There is no doubt that building societies are acutely aware of the development of the increasingly prominent role APIs are playing in modernising the financial sector, fuelled by the continued and growing success of FinTech and Open Banking.”
Moneyhub, a FinTech that provides secure, Open Banking (bank account and credit cards) and Open Finance (pensions, loans, mortgages, investments, property values) integrations and applications to businesses and individuals, has found wide ranging use cases for Building Societies, including:
Digital wallet solutions (for example the Moneyhub platform) can provide a society with a payments facility without the need for the significant costs associated with setting up and running a current account
Open Finance presents the full picture of an individual’s financial situation, it allows building societies to provide content, tips and tools to help customers with day-to-day finances
This holistic view allows building societies to identify those who may begin to struggle with mortgage payments before it actually occurs. Through a defined set of algorithms, risk factors can be flagged and help and advice offered proactively
Using a customer’s current and historical Open Banking data for credit checking, affordability and income verification allows fast, efficient and cost-effective underwriting
Open Finance allows customers to share their data - other savings accounts and mortgages for example - to receive personalised offers and switch accounts
FinTech firms interviewed during the research consider the use of Open Banking by building societies to be at a very basic level, citing opportunities for societies to adopt it to help streamline key processes such as ID and verification, dynamic data capture, and the evaluation of mortgage eligibility and automated regulatory reporting.
We reported on a number of current examples of the use of Open Banking within the building society sector, many of which are listed below. This year we can expect to see an ever increasing number of deployments of Open Banking within the building society sector as it gains further traction and as the financial services sector continues to move towards an Open Finance model.
Perhaps the greatest prize will be found in improved engagement - by being useful, relevant and personalised. Building societies appear to have a unique opportunity to use Open Finance as 21st Century financial wellbeing providers.
Newbury Building Society has developed ‘NBS Money’ in partnership with Moneyhub. NBS Money is an app that accesses Newbury products alongside a ‘virtual’ current account banking feature using account aggregation services
Newcastle Building Society has partnered with Paylink Solutions to assist customers in financial difficulty by launching a digital debt help service, with integrated Open Banking technology.
Phoebus, a core banking platform provider, has developed a self service customer portal which can be deployed as a standalone component to plug into any core banking platform to access mortgage data for balances, statements, and emails, as well as Open Banking functionality.
Sandstone has developed API gateways and Open Banking onboarding as part of its digital and mobile banking proposition across current account, savings and mortgages.
Mambu’s partnership with Tandem provides an example of a financial institution updating their technology to keep up with consumer demand. Tandem wanted to quickly introduce new financial services by building a new innovative product within their existing product and embracing open banking.
In 2018, Skipton was one of the first societies to trial the use of Open Banking, offering its direct mortgage customers the choice to use it in the mortgage affordability process rather than manually providing bank statements. It is possible that competition could be the key driver in taking API adoption to the next level. This is particularly pertinent at the front-end of the mortgage process, where it has been found that 83% of brokers surveyed primarily sought to understand eligibility when assessing the market for options for their clients.
The research underpinning this report was conducted by Whitecap Consulting in partnership with the BSA and involved a quantitative data analysis of all 43 building societies, interviews with 33 of the building society CEOs, and an online survey which received a total of 134 respondents.
This analysis and report have been funded through sponsorship from a number of industry stakeholders including: Credera, DPR, Equiniti, Mambu, Mutual Vision, Moneyhub, Nivo, Phoebus Software, Sandstone Technology, Shoosmiths and Sopra Banking Software.
The eight blogs in this series focus on key topics addressed in the research: FinTech, Strategy, Mutuality, Regionality, Technology, Open Banking, Mortgages, and Savings.
This article was originally published by The BSA. you can find it here.
Julian Wells is a director at Whitecap Consulting, a strategy consultancy based in Leeds, Manchester, Milton Keynes, Bristol, Newcastle and Birmingham, where he leads the FS & FinTech Practice Area. Whitecap is particularly active in the digital, technology and FinTech sectors. Financial services clients have included banks, building societies, technology providers, outsourced service providers, FinTechs, retailers, universities, and various firms in the intermediary financial services market.
This was an event we were fortunate to participate in ourselves, with a keynote presentation from Moneyhub CTO Dave Tonge on whether API security is up for the Open Finance challenge, which is available to view now:
CEO Sam Seaton took part in three comprehensive panel discussions which are now available to view too:
How Open Finance can boost financial wellness
Consumer money management - Open Banking style
Tech & Data Driven Innovation in Open Banking
When it comes to API Security, there’s no need to reinvent the wheel – there are really good security standards already in place. And with FAPI 2.0 on the way, we’ve ironed out any areas of confusion and put in place stronger industry standards.
The new currency that everyone will need to survive and thrive is trust. That’s the way that we will make it as businesses in the future. Open Finance and Open Data are the keys to unlock trust.
20 million say their financial situation is worse since the Covid-19 pandemic, and the impact will drive behavioural changes that are here to stay. Open Finance can help these people in ways that any business can leverage, through:
Connectivity that gives greater clarity and control to consumers over their finances
Technology that delivers real-time, data-led personalised understanding and does the heavy lifting for you
Better engagement via unique insights and tailored smart-nudges that help any company to build trust with their customers
Bringing convenience to the forefront with account-to-account payments
Simple propositions make Open Finance accessible and appealing to everyday consumers. Just putting long-term savings and pensions alongside day-to-day money drives a huge shift in consumer engagement with their long-term finances.
And finally, whilst we miss travelling, getting to meet new people and hear from other speakers in person, there are some real advantages to the impact the pandemic has had in driving events online. From an attendee point of view, you can join any talk you like at the click of a button, whether that’s live, or later on at your own convenience, giving us far greater opportunity to truly engage in and absorb the discussions that matter to us - on our own terms.
If you have any questions or feedback for us following Open Banking World Congress, or if we can help you with you Open Banking or Open Finance journey, please feel free to drop us a line, we’d love to hear from you.
Previously siloed aspects of financial services data, such as mortgages, consumer credit, bank accounts, investments, loans, savings, pensions and more can now be seamlessly connected thanks to the power of Open Finance and innovative TPPs (third party providers) such as Moneyhub.
As Angela Strange, general partner at Andreessen Horowitz, predicts: “nearly every company will derive a significant portion of its revenue from financial services” - and in the not-too-distant future too.
Before we had Amazon Web services, if you had a brilliant idea you had to go out and buy equipment, find a building and spend ages wiring things together. All of this had to be done before building the first line of code. AWS flipped this on its head and now anyone with an idea can quickly and easily start a tech business. The same is now happening with financial services.
When it comes to finances, there are three questions people tend to have:
What have I got?
What do I need?
And how do I get what I need?
Open Finance is a consumer content-driven approach to answering these questions by bringing your financial world into one place, and providing unique and relevant data, tools and insight.
Open Finance helps people solve real world problems. such as applying for a mortgage, saving, getting rid of debt, enabling payments, tax returns, and planning for career breaks, as well as even more technical challenges.
Open Banking is built on top of the Payment Service Directive Two (PSD2). Open Banking has finally unlocked bank data and put it in the hands of its true owner - the business or consumer who owns the account. This has been a great first step for organisations towards true open data (and Open Finance) - something Moneyhub has always been working for.
Mercer is the world’s largest outsourced asset management firm. They approached us with one core problem: “pensions modelling tools are typically over-complicated, arduous and stressful to use, and provide no incentive for people to come back and manage their finances.” We set out to tackle this problem using our technology to build the Mercer Money platform - offering Mercer customers a complete financial wellness tool.
The Big Exchange (co-founded by The Big Issue) are building a community focussed on making a positive impact through an inclusive financial system that is available to anyone. We used Moneyhub technology to power their digital wallet and their marketplace - offering a win-win scenario where The Big Exchange can increase assets under management, the consumer is happy with returns, and the world benefits as a result of these investments doing good.
A building Society came to us with a vision: “there must be a fairer, quicker and more cost effective way to run affordability checks on customers”. Open Finance makes it possible to truly understand all aspects of a customer's financial world - well beyond what is visible from traditional credit reports. The result is mortgage affordability checking that is faster and simpler than traditional approaches and can say ‘yes’ to more people, offering a fairer outcome for applicants.
This article was originally published in The Paypers Open Banking report 2020. To read the full report, please download it from The Paypers website.
Data is called the fuel of the Fourth industrial Revolution. Like oil, data needs to be extracted and reservoirs tapped, but concerns have grown that this can be at the expense of consumer privacy. It was soon clear that the data also needed refining if insight was the goal, but the processing was still exploitative. In financial services, it seemed that the asymmetry of information between provider and consumer was ever-widening.
Key to your data processing strategy, and your customer experience design, is how you get to know the people you’re interacting with quickly, effectively, and in context. This isn’t about extracting data upfront, it’s about progressively sharing, reciprocating and proving your trustworthiness.
But the value was still elusive and Moneyhub could see why. The industry needed to focus on the value it creates, rather than the value it takes. By focusing on doing this consistently, people will trust you to deliver - and trust also compounds over time.²
“The industry needed to focus on the value it creates, rather than the value it takes. ”
It means focusing on the value, meaning, and engagement you create for the people you serve. When utilising people’s data to create value for them, it means making sure they understand how their data is being used to create that value - and that goes beyond consent-based data sharing.
But an industry obsessed with pushing products still has lessons to learn when it comes to the difference between leveraging insight and selling it.
We need to accept that people should control who accesses their data and for what purpose. We need to think of organisations as data custodians or information fiduciaries. That means that providers need to be relevant and useful and Moneyhub provides that missing link.
It aggregates, organises, and enriches data and then monitors it on behalf of the customer. Then, with an understanding of the customer context, actionable insights (or ‘nudges’) can be introduced to coach the user towards better outcomes. This might be through prompts, alerts, or new options being surfaced - it’s about helping people and for what exchange of value.
Insight is not an end in itself and the consumer needs the means to put in action decisions, simply and cheaply. Moneyhub uses money to savings, investments, and pensions, or to pay bills and reduce debts.
By being a trusted partner of the customer, the insight from income and expenditure analysis combines with navigation towards improved financial wellbeing. Helping customers by being the everyday financial coach, means that wellbeing is not a goal but a by-product of improved customer outcomes. Here are some of our practical examples of that in practice:
Expenditure analysis shows that the customer is paying rent. There is no sign of contents insurance - so is there an awareness of the risk associated with that? Or could that rental payment history be used to support a mortgage application?
An employer provides a range of employee discounts from retailers – as one of our clients has shown, by personalising offers based on past expenditure, the average Moneyhub user can save over GBP 70 per month, with no change in spending habits.
Consumers are keen to invest ethically and sustainably but, in addition to aggregating and scoring their investment portfolio, expenditure analysis could be used to create nudges towards greener lifestyle options or a carbon footprint offset savings plan or donation.
Impulse spending can be converted to impulse saving with an unplanned treat being accompanied by a self-imposed rule to sweep the same amount into an ISA or a pension.
Variable recurring payments can be set up when goals are met or a budget is tracked.
By adding a house price feed combined with mortgage repayments, customers can be alerted to new financing deals becoming available as the loan-to-value ratio comes down.
With 80% of employees not sure if they are saving enough and the self-employed still outside of auto-enrolment, the adequacy of pension saving can be forecasted and nudges made to help towards a better outcome, referencing current expenditure and in-retirement lifestyle.
Despite companies often having substantial customer data available, they continue to require customers to go through time-consuming and inaccurate fact-finding processes. With consent, the consumer can share their data, containing verified assets, income, and expenditure information.
Consumers can self-police by using ‘appropriate friction’ such as alerts around budget overshoots or comparing the effect of saving an amount rather than spending it.
By never selling customer data or taking a third-party commission on product sales, Moneyhub and its enterprise clients have always respected customer interests and balanced privacy against personalisation. The value exchange is always fair and controlled by the consumer.
Open Banking is useful but ancillary to the benefits derived from holistic Open Finance.
Critically, value creation from insight is organic and relationship- based, a far cry from crass product pushing. If a product solution is involved, it is more likely to be bought than sold and more likely to be retained as it is suitable and affordable. From here, customer centricity becomes a reality rather than a slogan - and the path from insight to value is lit by Open Finance adoption.
1 and 2: Greater Than X's work on Data Trust: www.greaterthanexperience.design and video.
Vaughan is an experienced Sales Director with senior industry experience in financial services, especially the life and pensions, asset management and wealth sectors. He co-authored ‘The Insurtech Book’ and has worked as an associate and consultant to a number of businesses.
Whether you want to create your own solution, or you want us to do it for you—we have the technology for it. Our experienced team is here to support you now and in the future.
