Cross-sectoral approach to Open Finance
It’s quite clear that financial wellbeing in the UK is at an all-time low and has only been exacerbated by the pandemic. The data paints a picture of a population of people that don’t feel confident or in control of their finances but clearly do have an appetite to find a better deal. They are simply lacking the clarity and transparency to do so in an informed and convenient way.
Cue Open Finance and the array of tools and solutions it can offer to correct this imbalance.
“The real benefits in Open Finance come from trying to redress the balance between consumer insight and the power of the financial services sector. This will help to drive better deals, more appropriate products and services, and to ensure that suitability of those products is fit for purpose in the long term.”Vaughan Jenkins, Director of Business Development at Moneyhub
It’s important to first consider those solutions that will sit across the industry, rather than in a single sector. Mortgages are a type of credit; pensions a form of investment; and millions of people blur the lines between their business and personal finances. We cannot, therefore, only look at each sector in a silo.
TISA established the Open Savings and Investments project in January 2019, as the two areas are inextricably linked and need to be developed in unison. TISA are working to provision a common set of open standards and APIs to allow customers to share their data between firms.
Sector specific solutions are incredibly important, but those taking a cross-sectoral approach to Open Finance are developing tools that support a customer’s entire financial life, taking them on a journey from awareness, education and inclusion, towards savings, wealth and planning for life events.
We also need to be aware that the Open Finance solutions that are driving ‘digital’ financial inclusion, do not exclude the 11.9 million people in the UK that are not digitally able.
OneBanks is the physical representation of Open Banking and Open Finance – providing a human face to address the challenges faced by the vast numbers of people who do not have the capability to use technologies. This complementary solution leverages Open Data to address every single part of financial inclusion.
How are Open Finance solutions cutting across the industry?
The Open Banking standard, in theory, made it easy to integrate with APIs to source bank transaction data. However, there are two problems with this. Firstly, the scope of these standards extends only so far and certainly not far enough to encompasses the entirety of Open Finance. Secondly, managing multiple API integrations can be an overhead for a company or a function that just wants to do interesting things with the data.
This bred several companies that have taken on the challenge of connecting the dots across the industry – creating integrations, in one way or another, to source bank transaction data, but also beginning to straddle savings, investments, pensions and more.
TrueLayer, MoneyHub, Bud, Tink, and more recently Plaid, are the data providers that enable many of the Open Banking and Open Finance solutions being created today. Their importance to this ecosystem cannot be overstated – they play a part in nearly every solution referenced in this report.
This ability to aggregate data is a foundation on which Open Finance can be built. When coupled with insights that can be surfaced from this data, customers get the clarity that really allows them to manage their finances.
As such, Personal Financial Management (PFM) tools have sprung up across the market in recent years – Money Dashboard, Mint, Emma, Yolt have taken advantage of the ability to surface insights that help customers to manager their money more effectively. As too have the incumbent banks – Natwest, HSBC, Barclays, Lloyds and co are all developing similar functionality. These tools will only strengthen as Open Banking shifts towards Open Finance.
Equally, organisations like Experian and DirectID are unpacking the value in bank data so that businesses can make better decisions about their customers to support product distribution.
Giving users the power to do more
It’s what you do with the data, and what you do with the insights, that counts.
“There is a large advice gap. Existing solutions are a bit like an apple watch that gives you lots of insights but doesn’t actually tell you what the next steps are, so none of those insights are actionable”Adrian Shedden, Co-founder at Lumio
Fintech Lumio coins itself as the next generation of personal finance. Lumio connects your entire financial life in seconds, identifies your ‘Lazy Money’ that isn’t being optimised (like low savings interest or investment returns), and then suggests the products and services from its independent marketplace that will optimise and grow your money. Soon Lumio will have the power to automatically switch the customer to the best product for them, making insights actionable and growing their customers money, optimally, on autopilot.