Fintech Feature – OpenMoney
1 in 3 people in the UK have little or no confidence when managing their money, with many finding it increasingly difficult to make the most of the financial opportunities available to them. OpenMoney are a fintech founded on the vision of solving the way customers are neglecting their personal finances. Having already provided advice to over 50,000 customers, they champion better informed investing alongside the accessibility and affordability of financial advice for all.
At the end of last year, we spoke to OpenMoney’s Co-Founder Anthony Morrow about their more inclusive business model. Since our chat, they have expanded their offering even further with ‘Home by OpenMoney’ – a service aimed at helping first-time buyers make sense of the home-buying process. In this feature, Anthony shares his insights for the future state of Open Finance as well as other emerging issues in the industry.
Can you tell us a bit about the OpenMoney concept?
My background came from working very closely with Financial Advisors, who do a great job, but they do a great job for an ever-decreasing number of people – the barriers to advice just keep getting higher and higher.
Alongside this, it’s been well covered that financial literacy and numeracy in this country is at an all-time low. The assumption that consumers with low levels of literacy can somehow make informed financial decisions and take on a level of financial risk is just a massive mistake.
So at OpenMoney, we use technology and data – powered by Open Banking – to bring about positive change by empowering people to make decisions that are most suited to their financial circumstances – whatever they might look like.
It’s not all about pushing someone towards an investment product – in fact, we only tell 23% of people that we advise to invest with us. We want to help people to eradicate their debt, to organise their money better, and only when it’s right for them, to start saving and moving towards an investment journey.
If all our customers do is get a better grip of their own finances and make better decisions, then it’s a success for us.
Do you think your position against selling data to third parties makes people more comfortable using your solution and Open Finance in general?
Trust is key not just for data, but also for the brand – there is a long way for financial services to go to rebuild trust over the last few decades.
I don’t think it helps matters that the use of personal data doesn’t get good press in general. I know people who don’t think twice to click and accept false negative approval statements online for use of their data. Then there is the argument that it’s an age thing – but I think some people are just more comfortable with data sharing than others.
In the early years, Open Banking was promoted as being a product, when it’s actually a behind-the-scenes process where end users only need to know that their data is going to be used. Some of the early account aggregators would give you a graph on your spending data, and that would be the extent of it. All the banks now have all that sort of technology, so we need to ramp up exactly what’s happening with that data – this is where we need to do as much as possible to make sure there is a real and immediate value exchange.
We talk about Open Finance being an extension of Open Banking – but would you say we can get to a state of being truly open?
While Open Finance is a fantastic objective end point, there are huge challenges with it – particularly around incentivising providers.
Take the concept of Open Pensions. A provider writing new business will see the need to provide data access as a cost of acquisition – they must provide transparency, but over time they’d expect to increase their customer base through that transparency.
But for those providers who effectively consolidate closed book pensions, there’s no incentive. They don’t want new business; they couldn’t even write a new policy if they wanted to; and they are very unlikely to invest millions in technology for their customers.
So when you look at the Pensions Dashboard, it’s clearly a good idea to give customers a complete picture of their pension. But you’re going to be left with partial coverage – which is what you’ve got with open banking – and then it’s about making as much use of it as possible.
Do you think there’s a way everyone could benefit from Open Finance?
I’d hope everyone can benefit from it, primarily the customer. If it’s a market that’s designed with the customers’ interests at the heart of everything then it will be a success. But that will probably require change on all the other parties’ fronts, not only in how they operate, but with their expectations for what a successful relationship with a customer means.
We’re still in an industry that runs at 30-35% profit margins, showing there’s definitely still at least some room for improvement there. However, no meaningful change ever happens quickly, really. Not without intervention. Anything around Open Finance will almost certainly need to be regulatory driven. For example, there’s been so much work done to try and encourage account switching, but there’s not enough added value from banking with one large bank to the next. For most people it’s simply a means to get cash coming in and have some left before the next lot comes in. To them, it doesn’t really matter whose app or account they’re using – the add-on services are purely utility, which won’t ever change.
What are some of the upcoming key targets for OpenMoney over the next couple of years?
In November 2019 we acquired a workplace benefits system that we re-branded as ‘Work Life’ – the aim being to promote to the financial and mental well-being for employees, specifically smaller businesses. I can see this proving beneficial where bonuses have been hit hard in the current climate, but also adding further to our service offering at OpenMoney.
Mortgages will also be a big area of focus. We want to broaden the advice range offered to our customers, help people use their credit cards effectively and enable them to pay as little interest as possible. Put simply, wherever we can identify a way of saving people money, we want that included in the roadmap.
How long do you think it will be until we fully embrace Open Finance and what do you think can be done to bring that change forward?
I would say a decade or so. It will obviously need regulatory intervention which is likely to take a long time since it’s a huge market, encompassing a huge number of suppliers and providers. While the political positioning of it could also prove difficult given the cost of investment, we may start to see the smaller providers gain a better chance over the larger ones in embracing open finance entirely.
With personal debt levels creeping even higher in the wake of the coronavirus pandemic, the margin between those with and those without access to financial education appears to have intensified in exclusivity. This struggle is highlighted in recent reporting by the National Institute of Economic and Social Research where they reveal more than a doubling in the number of destitute UK households of the period 2017-2020. Perhaps more discouraging from this report is that those suffering in the largest proportions are from disadvantaged households, demonstrating an urgency for change on the open finance scene.
OpenMoney offers a huge opportunity in the industry to better represent the financial health of the under-served. With their ambition to provide a bespoke experience for each of their customers, they are breaking through the noise of traditional utility banking and demonstrate leadership towards a true culture of financial empowerment for all.