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After Open Banking will there be Open Balances? – Dryden

by: Mark Dryden, business development director 360 DotNet
  • 12/01/2018
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After Open Banking will there be Open Balances? – Dryden
Tomorrow the second payment service directive (PSD2) comes into effect that is attempting to foster innovation within the financial services sector.

This will create opportunities for new players to enter the market and for existing institutions to expand their capabilities.

Open Banking sits on top of the demands of PSD2 providing a unified set of standards allowing simplified development for integrations and a common API interface for UK institutions to follow.  The future is very bright.

Now this provides a gateway for a variety of tools that will help the financial adviser. Certainly, Personal Financial Management (PFM) will be a dominant service to utilise these functions, especially by tapping (permissively) into an individual’s current account with options to set targets, budget accurately and searching for product opportunities.


The advice possibilities

For advisers, the ability to permissively collect hard facts and automatically complete budget planners to then perform affordability calculations will shorten much of the due diligence and initial data gathering of the advice process. Here, Open Banking is a great opportunity for technology to work for both the adviser and the end consumer.

Looking ahead, Open Banking ties into a larger trend of opening up all financial related data – an example would be the (initially) government sponsored pension dashboard project to allow simplified searching of pensions.

When this is delivered, new players can look to sit across multiple providers and extract data, just as organisations looking to innovate with PFM will do, building their stories around an individual’s overall wealth summary.


But is there a missing link?

I would suggest that savings and mortgage balances (or Open Balances if you will) are just as important, in fact more so with mortgages as for many this represents one of the largest monetary commitments they will have.

With the government looking to increase competition and make financial education and information more accessible, the next logical step might be to allow permissive access into this data as well.

Within the intermediary sector this presents the same opportunities as Open Banking – sourcing hard facts and data from verifiable sources and lowering the demand of the data gathering.

Open Balances though will naturally find a comfortable home into PFM and dashboard tools that provide “the complete financial summary” or even “heartbeat of one’s situation”.


Who owns the customer?

But will it be PFM and dashboard tools that hold the customer relationship and their trust? And if so, how that filters back in the intermediary world will be challenging.

With Open Balances, robo-advisers and initial capture propositions will be able to provide more qualified responses for re-mortgages or those seeking their next property.

Imagine a scenario where I ask “Alexa, what’s my mortgage balance and can I afford to buy that house down the road”?

Given some of the commentary regarding the General Data Protection Regulations (GDPR), where the context is very much about “how is your organisation using my data and do I allow it”, permissively shared data such as Open Banking and Open Balances will change things to “if I provide access to my data, how can your organisation use that to help me”?

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