Open Banking and the changing face of digital UX for wealth managers
Now that the dust has settled somewhat from 13th January 2018, when Open Banking officially came into effect in the UK, the fruition of banks providing APIs is well underway. We see banking truly entering the API economy. Initially, this is an initiative targeted at bank accounts, but it will be rolled out across wider financial assets.
In short, this means that all regulated banks now have to let customers share their financial data with authorised third-party providers through APIs. With permission and the right tools, advisers and wealth managers could really take their clients’ experience to the next level. This could take the form of a website, portal or native app on a phone or tablet — regardless of the device, the intelligence could be profound.
How could Open Banking change the digital user experience (UX) for investors? Here are some factors to consider.
Lacking time, but deal hungry
Opening up a new bank account, switching insurance services, or changing your investment profile can be long processes with multiple forms. Open Banking could make on-boarding much more simple, as users will no longer need to provide this kind of information. Instead, they will just need to allow access to their financial data, which services can immediately access and use to build out their financial profile and, potentially, their product profile for suitability. It’s like robo-advisers on steroids! The API economy in full effect allows the user dashboards of the future to provide cross banking measurement and efficiencies.
All accounts in one place — fintechs vs big banks
One of the biggest benefits of this is that it will allow customers to manage money much more easily, and the potential for healthier relationships with money is endless. Not only will customers be able to access their entire financial set-up with good UX, it will also enable advisers and wealth managers to create tools that can also spell out financial planning issues, which they can help solve or hypothetically demonstrate solutions.
Naturally, this will present greater opportunities for banks and fintech companies to collaborate; the consolidation of product types for some investors is inevitable. It becomes a market rife for millennials, where brand ethics and loyalty is becoming paramount.
Challenger banks like Monzo, Revolut and Atom already offer users greater visibility within apps, breaking down user payments into categories like ‘groceries’ and ‘bills’. From now on, this is likely to expand further, with more companies likely to focus on a bigger and more complete picture of personal finance. For every action there must be a pro and a con. It’s exactly why people used to go to their banks and advisers — for a holistic view.
Monzo’s app has seen it’s user base grow 300% to 450,000, reflecting demand among tech-savvy consumers, particularly those coveted millennials showing that the Open API economy is the future. Money management apps that aggregate data from multiple institutions will be a bare necessity for asset managers, advisers, and anyone in between that calls themselves a wealth manager, all thanks to Open Banking.
Big banks see the potential
HSBC has allocated $2 billion for technology investments and, as you will have seen, has launched a new app that contains features also present in Monzo’s app. This includes a tool that calculates disposable income and sends notifications to users when certain events occur, such as the exceeding of a set spending threshold, or if this disposable cash can be used to invest.
Interestingly, HSBC has exposed its app to become available to customers of other banks, demonstrating just how far some banks are willing to take their adoption of the new landscape Open Banking is creating. How will far will asset managers and advisers go?
Is dominance in brand and tech functionality enough?
Can asset managers and advisers launch money management apps? Is the strength of their brands and apps (offering functional parity to services from banks and true fintechs) enough to make up ground lost to the world of Money Education?
On one hand, advisers and asset managers don’t have the best reputations, but when it comes to trust, there is anecdotal evidence suggesting that established asset managers and advisers are seen as more trustworthy than upstarts that haven’t been around for very long, providing you aren’t talking to a millennial.
As for functionality, given that banks like Lloyds and HSBC are investing billions in digital, where does that leave advisers and wealth managers?
There’s a strong argument to be made that they shouldn’t be aiming to match the banks in digital engagement feature by feature. Instead, they should seek to take a leadership role when it comes to innovation in investment and thought leadership. A customer has investment goals and desired outcomes, so advisers, wealth managers and ultimately the asset managers manufacturing the dream, need to deliver solutions which differentiate them from the rest entirely.