Citizens' bets on 'open banking' to ease account switching

Citizens

Citizens Bank's latest foray into open banking is aimed at the annoyance of switching recurring payments from one card or bank account to another, a hurdle the bank plans to ease through a mobile app update.  

The bank has deployed a feature to its app that enables customers to update saved payment information across billers, subscriptions, online retailers and payroll companies. 

"We have a lot of bills, and they're tied to our financial institution," Chris Powell, head of deposits and customer engagement at Citizens, told American Banker. Citizens is the initial user of updated Mastercard open banking technology that's designed to ease account onboarding.

Open banking generally refers to customers giving their bank permission to share their data with third parties through tools such as application programming interfaces that support the data transfers. While the regulations governing open banking are in flux and open banking's revenue model is still evolving, the practice has become a key piece of financial institutions' customer acquisition strategies.

What Citizens is doing

Citizens has been active in open banking. The bank earlier this year launched its Open Banking API project, which supports data sharing for businesses and other customers. The Open Banking API allows commercial customers to link to Citizens accounts from an external platform to ease data flow. 

The more recently launched new account opening and payroll upgrades are aimed at consumers, merchants and employers.  

"If you think about all of the places that your card is on file today, all of these services, it can be difficult to move that," Powell said. After an initial set up with Citizens' app, the user's registered Face ID can be used to access the app and the added option feature to migrate all billing or payroll information. "The old way would be to log into each site individually and replace the old card with the new one," Powell said. 

Read more about open banking. Open banking | American Banker

Citizens hopes to take advantage of general dissatisfaction with banks. J.D. Power reports 54% of consumers may switch banks in the next year, while 13% say they definitely will switch. Half of the "definite switchers" say customer experience is the reason. J.D. Power does not address the perceived hassle of changing banks as a reason for dissatisfied consumers staying put, but making it easier gives Citizens an advantage, the bank argues. 

"From Citizens' point of view, it makes it easier to switch to Citizens by streamlining the shifting of new account holder payment connections away from other banks," Aaron Press, research director of Worldwide Payment Strategies at IDC, told American Banker. "Of course, Citizens will still need to offer accounts and products that attract new customers separate from this capability, but it does reduce some barriers to switching."

There are existing services that help consumers change banks, but the open banking update is more widely available than a concierge service and easier to use, Powell said. 

"Even if you have a direct relationship with a banker, you'd still need a list of accounts to be moved over," he said. 

Open season at Mastercard

Mastercard recently embedded two of its products, Deposit Switch and Bill Pay Switch, into the card network's open banking platform. Deposit Switch enables consumers to switch payroll deposits to a new account while Bill Pay Switch allows consumers to migrate recurring payments to a new account. 

This open banking integration enables consumers to authorize direct deposits and change recurring bill payments when opening a digital account or updating an existing account. To support its data sharing initiative, Mastercard added technology from Atomic, a payroll technology company that was part of Mastercard's Start Path program for technology startups. 

Mastercard is leaning on its network to power the products. Deposit Switch connects to major payroll providers; while Bill Pay Switch links to e-commerce accounts or content platforms. For example, the billing feature can migrate Netflix, Amazon or Apple payments from one bank account to another.

"Consumers are demanding maximum value from their bank account, including simplified processes for account opening and financial management," Bart Willaert, executive vice president of open finance for the Americas at Mastercard, told American Banker in an email.

Mastercard's service making it easier for customers to switch most of their recurring payments from their existing bank to a new bank is good for Mastercard at multiple levels, Eric Grover, a principal at Intrepid Ventures, told American Banker. 

"The service will generate revenue. But as or more importantly it will enable increased issuer competition, which is good for Mastercard," Grover said, adding it should make it easier for smaller issuers who pay higher network fees and rely more on the network brand, to take payments share from large banks JPMorganChase, Bank of America, Wells Fargo, and U.S. Bancorp. 

Deposit Switch and Bill Pay Switch are also part of Mastercard's strategy to expand revenue from services, or non-payment products. As regulatory pressure and fintechs squeeze revenue from payment fees, Mastercard and Visa are both using their networks of banks and merchants to offer technology and other services such as processing technology, security and consulting. 

"At Mastercard, our services power smarter, more personal, and more secure commerce. Data-driven technologies like open finance allow us to deliver more value with greater impact for everyday financial interactions," Willaert said. 

Mastercard can also use its technology to enable moving new Citizens customers to Citizens-issued cards, which run on Mastercards' rails, Press said.  

 "This is especially true for debit-linked payments, which presumably will have to move," Press said. "And if new Citizens customers also get a Citizens credit card, it increases the likelihood that they will shift transactions to those new accounts."