After a trying year, companies are approaching a defining moment that can determine their future success.
The pandemic has accelerated digital transformation in financial services, and firms that do not take this moment to engage in open finance—the transfer of information from consumers’ financial accounts to third parties of their choice—will risk losing their edge over competitors.
A handful of stock trading apps, just to pick a recent example, have activated millions of new investors in record time with help from financial data connectivity providers. Whether they actually turn these rookie users into longtime valuable customers remains to be seen, but this is arguably the nicest challenge to have right now.
While the cost of integrating new technology to accommodate this shift may appear onerous at first, any immediate expenses should be weighed against the costs of building a business on an outdated or non-performant technology stack that will ultimately stymie growth.
With this in mind, here are three key factors decision makers need to gauge when investing in a data connectivity product:
User experience.There is no straightforward answer for when and how you should ask customers to connect their accounts. Learning to lead your customers to connect with confidence takes time, and might require educating customers and managing change within your teams. The sooner companies start experimenting, the faster they reap the reward of their new open banking technology stack.
Service quality and reliability. Multiple service providers now offer financial data connectivity at different price points. While the process is similar—find your bank, connect your account—the quality and reliability of their service directly impacts conversion rates. If your customers don’t trust your connectivity provider, or face too many technical issues while connecting, they will drop off. As a result, paying a premium for higher quality of service could end up saving you costs and other resources.
Process improvement and automation.Most businesses get started with financial data to solve a specific pain point, usually removing friction from their digital onboarding process with bank-sourced KYC and account information. While doing this, they access a wealth of data they can use to improve and automate a variety of processes, from fraud detection to customer segmentation and beyond. This downstream usage of data is where the real value of financial data connectivity lies. Automating repetitive tasks with little value add, such as manually sorting through PDFs, drives efficiency, freeing up time and resources to better serve a larger base of customers.
In a world of rapidly changing technological innovation, choices made now establish a firm’s future competitiveness and resilience. Open finance is increasingly seen as the core infrastructure of digital finance. Having a clear understanding of the factors making it valuable is critical—not just to determine if it makes sense to move forward, but also how to prioritize for maximum ROI.
