The power of open banking for non-bankers: a retail case
Open banking is not a revolution exclusively for banks. In fact, Retailers and Insurance companies are already exploring how to improve customer interaction with open banking access APIs.
Open banking is not a revolution exclusively for banks. Customers interact with digital products across-industries and are increasingly searching for seamless digital experiences in all of them. Technologies like open banking are seen as a potential enabler for this to happen. From September onwards, PSD2 will give industry diverse companies the possibility to work directly with banks without the need for intermediaries. In fact, Retailers and Insurance companies are already exploring how to improve customer interaction with open banking access APIs.
In this article, we talk about one Fintech which poses a leading example for the retail industry by delivering customer value through open banking APIs. This case shows how customer experience and customer trust are crucial elements for innovation in open banking and will provide insights on how to win in the new loyalty race for non-banking industries.
Open banking allows paperless retail experiences
Flux gives their customers an effortless and paperless experience for their spending. Flux obtained an AISP license that opened up the possibility to connect a detailed level receipt service to their bank accounts. In doing so they provide users with all their loyalty, rewards and detailed receipt information directly in their banking app. It also allows them to connect different payment accounts to get information from different sources in one place.
The major win for customers is how well integrated this service is with their current banking behavior - combining the bank app and the paperless time-saving experience Flux offers. This poses a good example of how data access encourages the creation of scalable customer-oriented services that were not possible before the democratization of banking data. Today, customers are their own gatekeepers for transactions and financial information, that they will open up whenever they find value in exchange.
We see Flux as a good example of how customers adopt new financial technologies based on the most frictionless digital experience. This shows that the potential opportunity exists for all industries if customer-centricity is adopted as a core value. Today, Bittiq´s business orientation promotes the spreading of this principle in financial institutions by developing innovative financial services for its users.
The Fintech way to build solutions
As is common startup practice, Flux identified a consumer problem to solve and market potential. In this digital era where digital payment methods are widely deployed, ironically the only way to record item-level purchases was through paper receipts. Flux found a disconnection between the point of sale (POS) in retail, bank statements, and banking apps.
They further identified an outdated practice from retailers, yet highly relevant for loyalty nurturing, where rewards, cashback vouchers, and loyalty cards were all handed to customers on paper. Besides eradicating printed receipts, they found that a core issue for users was the time it required to track and manage printed receipts. In response to these findings, they developed a platform able to automatically transfer the POS gathered information to the user ́s bank app. Hence, this shows that creating an innovative solution for a problem that was blocking a seamless experience means high value for institutions and end-users.
Bittiq experienced a similar journey to consolidate its value proposition. Before developing our first solution, we ran over 300 interviews to validate we had a relevant problem to solve. In our search for a financial solution, we uncovered that people actually already had a good overview - it just cost them a lot of free time to do so. Then we created a service that makes it a lot easier for them.
Value for customers, but also for big institutions
On the business side, Flux offers benefits for both banks and retail companies. Banks are interested in expanding their service range to remain relevant to their customers on a daily basis. Therefore, adding a solution like Flux closely related to daily transactions increases the usability of the app. Moreover, Flux gives banks the proof of purchase that should reduce chargeback disputes with their customers. For retailers, there are benefits in cost-cutting related to the paperless factor and wasted resources promoting the use of loyalty cards. But most importantly, they consider Flux a powerful channel to reach customers in an automated way to increase loyalty and up-sell possibilities.
This case shows us how Fintechs can join forces with financial institutions to achieve great services for users as well as for the industry. Similar to our own experience at Bittiq, we see that financial institutions are increasingly interested in offering a better interaction with their customers using innovative financial services. As the open banking transition matures, such partnerships are expected to increase and take effect in many different industries.
At Bittiq we help financial institutions to create relevant interactions with the customers. But we see a world of possibilities for creating this relevancy through integration across industries. For instance, combining financial history with actionable insights on customers expenditures can be well integrated by retailers to improve purchase experiences. We already see an increasing interest in non-banking industries in adopting open banking.
There is more than just the categorization of transactions to be integrated into banking apps. Important changes to payment processing services will provide more innovative customer experiences. Non-banking industries should be prepared for higher customer expectations with respect to the seamless integration of digital banking in their daily lives.
We identified the following key learnings from this retail case:
- Non-banking industries will integrate open banking technology to increase customer loyalty by leveraging financial history or detailed receipt information for example.
- Incumbents may accelerate the adoption of open banking by partnering with Fintechs who are building expertise, are customer-oriented and delivering faster.
- Customers adopt solutions faster when they require less effort to use them and are already related to a trustworthy provider. This also accelerates customers´ willingness to open the gate for their data with associated third-party providers.