Hetal is Programme Director and Head for HSBC UK’s CMA Open Banking programme. He is accountable for delivering the open banking solution specified by the CMA and also for supporting the businesses as they seek to develop propositions that use open banking to benefit customers. Prior to this role, he led front office commercial/corporate banking teams at Barclays, as well as heading strategy functions at both Lloyds & Barclays. He is a keen adopter of new technologies and all things digital.
In which areas do you feel open banking is creating value for your organisation?
At the moment there are probably two key areas that I’m confident will grow over time. The immediate priorities for us are, firstly, around using other banks’ customer data to put together a total view of holdings for a customer.
This enables us to really help a customer with their personal financial management in a way that historically has been challenging, where a customer might spread their business across other institutions. For us, that’s key, and we’ve seen, increasingly over time, customers are fragmenting their holdings across multiple institutions as they seek better value. That’s a good thing, but we have to reassemble that to create a single view of that for customers so that they can make informed decisions. Open banking is a key way of supporting them in doing so.
The second key area is in the credit journey. As a large bank in the UK we have circa 15% market share. That means there’s 85% of the market that, at the moment, we don’t have the best quality data on, and therefore we may not always be able to offer services to. For us, open banking is a key tool to help us assess, and to support, those customers as well. In addition, having the data provided in an immediate and reliable way will speed up the credit assessment and customer onboarding process significantly.
How this will change the way customers think about banking?
I think where previously customers have often been quite product focused, causing institutions to compete around product features, going forwards that will change. I think it’s a new type of relationship which is about service and engagement, which may have nothing to do with a banking product.
I would use connected money, our recently launched service in the UK, as an example of this. At this point, it is only available to existing HSBC customers, but that will change over time and I’m sure that in the future we will have relationships with customers who have no traditional banking products with us but are either free or premium subscription services customers of some sort with connected money.
That’s an entirely new kind of relationship for a bank, which is an exciting change.
What impact will this have on the role of the bank?
There are some who think banks will become utility service providers, and digital competitors will take over customer relationships and engagement. I think that’s quite a bleak view, but there is definitely a risk if banks are slow at developing engagement tools themselves.
The analogy I use is how most of us don’t really care which email provider we use. This is because if you buy a new phone, or a new computer of some sort, the standard stock mail app available to you will connect to every email provider. At worst, open banking could see banks pushed down to the utility layer where they have no direct relationship with the customer and they just provide a service at some kind of reasonable price to the customer – it is unlikely to be a profitable business model in that world.
So the focus has to be on how do you maintain the relationship with the customer, maintain engagement with the customer so that you can proactively understand their need and tailor services to them and thereby remain relevant and hopefully more profitable. And I think that drives you towards two key things - how do you use data? And, how do you communicate?
How do you envisage the future of the ecosystem?
I think it’s a really interesting space to watch at the moment. If you look at what’s happening in the UK we have getting on from 100 firms, not all fintechs, many well established firms from similar business areas, who are seeking to become third party providers, which is a new regulated type of firm, who can access open banking services.
So, I think we’re going to go through a period of incredible innovation as all of those firms bring propositions to the market and compete for customer attention and hopefully many of those will really add value and succeed. What’s going to come out at the end of that is hard to tell. There’s lots of different scenarios, we can find it focuses around two or three capable data heavy firms, who may become dominant because of their ability to use data better than other providers in the market. But, I don’t think that’s the most likely outcome.
I think it’s likely we’ll see a complex market for a number of years where banks and firms similar to banks, such as credit bureaus, who have large established footprints, provide services in the market, but are also competing with each other alongside payment acquirers and others. And then over time, we may see consolidation.
What three takeaways would you offer in regards to the impact of open banking?
From a customer lens, as customers themselves and as professionals in the market, I would encourage bankers to think from first principles.
How can you re-build the services we provide today using a new data set, and that’s all open banking really is a new data set, to create real value? How can you combine this data with other services? If you combine banking data with geo-fencing and travel data then there are a whole bunch of use cases that emerge that create value for customers.
Where is the revenue? What we’re seeing at the moment is a mix of third parties coming to market with propositions that are interesting and engaging but most of them are free. And, as we’ve seen elsewhere with digital innovation, its very hard to move customers off a free model to a paid for model and if you can’t have that you have to have advertising or some other way of funding the service you’re providing.
The third piece is really about costs and business economics. With any type of new data source, there’s the opportunity to take out existing inefficient data collection, slow processing, risks in processing through human error. How can this new data source make these customer journeys more efficient, making the providers more efficient, making everything slicker. Those are the three things I would offer as key takeaways.
Join Hetal for his keynote, How Open Banking is Creating Opportunities to Transform Customer Experience on December 5th as part of the Accelerating Digital Transformation Conference at this year's FinTech Connect!