9 Points to Remember as Open Banking Changes AI in Finance
Open Banking is creating significant changes and opportunities for both customers and financial services providers. Open Banking and the data revolution are the hotbeds for transformation as finservs consider how they use data to drive decisions.
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Finservs that can harness the value of data made available by Open Banking will be best placed to capitalise on it.
The Effect of Open Banking on AI and Data Analytics
Historically, a lack of consumer data has been a barrier to entry for new players in financial services; the Open Banking mandate changed that.
Open Banking shifted ownership of customer data from the bank to the customer and reduced entry barriers for fintechs. Both incumbent financial institutions and new entrants can now use data to identify the product or service which is most appropriate for a potential new customer, provide new services to customers and determine the credit risk and price of credit facilities.
While it removed barriers to entry for fintechs – for established financial institutions, Open Banking made the field more competitive. Traditional companies have no choice but to utilise the data they have to drive customer loyalty and engagement, and innovative products and services to stay ahead.
AI was already driving a dramatic shift in how financial institutions attract and retain active customers, but with access to even more data, the ability to aggregate, manage and analyse data will become increasingly important.
Hence, to compete and drive value for consumers, legacy institutions have to leverage analytics and artificial intelligence, machine learning and deep learning to deliver a more personalised customer experience and create innovative new products and services.
9 Ways to Capitalise on the Wealth of Data Available
Both fintechs and incumbents can capitalise on the availability of data due to Open Banking, combined with analytics, to broaden their offering to consumers.
As customers seek better transparency, data governance, hassle-free money management and inspirational products, financial services firms will have to harness the data made available by Open Banking.
They will have to recalibrate their approach to analytics, AI and automation, and consider how to:
- Utilise the data that customers provide due to Open Banking to the fullest extent — not just to remain compliant with Open Banking standards.
- Make use of this holistic view of the customer to change the way financial institutions engage with them.
- Catch up to the way competitors engage with their customers.
- Differentiate products and services based on the data customers have shared with the company.
- Be aware of the conduct risks Open Banking creates.
- Leverage AI along with the data harnessed from Open Banking to create additional ways to transform customer experiences.
- Implement strict frameworks that address data privacy obligations as well as ethical implications.
- Keep in tune with how customers feel about financial institutions sharing their data due to Open Banking.
- Consider the new analytics architecture required to ensure the operational impact of Open Banking is minimised.
Financial institutions using Open Banking need to pay special attention to the transparency and explainability of AI algorithms. They not only need a strategy on the role AI will play in delivering a better customer experience but also know how to govern and manage the risks associated with AI.
Sign up for the Oxford AI in Fintech and Open Banking Programme to learn about how Open Banking is unbundling the financial services industry and how you can use it to take advantage of the new opportunities it’s creating.
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