Elevating the customer experience with Open Finance

Open Finance is a term that I’ve been hearing more in the financial technology (fintech) world. According to Forrester, Open Finance extends the third-party access principles of open banking across a wider set of financial products such as mortgages, loans, investments, and pensions. Many underlying banking systems and software were built for the brick-and-mortar branch era. Separating these from core banking workflows and exposing data through APIs represents an opportunity to enhance the customer experience. It also enables not only financial services but also other industries to offer financial services without the need for banking licenses or multiyear implementations.

AWS recently presented a webinar on this topic, entitled Open Finance: Transform your customer experience with AWS Marketplace. The session introduced us to Ben Weiss, principal banking specialist at AWS, and Joel Lieginger, CEO and founder of Paceline. AWS Marketplace and Paceline showed how financial institutions can implement Open Finance solutions to improve the customer experience. They also shows how to use Open Finance to offer customers greater choice and control over their finances and data.

Adapting fintech to changing customer needs

During the COVID-19 pandemic, adoption of digital platforms by banking customers continued to accelerate. Statista Research Department reports that 80 percent of financial institutions worldwide listed improving the customer experience as a top-three priority. This trend is expected to continue, pushing banks to empower customers to do more on their own without going to a branch or contacting a call center. Customers now live in a digital world on their various devices and demand that banks meet them there.

Furthermore, customers are willing to share their data, provided they gain something from the arrangement. A recent Accenture study indicates that 67 percent of customers would share more data with banks in return for new benefits. According to Bain & Company, 50 percent of customers would buy a product from their primary bank if it made a personalized offer.

Open Finance solutions represent a path for organizations to build more modern experiences. They can also enable developers in other industry sectors to build unique experiences with finance embedded at the core. As a result, these solutions can boost customer net promoter score, raise revenue per customer, and decrease the cost of delivering services.

Open Finance’s new business models

Several new business models have emerged that use Open Finance. As a first step, banks have exposed account data across entities and regions into a comprehensive view for the customer. This makes it easier for customers to understand and quantify their finances in a single place.

What do other new business models in Open Finance look like? They span multiple possibilities, from API and data aggregators or data vendors to enterprises that offer partnerships or finance as a service. A quick list of examples from the Open Finance session:

• A financial institution in the Nordic market built an API aggregator that enabled businesses to tap into a network of thousands of financial institutions through one set of calls.
• NASDAQ took historical tick data, news, and fundamental data to build data services for organizations to access business data as needed.
• Starling Bank exposed its APIs, allowing third parties to build marketplace applications that augmented its core customer experience.

Open Finance success story: Paceline launches health and wellness credit card

In March 2021, retail health and wellness platform Paceline introduced a credit card that incentivizes consumers to live a healthy lifestyle through financial rewards. This rewards program is fueled by the cardholder’s physical activity, all tracked via Apple Watch. That physical activity earns rewards from relevant, curated brands such as Amazon, Starbucks, and Athleta. With the Paceline credit card, users can earn category-based cash back rewards based on both physical activity and spending.

Joel Lieginger, Paceline CEO and founder, wanted to bring a credit card to the market that was wholly integrated with the company’s existing platform. Paceline turned to Railsbank, a provider of global embedded finance experiences with products available in AWS Marketplace, to quickly introduce its credit card. As Paceline built its offering, it used both the Railsbank banking as a service (BaaS) platform and the credit card as a service (CCaaS) solution.

Railsbank addressed the fundamentals of banking, credit, payments, operations, risk management, and compliance, enabling Paceline to focus on user experience and differentiating its brand. Lieginger explains, “With the Railsbank CCaaS product, we can build towards our vision and launch the first health and wellness credit card that rewards and incentivizes physical activity with material financial benefit—all in a fraction of the time it would take to build ourselves.”

Conclusion

Many financial institutions and enterprises worldwide are striving to offer more choices and control to customers. AWS Marketplace offers flexible consumption and contract models as well as quick and easy deployment of various Open Finance solutions, all to enable these enterprises to accelerate their customer experience initiatives.

To learn more about real-life use cases and customer stories, watch the webinar Open Finance: Transform your customer experience with AWS Marketplace.

About the author

Shaheen Kanda is the Global Lead for FSI at AWS Marketplace. Before joining AWS, she founded two fintech startups and spent a decade working as a leveraged finance banker in New York City.