Open finance and the changing role of a bank manager

Open finance has the ability to completely transform business banking

Since the start of the pandemic, we have seen aggressive transformation across many sectors to cater for changing customer landscapes. Business banking is no exception. Banks are now facing growing pressure to introduce new processes in line with customers’ heightened expectations.

Open finance can transform SMB banking by removing legacy manual processes. It presents the opportunity for digital onboarding, automated monitoring, and the chance to reshape the role of the local bank manager.

What is open finance?

Open finance is a step beyond open banking and extends to a wider set of financial data. The purpose is to provide consumers and businesses with greater control over their financial data, and in doing so, transform the way in which they access financial services. 

What does this mean in practice? Well in simple terms, a business can apply for products and services by connecting to the software they use to run their business such as their online accounting, banking, and commerce platforms.

What challenges do bank managers face?

For many years, banks and bank managers have played an integral part in the high-street and the wider SMB economy; however figures from the last decade suggest these times are changing. 

Since 2010, the number of branches have almost halved and Barclays, HSBC, and Lloyds have recently announced further closures in 2021.

With increasingly large portfolios, dwindling credit appetites, and legacy internal processes, bank managers have had a difficult task in recent years. Even before financial services had to battle with the onset of the pandemic, onboarding times were slow and monitoring customers was famously difficult. With such legacy processes, bank managers are consumed with admin rather than adding real value for their customers. Whilst the strong customer relationships and their presence in the community are still important, winning and retaining business is a tricky job when faced with faster and more appealing fintech competition. The challenger bank, Starling, is the obvious success story here, lending over £1.4bn under government schemes and an annualised revenue run rate increase by over 370%.

Previously, banks have relied on their busy bank managers and their long standing relationships to hold off their digital competition, however, it is apparent that this strategy is changing. We are moving towards times of greater innovation within the SMB banking space.

How can bank managers utilise open finance to benefit themselves and their customers?

Let’s focus on 3 core pillars of the bank managers role: onboarding new prospects, monitoring existing customers, and proactively offering new products.

Digital Onboarding: So, what does onboarding look like with open finance? Rather than sending across a range of excel documents and several months of bank statements, in a handful of clicks an SMB simply connects their bank with their accounting, banking, and commerce platforms. Their bank is then able to pull all the required data into their internal systems for instant decisioning.

Automated Monitoring: Rather than bank managers hounding customers for documentation every month to monitor facilities, data can be pulled on an ongoing basis and ratios/covenant testing automated.

Meaningful Insights: Open finance presents the opportunity for bank managers to have a real-time and ongoing view of a customer’s financial health. Bank managers no longer need to rely on 9-18 month old last filed accounts or credit bureau data which hardly drives relevant and timely outreach. Bank managers can have the tools to better service their customers, recommending the right products at the right time.

How quickly will open finance be adopted by banks and their customers?

Whilst it is clear fintechs are rapidly adopting open finance technologies, the path for larger financial institutions is less clear. With the news of Visa’s acquisition of open banking provider Tink, it is likely further acquisitions will follow. Either way, the major banks need to react quickly in order to ensure they don’t lose more market share to their ambitious neobank competition.

For too long SMBs have been underserved and inhibited by the lack of financial options. Covid, whilst a curse, acts as a catalyst for the digitisation of financial services and with the popularity of cloud based accounting players like Xero, sharing data digitally is quickly becoming the norm. A business owner does not care about the medium in which they share their data, providing there is a clear value exchange: a faster decision, new products or a larger facility.

If you would like to learn more about how Codat could help, please contact info@codat.io.

Dom Medcalf