While Open Banking use cases have been somewhat lacklustre so far, we could be about to see a shakeup in terms of how banks and utility providers unite for the benefit of the customer.
Just this year it has been reported that
TSB Bank is launching a bill management and utility switching service after a pilot found that users saved an average of £150 a year. Also, Barclays recently invested in Youtility, a London-based start-up tapping into Open Banking to help people track their
household expenses and switch utility suppliers. Some challenger banks, such as Monzo already allow customers to
switch energy provider through their app. As more banks roll out similar services what does this mean for the sector?
What do banks offer now?
One could argue that these types of services have been a long time coming. Currently, banks have all the data they need about their customers’ utility spending to make helpful suggestions to reduce their bills, but efforts to do anything proactive with it
have been far and few between.
With many customers struggling to pay their bills as a result of the ramifications of the pandemic, banks should be more proactive in terms of helping individuals save money. Helping to reduce expenditure on utilities seems like an obvious move.
What will the impact be?
As more and more banks jump on this bandwagon, offering utility switching services and spending advice is likely to become a competitive advantage. If a customer knows they can save £200 by switching to another bank that can take care of their utility spending
for them, it will be attractive to many. So, banks not already exploring this avenue must do so – fast.
The knock-on effect of banks and utility providers working together more on these types of services is a positive one. Banks will realise the extent of the variety of new products and services they can create just by better leveraging the customer data they
For example, spending pattern analysis will be particularly key for banks in this area. If a bank can identify when a customer has two different magazine subscriptions coming out of the same account, they could suggest to the customer to use an aggregated
magazine subscription service instead to save them money.
Similarly, if a customer has a weekly yoga session at one gym and goes swimming at another, the bank could proactively suggest to the customer that they get a membership at a single venue to reduce their overall spending. Individually Brits spend an average
of £46 per month on subscriptions (£552 per year), according to
research from Barclaycard Payments, so the potential savings customers could achieve is huge.
Strengthening customer relationships
Of course, by making these useful suggestions there is also an opportunity for banks to build trust and strengthen their relationship with existing customers. Also, the banks’ ability to make useful recommendations will only improve over time. The longer
a customer stays with one bank, the more information the organisation will have about an individual’s payment history and spending habits. So, in theory, the level of personalisation will only continue to increase.
The one potential drawback for consumers could be that it will make it harder for them to switch banks further down the line because the new organisation will have nowhere near the same level of detailed information about their spending habits.
The future role of the bank
Although bill management and utility switching services seem simplistic, we shouldn’t underestimate their long-term impact on the role of banks. With financial services organisations getting more involved with how customers manage and spend their cash, they
will no longer be viewed as simply a place to keep money safe, but also as a trusted financial advisor. And, by helping customers boost their savings, these additional funds can be funnelled off into savings products, where and profits lost through reduced
spending can be recouped.