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Open banking is transforming digital wealth: these are the challenges

Wealth management platforms are increasingly incorporating open banking functionality into their online offers, causing savers and retail investors especially benefit from a much simpler experience. However, challenges still lie ahead within the sector. Legacy infrastructure and outdated technology continue to cause friction and inconvenience, for both investors and wealth managers. In this sense, wealth management platforms will live or die depending on the user experience they offer.

On the other hand, as fintechs have democratized wealth management to the general public, the fight for customer loyalty has become increasingly intense. The investors They are not afraid to change providers in search of better service. As with any other industry that has been revolutionized by new technologies, users now see a fluid digital offering as key.

For example, studies show that in financial services, 40% of consumers abandon banking applications before completing their activation. Furthermore, the analysis carried out by TrueLayer and YouGov evidence that 61% of investors do not tolerate a registration process that lasts more than 10 minutes. This is capital for the subsistence of financial brands.

Account funding has been the most compelling use case to date

So it’s perhaps no surprise that instant account funding has been the most compelling use case for payments through open banking so far. in the WealthTech space.

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Before, new customers had to deal with a frustrating experience adding funds. Your options included cards, which are slow to settle and prone to fraud, or manual bank transfers, which did not offer the best user experience. Open banking offers an alternative to the difficulties of obtaining quick financing. Instant bank transfers offer a low-cost, instant and secure payment option. They also show the challenges that still lie ahead.

In fact, 23% of Spanish investors affirm that they had lost an investment opportunity because the funds did not reach your account quickly enough. The immediacy of bank transfers is vital in wealth management and investment. And every time it will be more so.

Ramiro Martínez-Pardo, CEO and co-founder of HeyTrade, believes that open banking is crucial to serving its investors. «HeyTrade aims to facilitate investment through technology and there is no one better than TrueLayer to help us achieve this goal. HeyTrade can offer investors all the facilities of true open banking with our user able to open an account in less than five minutes and start trading immediately. “

According Bobby Chadha, Director of Product at TrueLayer, open banking can offer solutions beyond bank financing: “There really is an opportunity to transform the entire transactional investor user experience using both payments and open banking data, as it can facilitate interactions with key clients, such as registering and onboarding clients quickly and on a large scale, or allow instant funding in accounts ”.

But it also recognizes that, to trace payments between extremes, open banking must be combined with other technology, since there are weak points throughout the investor’s experience, going through account verification and counseling, up to the refund of funds. Thus, the construction of this scheme would require a holistic approach with open banking at the core.

Bobby explains it this way: “At TrueLayer, we recognize that open banking cannot solve everything, which is why we have enabled instant payments, on open banking rails, which means wealth managers can allow their investors to withdraw funds instantly, making possible an experience of excellent user ”.

Analyzes show that immediate withdrawal of capital causes customers to end up depositing more money. On average, 37% of today’s investors would consider depositing more funds if instant payments or refunds are available.

Open banking benefits investors of all kinds

Although the increase in wealth management applications has democratized investment for the average citizen, open banking also has the potential to improve investment experience of investors with more capital and its asset managers.

Open finance is often seen as the next step in the open banking journey, presenting new opportunities for investors. wealth managers and investors, as well as access to new financial data sets that do not belong to the field of open banking, such as mortgages, savings, pensions, insurance and consumer loans.

On the retail side of the market, investors could begin to consider assets such as their homes within their equity portfolio, providing them with a better view of what their home looks like. “Total balance sheet”, beyond your marketable assets.

Therefore, open banking and finance present both a risk and an opportunity for wealth management providers. Those who fail to meet customer expectations for a seamless end-to-end digital investment journey will be left behind. Meanwhile, those who can meet new challenges, such as offering smoother experiences and better insights driven by banking and open finance, will position themselves as leaders.

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