How Open Banking will supercharge digital wealth management

Open Banking was a breath of fresh air, giving third parties access to personal account information, and the ability to move their money as they wished.

wealth management and open banking

December 20 2021

When Open Banking was introduced in 2018,  regulators hailed it as a new dawn for financial services. Speaking before its launch, Head of Open Banking Limited Imran Gulamhuseinwala explained: “People are paying too much for their overdrafts; money is sat in current accounts not earning interest; there's not enough switching.”

Banks, it was claimed, had too much control over financial data and payment processing, which was stifling innovation. Open Banking was a breath of fresh air, giving third parties access to personal account information (providing they had the consent of the individual of course), and the ability to move their money as they wished. 

So far, the story of Open Banking has been about everyday banking needs. But that’s just the beginning. One area that particularly stands to gain is wealth management, with Open Banking promising faster onboarding, automated payments and customer-centric flows that make it a perfect addition to digital wealth management and investment services.

But while in the UK alone there are now over 2.5 million Open Banking users, with hundreds of thousands of consumers and businesses using Open Banking services for the first time every month, we’ve only scratched the surface of what is possible.

So why is it so advantageous for wealth management services to incorporate Open Banking?

Why wealth management systems should be using Open Banking

KYC and onboarding: Open Banking’s ability to access personal banking information provides wealth management services - particularly digital wealth management services - with an opportunity to streamline their onboarding process. A new user’s requisite information (such as name, address, monthly outgoings, funds available etc) can be received instantaneously through an API call with their bank account - alleviating them from having to fill out this information themselves. 

This increases conversion rates, reduces errors and generally provides a much smoother onboarding journey. In a competitive environment, the easier it is to create an account on a service, the more likely a customer is to complete that process and recommend it to a friend. 

Payment flexibility: When it comes to managing wealth, people want to move their money in different ways. Some may prefer to deposit funds on an ad hoc basis. Others may want to deposit funds every payday, especially if they’re making regular contributions to a pension account, for example. The same can be said for withdrawing money to bank accounts - peoples’ preferences will differ depending on their investment goals and financial situation.

Open Banking allows individuals to streamline payments into and out of their wealth management services, automating regular payments or authorising one-off payments directly from their bank accounts. The wealth management service also benefits when using Open Banking, compared to other payment options: payments can be transferred directly between bank accounts, without the need of any intermediary, which can be up to 80% cheaper than card payments.  

Multiple account visibility: The future of wealth management isn’t in a silo, but as part of an integrated financial service. It’s this vision that is powering the growth of financial Super-Apps - services that combine banking and wealth management in one place. 

Open Banking’s Account Information Services gives wealth managers this same opportunity, the chance to present all of a user’s financial information in one place: their pensions and investment accounts, alongside everyday banking and savings accounts. With digital wealth management services already having a strong focus on UX and easy-to-use interfaces, Open Banking is a continuation, not an overhaul. 

Revolut has already taken this step, allowing their users to connect all of their bank accounts to their service, while also offering investment services, allowing users to manage their entire financial lives in one place. Other ‘Super-Apps’ are likely to follow suit as they combine multiple financial services, including wealth management, within a single user experience. Wealth management services now have the opportunity to make the same claim - using Open Banking to plug in their client’s existing bank accounts, and become the only app they will ever need.

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Just like businesses in scores of other industries, wealth management has gone digital in recent years. Wealth management is using mobile-first, fully digital products to make investing accessible to everyone. Why shouldn’t an individual be able to open an investment fund with £1 instead of £100k? 

Open Banking is the next step in this journey. Smoother onboarding, lower costs and improved conversion rates will all serve to make wealth management even more accessible and simple to use. Open Banking has brought down the walls around banking data, now we can use that accessibility to radically improve wealth management. Imran Gulamhuseinwala must be proud.

Open Banking