New data sharing laws will test the agility of financial services firms

Banks, insurers and asset managers must move quickly to protect their relationships with customers as pending Open Finance regulation in Europe, and elsewhere, will increase competition.

To succeed, they need to create a strategy to safeguard their direct customer relationships as new offers provide better service and more convenience to consumers and businesses alike. They should go on the offensive and strengthen ties with their customers by capitalizing on the new regulations and seizing some of the business opportunities they’re likely to create. Firms that try to stay as they are, and opt just to do their minimum to comply with the new Open Finance regulations, could become vulnerable and increasingly become mere product providers.

The biggest threat to financial services firms is that large data aggregators step in and take over the relationships those firms have built with their customers, said Christopher Schmitz, European Open Finance and Fintech lead at consulting firm EY Parthenon.

“If an aggregator can get access to data, either by being licensed or by using a licensed provider, and can then persuade customers to share their data with them, we could get a situation where financial services firms lose access to their clients.

“They face the risk of being marginalized and becoming just product providers.”

Schmitz said most of the banks and insurers he’s spoken with recently are looking to go on the offensive and aim to capitalize on the new sources of customer data available to them. The potential rewards are likely to be substantial.