How Open Insurance can learn from Open Banking

Stefan Stignas, Head of Exploratory Banking & Strategic Partnerships, SEB

Stefan Stignas, Head of Exploratory Banking & Strategic Partnerships, SEB

You might be familiar with the expression “Open Banking”. Open banking is sometimes also called “Open Bank Data”. It’s a banking practice that provides third party financial service providers open access to consumer banking in form av balance data, transaction data etc. It all started by the decision from the European Parliament’s decision “Payment Service Directive” (PSD2) in 2015. That directive set the technical standard of what data should be able to retrieve through APIs (Application Programming Interfaces). The PSD2 directive have been somewhat copied to most parts of the world today even if the EU GDPR legislation doesn’t come in to play in other geographies than EU.

So, what have we learnt to far, well one thing is that hundreds of start-ups have been trying to outperform incumbent banks with new “hyped” apps and value props but with mixed success. We have learned that a few HUBs have been very successful in established a standard for how to aggregate and categorize the customer data and then sell that data back to banks and other interested buyers. I am talking about companies like TINK or AIIA here.

But we have also learnt that the PSD2 APIs alone are not good enough to create a competitive enough product to compete with the banks. Screen scraping is still used in same cases as a result of that.

This is a sigh of relief for banks which five years ago felt themselves to be in the firing line and extremely challenged.

Today we instead can see more and more banks developing so called “Premium APIs” where anyone can retrieve more, and better data given two conditions.

1) The ultimate customer give consent to give it away

2) You pay for the data when you buy it through the API

"The Financial Ecosystem that is evolving shows that the customers want to share their data with trusted partners if they get a better product or service BUT this is if they trust the data is handled safely"

This has become a new source of income for banks, and it has shown that banks (no matter how non popular they sometimes are perceived to be) are trusted by their clients to handle the data compliant and correct.The Financial Ecosystem (Connected API structure where end customers can get enhanced customer experience by sharing their data into that structure) that is evolving shows that the customers want to share their data with trusted partners if they get a better product or service BUT this is if they trust the data is handled safely.

This is here I think Open Insurance can short cut the learning path. Open Insurance is like Open Banking where EIOPA (EIOPA is one of three European Supervisory Authorities) has decided to standardize APIs the same way as PSD2 has but this time regarding Insurance and occupational pension data.

The standardized API is most likely not going to be good enough this time either therefore this is a great opportunity for the insurance companies who will in parallel develop premium APIs.

My forecast is that incumbent banks will have the gravitas and needed scale of traffic in their apps to be the marketplace for insurance and occupational pension traffic. Insurance companies own channels are too narrow and niched. Just ask yourself how many times you’ve been into your bank app already today. and then try to remember when you last time logged in somewhere to see your how your insurances or you pension looked like. I bet it wasn’t this month.

So, the point here is that for banks prepare for embracing the full set of data into your app (for private individuals and SMEs) and display not just balance, savings, PFM and what have you, but also non-life insurance, Life insurance, occupational pension from all your clients current as well as former employers.

And for Insurance companies, let go of the costly vision to drive traffic to your app or website. Be smart and develop efficient datasets to be sold and distributed through premium APIs and be ready to launch those in parallel with the APIs EIOPA will force you to build. That’s how Open Insurance can learn from Open Banking.

Financial

Customer Experience