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Deep personalisation: unlocking new financial revenue streams

Deep personalisation: unlocking new financial revenue streams

Traditional banking models can cause a headache for consumers and institutions alike. For instance, while forgotten direct debit payments can be frustrating for customers it can also lead to a costly chargeback for banks - resulting in a loss of overall profit.

Open banking is now connecting different service providers across the entire financial ecosystem to prevent these kinds of problems, while also generating new streams of revenue.

In order to meet evolving consumer needs and maintain their position in the market, financial institutions need a seismic shift from traditional financial services. In this blog, we’ll explore different strategies for generating new and ethical open banking revenue streams.

Revenue generating ideas for financial institutions

As every consumer-facing industry develops, the need to maintain a competitive edge only becomes more pressing. Revolutionary advances in retail, for example, have led to highly-personalised email marketing techniques, providing future-proof protection even while the high-street declines. 

Similarly, open banking can truly unlock new revenue opportunities within finance, thanks to deep personalisation. Here are three new channels to consider:

  1. Leverage customer banking data
  2. Partnerships and collaboration
  3. Personalised experiences

Leveraging customer data

Customer data is a hot commodity, especially since it’s so highly guarded by data protection regulations. It’s true that most companies are already collecting personal financial data for open banking payments, account aggregation and more. So the question becomes: how do you get maximum value from this? 

From a financial inclusion perspective, let's take an underserved customer sector as an example; those with thin credit files. In the UK, credit reference agency (“CRA”) data only shows once you have lived in the UK for a minimum of three years. But over 143,000 people came to the UK last year on skilled visas. Why should some of these people, with high-paying jobs, be denied financial products just because the data isn’t available? 

Other sources of information, like transaction data, is proven to be just as reliable - and it works in real time to help advisors deliver decisions quickly. 

Leveraging customer data in the transaction channel puts real-time income and spending data in the hands of the institutions, replacing the need for CRA data. Banks and credit unions can lend with confidence to a new sector of society, effectively generating another stream of revenue.

Ethical and responsible data collection

Of course, the biggest priority during data collection should be respecting data privacy and following regulations. 

At Bud, this has worked in our favour, as customers realised that they would benefit from better personalised product recommendations without the fear of unconsented data sharing. It led to 40% of customers connecting at least one of their accounts to Little Birdie’s subscription management tool, further enhancing their revenue generating opportunities.

Partnerships and collaboration

Two heads are better than one, right? In the case of financial services, partnerships through API technology have led to significant growth - and 97% of senior leaders believe it’s the key to business survival.

It might sound as if you’re expected to team up with the competition. But even in fintech, there are plenty of opportunities for collaboration that can benefit both parties and the customer. 

For example, one of Bud’s clients partnered with a range of lenders to provide new borrowing opportunities for their customers, who are thin-file loan applicants. Underpinned by Bud’s API’s and real-time transaction data, the lenders could satisfy their criteria, even where CRA data was missing. Customers were able to receive better personalised credit offers, the banks expanded their loan books and our client opened up a new stream of revenue. 

Personalised experiences

By now, it’s clear consumers are willing to share their information for more personalised banking and lending experiences. In fact, a recent research report conducted by Accenture found personalisation could actually boost banking revenue by around 20%. 

But on the ground, we’ve found that banks actually have a fear of engagement. Without detailed and personal knowledge on individuals, banks can’t be targeted enough in their communications and risk annoying their customers. For this reason, many choose not to engage at all.

However, there are many opportunities to invest into personalised experiences and help your customers manage their spending, such as: 

  • Real-time notifications: your phone bill is due tomorrow. Do you want to transfer in £10 to make sure your account has enough to cover the bill?  
  • Integrated services: connect your third party providers like accounting software for faster calculations at the end of the tax year
  • Product recommendations: we can see that your savings account is paying out 2% interest. Our account offers 4.5% interest, would you like to open an account? 

These customer-centric approaches are able to improve customer engagement and satisfaction levels. For example, Little Birdie gained over 10,000 app downloads by enriching personal customer data to find redundant subscriptions. The helpful nature of this bank-customer engagement has increased loyalty, driving long-term relationships and open banking revenue growth.  

Personalised cross-selling and up-selling is the next step

Thanks to detailed customer characteristic data, open banking empowers financial institutions to better identify cross and up-selling opportunities. 

In practice, Bud could identify a homeowner without contents insurance and then use this information to proactively reach out and make their  product offer. 

But that’s just one example - there are plenty of innovative strategies for fintech institutions to leverage open banking and generate targeted offers based on customer behaviour. When executed well, these cross-selling opportunities convert approximately 65% of the time, compared to just 12.5% of new customer targeting.

Unlocking open banking revenue

Of course, each of these strategies hinge on open banking adoption to elevate customer experience and generate a new revenue stream. That’s where Bud comes in. 

Engage is an AI-powered platform that connects your customers' accounts to help make sense of their transaction data. Relying on our comprehensive APIs, the model adds context to the numbers and can draw out deeply personalised characteristics. 

Then, our clients leverage this personal data to qualify new customers, collaborate with third parties, nudge their customers into better behaviour, and generate targeted cross-sell offers.

Contact the team at Bud today to find out exactly how you can unlock new revenue streams with personalised open banking technology.

Schedule a Demo!