The open banking revolution is here. Is your real estate ready?

PSD2 became national law in EU member states on 13 January 2018. In the UK, CMA Open banking also went live. These regulations allows third party providers to access customer account data (if approved by the customer).These third parties can then use the customer data to offer services and solutions via their own platforms.

In practice customers could pay bills, make transfers and analyse spending via a secure app while having their money in a current account held by a retail bank. It is the start of a programme designed to open up banking data.

This could prove to be catastrophic for incumbents, relegating them to data providers, robbing them of the chance to engage exclusively with customers and reducing revenue streams.Tech companies and startups could become real rivals to retail banks.

PwC forecast that banks face losing up to 24% of market share within five years to standalone FinTech companies if they do not respond. 

Traditional banks do not have to lie down and roll over. The alternatives include:

1. Monetising customer data by selling deeper insight and analytics capabilities beyond what is required by regulation. 

2. Fight back against third parties by accelerating digitalisation, harnessing the power of data analytics and focusing on providing a seamless and personalised user experience that promotes customer loyalty.  

3. Operate openly in an expanded ecosystem through collaboration and co-creation with a range of stakeholders.

Regardless of the route banks go down, there will be a fundamental change in the workforce and organisational model of a retail bank, this in turn requires a fresh occupational model.

Completely new roles and teams will emerge that develop and manage data and the creation new platforms. Developers, data analysts and coders demand a different type of workplace and location than the traditional financial services office.  

A much greater emphasis will be placed on open innovation and co-creation demanding flexible accelerator and incubator space. Examples of this happening now include HSBC taking 65,000 sq ft at the Blue Fin building to house their digital team.

Barclays committed more than £25mn over five years for their accelerator in Shoreditch. Finally retail banks must use their real estate to make a statement of intent, promoting revised values and identity.

Retail banks are facing a potential cliff edge. For those that stand up to the challenges that open banking bring and harness the power they have with holding vast amounts of customer data combined with creating a strong identity, the future is bright and exciting.

Our UK retail banking sector profile explores this changing dynamic and its real estate implications in greater detail.