PART TWO: How Open Banking is helping Utilities in the Pandemic

Last week, I wrote about Experian’s Open Banking Tools -  The Affordability Passport?  and Experian’s Commercial Acumen - and how it was used to help Utilities Suppliers during the Pandemic. If you missed my post - take a look here Part One Open Banking Helping Utilities

Today, I’m going to discuss the key learnings from those pilots and what’s next for our suppliers as well as open banking in the Utilities Sector. 

So, what were  the key learnings from the Open Banking pilots?

Firstly, and most importantly, all those involved in the pilots are continuing with the technology, so we’re heading in the right direction! Please bear in mind that some of these have only been up and running for a couple of months and so it’s still very early days. However, the following highlights some of the key benefits that have emerged:

Speed to deploy. Both the Affordability Passport and Commercial Acumen services are simple and easy to deploy. The consumer journey involves the simple trigger of an email / text with a URL link, that links to the Affordability Passport app that enables a customer to give their consent to share data, access their bank account and source their bank statement data. The categorised statement data can then be viewed in the secure web portal hosted by Experian.  The pilots were extremely quick to set up, typically within a couple of weeks, and required minimal IT.

Confidence to Assess ‘Ability to Pay’. Given the recent changes to Supplier License Conditions for Energy suppliers, there has been strong feedback that the tool provides clear, demonstrable and accurate information upon which a thorough ‘ability to pay’ assessment can be undertaken. Bearing in mind that 12 months of bank account information is used to look at income and categorised expenditure (and fluctuations in both of these), it’s easy to see why the tool provides invaluable insight to arrive at a robust repayment plan.

‘Confidence that Debt Repayment Plan will succeed.’ Judging by the rising and record levels of debt in utilities, in particular[1], where a repayment plan is not in place, the high failure rate on debt repayment plans experienced by most suppliers is not surprising and will likely worsen.  Sadly, the pandemic will continue to create serious financial challenges for many customers, pushing more into financially vulnerable circumstances. In such cases, it’s really important that debt repayment plans are realistic and affordable. Those involved in the Open Banking Pilots felt confident that the information provided was more likely to result in a successful debt repayment plan as they were based on accurate information. After all, how many of us really know what our income and essential expenditure on food, bills, etc... over the past 12 months is and how it’s changed?

Sharing of information during the pandemic has enabled organisations to identify if a customer has suffered a decline or loss of income, if they’re employed in an industry which has been badly hit by lock-down e.g travel or hospitality and their discretionary spend has become increasingly stretched as finances are stretched.

The following points show areas where there’s still work to be done for the Open Banking team;

Customer Adoption Varies. Some customers were keen to use the Open Banking journey, preferring either a quicker answer or the digital route, thus avoiding having to talk through details of their personal financial incomings and outgoings. Others preferred to talk it through. The take up rate was highly dependent on the use case but was typically higher where customers perceived a benefit to them e.g. reduced time on the call or reduced tariffs. Overall, this feedback is expected as Open Banking is still a relatively new concept, especially in utilities. As Open Banking gains in popularity, we expect more consumers will become comfortable using it, though we always expect that some will ‘opt out’. When launching an Open Banking service, it’s important that utilities make time to explain the benefits of Open Banking to consumers, to reassure them that it’s a safe, convenient and secure way to share data. This will build trust and encourage take-up.

Mixed Agent feedback. As we would expect, agent feedback was also mixed. Some felt comfortable with the technology and some needed greater understanding and training to persuade customers of the benefits. Those organisations that gained the most from the pilot (and are now looking at expansion) are those that invested in continual reviews to amend processes to take on board agent feedback, amend scripts, review training, etc.

Suppliers trialling Open Banking all expect to see a reduction in costs as resources are reduced due to digital information exchange. It’s too early for this benefit to have been realised. Whilst it is early days and the results are positive – the industry isn’t using these solutions at scale yet – how quickly can the industry accelerate usage to ensure that the benefit is being realised more broadly?

What next for Suppliers and Open Banking?

It’s important to understand that Open Banking is now here to stay and is seen as an important part of the FCA’s Open Finance initiative and government’s UK Data Strategy to facilitate innovation and competition in the provision of financial services.

Many clients are seeing the benefits both in terms of addressing regulatory needs, speeding up customer ‘resolution’ times and, hopefully, over time, will be able to reduce costs and support more vulnerable customers who may be reluctant to have traditional conversations about their finances.

Some suppliers who have adopted Open Banking are now taking the next steps and looking to use APIs to enable greater integration and to increase their digital capabilities by looking towards ‘self-serve’ debt plans, underpinned with a thorough affordability assessment. For customers who are comfortable to use new technology, are low risk and perhaps where this is the first-time they have experienced difficulties, Suppliers are looking to use our solutions to offer automatic digital approval of debt repayment plans based on Open Banking ability to pay assessments.   

Experian are keen to work with more suppliers to trial Open Banking and to look towards using greater digitisation and enabling customer self-serve. If you’re interested in more information, please don’t hesitate to get in touch with me, your account manager or email: [email protected]

[1] Rising Arrears in Utilities - LinkedIn post by Colette Land