Shifting hackathons into next gear to tackle Open Banking

Hackathons have become important drivers of change across the business world.

The financial services industry has often had a love-hate relationship with them. Advocates recognised their importance; critics reckoned they were theatre.

But as banks across Europe find themselves at multiple crossroads, hackathons, in their truest form, are crucial.

In the early days of disruption, they were often a nice-to-have, a simple way for the industry to stay ahead of the curve. But today, the challenges the industry faces mean that hackathons are essential for future-proofing banks.

The incoming Payment Services Directive, also known as Open Banking, will fundamentally challenge banks’ existing revenue models, forcing them to adapt to new rules largely set by their customers. 

Tackling this, and a whole host of other challenges, requires a gear change from the industry. And, it requires laser focus on the end-customer. Ultimately, if those customers are to hand over their data, banks need to make it worth their while. Finding ways to reward those people and encourage loyalty will be key.

To that end, we recently attended the Lloyds Open Banking Challenge Hackathon, at which 14 teams spent 48 hours addressing the opportunities brought on by the new regulation.

The Hackathon’s success was built on three key features.

First, there was a full representation of all banking services, from loyalty and rewards to compliance. This is crucial and shows the whole bank is fully involved in the event, and not just putting on an external show.

Second, it looked at a live issue. In this case, it was looking at the open APIs being introduced as part of Open Banking and addressing specific themes within that, such as two-way APIs.  

Finally, there was the much-needed clear focus on the customer. As a company which, among other things, helps banks run reward schemes, it may come as no surprise for us to say it, but fintech can sometimes be its own biggest enemy by innovating for the sake of it. However, this event focused on bringing everyone back to the customer, what they want and how they’d like to be rewarded, the foundation for delivering real value.

Such a setting allowed us to build a prototype that will use data to build a complete view of the customer, including spending habits and key-life changes, enabling us to deliver that real value.

The need for this kind of innovation and thinking couldn’t be timelier. With less than a month until the new regulation comes into force, although some banks have now been granted more time, UK banking is at a pivotal moment with digitisation and big data set to transform the banking experience for retail customers.

Banks will have to be realistic about the need for speed. Breaking down layers of compliance and internal back-protecting will become even more crucial in keeping up with new players.

Beyond legacy systems, cultural resistance to change can be rooted even deeper than structural challenges and single-handedly hinder the ability to keep up with new developments.

Thankfully, we are starting to see that it is not just a protective play but a proactive play to turn Open Banking to an advantage for the bank. Our success at the Hackathon shows that banks are genuinely starting to see an opportunity in ideas that are centred on the guiding principle of how to benefit the customer with tangible rewards.

To win this race, the bank must find a valued reason for a customer to choose their digital estate in which to bring together all their banking information and stay there. Rewards and offers will play a big part. This means finding ways to bring new users to their platforms, as well as keep and growing the engagement of existing ones.

Using the extra knowledge that comes with more data from other bank accounts will also be a key leverage. The easy solution for this lies in how different parts of the bank, from mortgages and insurance to current accounts, will start to talk to each other to create a rounded view of their customer.

'What's in it for me?' will be the first question asked by the customer and they will be quick to point out if the mutual value exchange is lacking. Banks will need to prioritise customer savings and rewards over their own product agenda. 

The incoming regulatory changes will make it even easier for consumers to shop around for solutions that work for them. Hackathons can be a powerful way of discovering the answer, if executed with care and consideration.