Could Open Banking end the consumer loyalty trap?

By William Kostoris, Co-Founder, Youtility
William Kostoris investigates whether Open Banking and new techniques like behavioural science could be used to solve enduring finance challenges

Across the UK, people are being penalised for their loyalty, paying far more for essential services like energy and broadband than new customers. Research from Citizens Advice shows 8 out of 10 people pay significantly higher prices for at least one essential bill because they stick with the same supplier or remain on the same tariff/deal. 

In general, suppliers increase their prices over time but despite this reality, we often remain paralysed in our ability to switch – confused, apathetic or frustrated at the process of comparing deals and regaining control of our home finances. 

Each year an average UK home loses an estimated £877 in unrealised savings and penalties. By dampening market competition, the loyalty trap also restricts efforts by suppliers to innovate. Most concerning of all, this problem has a disproportionate impact on vulnerable customers and is a major factor contributing to the ongoing savings crisis.

Our mission to end the consumer loyalty trap is increasingly relevant when the economy is approaching recession and household budgets are stretched to breaking point. 

The fintech solution 

Fintechs are starting to offer solutions to this ongoing problem through the growth of Open Banking products, usage of which is projected to double to 40m by 2021. Open Banking allows for supplier switching and relevant spending insights to be surfaced from within mobile banking and fintech apps via third party APIs. 

The majority of consumers rarely engage directly with utility suppliers and track spending from banking or money management apps. Embedding a marketplace comparison tool within a consumer’s existing digital finance app allows for a seamless comparison and switching process, helping to deliver new revenues to banks and fintechs alongside significant added value for consumers. 

This new age switching technology is not just limited to mobile banking and can be surfaced in a variety of relevant platforms that are seeking to become the single dashboard for a consumer’s financial ecosystem. 

Behavioural science and analytics 

Integrated switching by itself is not sufficient to tackle the loyalty trap. To trigger positive behaviour change and encourage people to take action, notifications and prompts need to be personalised and contextualised to an individual’s underlying circumstance. 

Articulating how a saving compares to the rest of the market, or similar nearby homes, or simply prompting when a high bill arrives, or putting in the right context based on a personal situation helps to trigger proactive actions at the right time. 

By building technology with human behaviour at its core, it’s possible to tackle the inertia at the root of the consumer loyalty trap and reduce core household spending at a time when many are struggling.

This article was contributed by William Kostoris, Co-Founder of Youtility


Featured Articles

Moody’s: Financial Crime at Shell Companies – The Key Signs

In this deep dive, Moody’s Analytics' Senior Director Ted Datta details how to tell if a shell company is being used for financial crime…

EU Council Adopts Instant Payments Regulation

The Council of the European Union has adopted new regulation that will make instant payments in the euro currency available to all EU and EEA members

Ericsson and HPE Partner to Launch Fintech Cloud Services

Announced at MWC 2024, Ericsson is collaborating with Hewlett-Packard Enterprise (HPE) to deploy fintech cloud services on HPE GreenLake

Capital One's Takeover of Discover: All you Need to Know

Financial Services (FinServ)

Sustainability LIVE Net Zero: Sustainable Finance Insights


EPAM: 96% of Consumers Happy With AI in Banking