Trialling open banking: tales from two utilities

A recent Utility Week Innovate webinar explored the experiences of two utilities trialling open banking to help address mounting challenges around affordability and debt. Here we explore key lessons and talking points.

Open banking has made an enormous impact in the financial services sector where it was developed to help stimulate competition and customer-focussed innovation in consumer banking.

The technology enables secure visibility of current account data for third party service providers and has prompted a proliferation of new offerings to help consumers with better financial management, from aggregation of products to spending and saving advice. It can also provide an alternative platform for making payments, with slick bank-to-bank transactions which are instant and low cost.

During the pandemic, which has caused many individuals to think differently and with added intensity about their personal finances, use of open banking in the financial services industry has more than doubled with over 2 million users currently recorded across the UK’s top nine banks. There are more users attached to challenger banks.

For utilities, who in the post-pandemic landscape are facing mounting challenges around the affordability of their services for increasing swathes of the population – these capabilities are clearly of interest. But how transferable and useful could open banking be for the energy and water sectors?

According to the Open Banking Implementation Entity (OBIE) – an independent body set up in 2018 to help maximise the benefits of open banking to an ever expanding pool of potential users – the scope for positive impacts on the utilities sector is huge.

Speaking at a recent UW Innovate webinar – which was hosted in association with open banking service provider Yolt Technology Services (YTS) and is available to listen back to on demand here – the OBIE’s stakeholder engagement manager Constanza Castro Feijóo observed: “Open banking enables account information services that allows you to assess and have an overview of someone’s current account data, and payment affordability.”

“I feel that specifically for the utilities sector, open banking can play a key role in bringing opportunities to solve some legacy issues by enabling the instant assessment of affordability and by offering a ubiquitous type of payment for everyone.”

She continued: “The potential is massive, especially given the circumstances we’re in. Open banking can enable an organisation in the utilities sector to instantly and accurately assess the affordability that one of their customers can have, and enable a type of payment that removes friction for the person paying.”

This potential is being tentatively recognised by senior professionals in the utilities industry, especially those responsible for vulnerable customer strategies or for improving efficiency in payments and collections.

But while lots of people are talking about the possible benefits open banking might bring, relatively few have so far taken the plunge when it comes to conduction live trials of open banking with their customers.

Among the pioneers are Eon and United Utilities, representatives of which both spoke about their open banking experiences to date during UW Innovate’s webinar.

What sparked the experiments?

Joanne Lazzari, vulnerable customer lead at energy retail giant Eon explained that her organisation’s initial foray into open banking was very much targeted at uncovering additional options for supporting customers in financial distress.

“We know that customers in financial difficulties often find it difficult to engage with their creditors, to actually pick up the phone to make that initial call to start to talk about their situation,” she said.  “So any tools that we can use to really make that easier is always of interest to us.”

As such, Eon selected a small cohort of its worst off customers with which to begin its open banking trial. In retrospect, Lazzari reflected this might have made experimentation with the full range of potential services open banking can enable especially challenging, with customers in this segment more likely to be sceptical of allowing insight into their accounts.

To counter concerns from customers that their account information might be used in ways they were not comfortable with, Lazzari said intensive training of staff was required up front to ensure they had a clear story to tell about the benefits of open banking.

Although United Utilities started its open banking journey somewhat later – in the thick of the pandemic – the water company’s head of income, Michelle Atkinson, said it was also inspired by a drive to improve its services for financially vulnerable customers and increase efficiency in the process of conducting eligibility checks for its social tariffs.

For United Utilities, this also meant focussing on customers with the lowest levels of affordability and using open banking as a means for getting a “snapshot” of their financial status.

Being clear with customers that this insight into their current accounts was limited, secure and had rigorous controls around it in terms of what the data could be used for was critical in overcoming objections, Atkinson advised.

The key point to get across here, she said, is that the application of open baking being used in this instance only gives United Utilities a “one-time snapshot” of account data. She added that this snapshot is then fed into a “formalised scorecard that our agents can’t manipulate. They use it for completing the [social tariff eligibility] form and then the data is removed.”

Results and next steps

For Lazzari, the investment Eon made in educating staff about open banking has paid off, with many customers allowing well-rehearsed explanations to overcome any initial objections they might have had to approving the use of open banking.

She continued to share examples of the ways in which open banking has improved the speed and effectiveness with which bespoke payment plans have been developed for customers with the biggest affordability challenges. And how this is having a positive impact on Eon’s debt position.

So pleased has Lazzari been with the impacts of open banking, that she is keen to see it rolled out to for a wider customer base. In particular, Lazzari identified potential for open banking to help with managing “pre-delinquency” situations. She did acknowledge however that major organisational restructuring programmes at Eon – including migration of customer onto its new Kraken technology platform and establishing the Eon Next brand – mean it’s likely development of open banking may be put on hold.

Similarly, Atkinson is hopeful that the significant success of early open banking trials will eventually lead to the technology becoming part of the “business as usual” customer experience.

She said United Utilities has been “really pleased with customer appetite and acceptance thus far”.

“Of those customers we’ve identified as eligible and offered the solution to, 80 per cent have gone through that journey successfully and given us feedback that not only was it the first time they’ve used the open banking journey, but that they would recommend it to a friend.”

From an efficiency perspective, Atkinson confirmed that the open banking solution has increased the speed at which United Utilities can offer tailored affordability solution at speed to its most needy customers.

In terms of next steps, Atkinson spoke of a drive to automate the snapshot-to-scorecard process for information captured via its open banking solution. She explained a solution for doing this should be ready to roll out this autumn and will provide further protection against any unintentional miss-use of data.

Another key focus for Untied Utilities will be to overcome the limitations of its current open banking set up, in so far as this only allows the company to use open banking to fast track social tariff applications for single person households.

In response to this, Bas van Marissing, product manager at YTS assured that aggregation of account data, acquired through open banking, in order to create a clear view of household finances, is “perfectly possible”, and something YTS has helped partners in other sectors achieve already.

There was also some discussion of the scope to ultimately use open banking to create a shared view across energy and water utilities, as well as other key service providers, of any one household’s ability to afford its various bills at a particular moment in time. It was observed that this could spark collaboration on holistic, realistic payment plans.

Untapped potential?

While the utilities representatives at this webinar were focussed on the potential for open banking to help tackle debt, affordability and vulnerability challenges, YTS’s van Marissing was keen to emphasize that this lens through which to view the technology is a narrow one.

There are  range of other ways in which open banking could help utilities perform better under their stretching regulatory and competitive pressures, he said. In particular, he was keen to see more companies acknowledge the potential for open banking to become a common platform for payments processing, outlining some compelling examples of the benefits it has brought elsewhere by reducing the overheads companies pay in transactions fees.

While there was some scepticism from the utilities speakers about the idea that open banking or bank-to-bank transfers might rise to become as ubiquitous as direct debit payments, the OBIE’s Castro Feijóo seconded the proposal. She pointed to trials of open banking within four months of the launch of a new open banking solution at HM Revenue and Customers, the department managed to process over 500,000 transactions with a total value of over £1 billion. She added that in the OBIE’s experience, across sectors, open banking application had been seen to bring about 80% efficiency gains in terms of reduced transaction fees and increased speed to resolution of payment issues.

One of the most important things to note for any company seeking to unlock these kinds of benefits, cautioned Castro Feijóo is to consider carefully the kind of language used by agents and in marketing about open banking payment options. Sometimes the term “open banking” can seem off putting and meaningless to customers, she acknowledged. She advised that using more descriptive terms like “bank-to-bank transfers” can be more helpful. OBIE is shortly to publish a new guide to open banking language for existing and interested users of the technology.

Listen to the webinar in full by registering for the on demand recording here.