Open banking and customer retention: 5 actionable tactics

Open banking is a powerful tool for fulfilling the unmet needs of customers... and retaining them long-term. Here's how.

Fun fact: Getting new customers can cost five times more than keeping them. In other words, customer retention is a key driver of revenue for every business. But when it comes to satisfying customers, actions speak louder than words.

Open banking is an incredibly powerful tool for building products and services that cater to the unmet needs of customers. But there’s more to it than just that… open banking can also be used to build loyalty among existing ones. Here are five ways to do it.

1) Take the pain out of payments

Did you know that 20% of consumers find it frustrating to not know when their payments are due? That’s what we discovered in our latest State of Payments report.

It’s not uncommon for customers to churn. Not because they want to, but because their payment method fails. This is what’s known as involuntary churn… and it can happen for lots of reasons like not having enough funds in the bank or their bank rejecting a transaction.

The problem? It’s expensive for businesses because it results in lost revenue and damaged customer loyalty. But, businesses can address this problem with open banking payments.

Known as account-to-account payments, customers can pay directly from their bank account, which is a more reliable way to pay. Why? Because if there’s a problem with the payment, such as a failed transaction, there’s no need to trace it through intermediaries.

Bonus: account-to-account payments tend to have lower failure rates than using credit or debit cards. Going back to our report, 34% of consumers stated that they are more likely to use open banking payments, while 37% were indifferent as long as their needs are met.

Moreover, open banking payments rely on advanced security measures such as encryption and authentication protocols to protect bank data and prevent unauthorised access, reducing the risk of fraud or errors.

2) Personalise products and services

When it comes to financial services, one size has never fit all… and it never will.

Let’s say you need a loan. The first lender you approach offers standard terms, but the second one takes a more personalised approach. They use financial data like your balance and transaction information to tailor loan terms, making you less likely to default.

Which one would you choose? Of course, the second option.

If customers share their financial data, they want it to be used with care. That means businesses should use it to tailor products and services, rather than offer generic solutions aimed at somewhat similar demographics. Here’s proof: 40% of consumers say they’d be willing to share their financial data in exchange for personalised products and services.

But that’s not all. Instead of relying solely on a credit score, businesses can use financial data to analyse income, spending habits, and payment schedules. This is especially important for the 15.6 million people who struggle to access basic financial services, and the one million SMEs denied access to finance last year.

TLDR: When you offer your customers products and services that meet their specific needs, they’re more likely to stick around. Customers tend to stay loyal when they’re offered a personalised experience.

3) Streamline applications

Applying for financial services isn’t fun. Between the form-filling and the verification requirements, it’s no wonder customers find the process overwhelming. In fact, 68% of customers recently abandoned their online applications. But what if it could be made easier?

Good news, it can… with open banking.

Open banking enables businesses to streamline the application process and make it more convenient. By leveraging open banking data, businesses can reduce the paperwork burden for customers and simplify the process for their own teams.

This is particularly important in lending and investing where firms are focused on managing their portfolios. By using customer data to quickly and accurately build a customer profile, businesses can issue higher-quality loans that are more likely to be profitable.

Open banking can also simplify Know Your Customer (KYC) checks, such as those required when opening a new investment account. In short, businesses can quickly fulfil applications and smoothly onboard customers resulting in an efficient experience for everyone.

Learn more about how open banking supports KYC and AML checks here.

4) Offer flexible repayment options

When it comes to financial services, affordability is key. But just looking at a customer’s income or a snapshot of their financial history doesn’t always give the full picture.

Open banking allows businesses to access up to two years of a customer’s financial data, which means they can create a more accurate affordability profile.

For example, if a customer took out a loan to fix up their home but is now struggling to make repayments, the lender could take action to recover the debt… or they could use open banking to understand the customer’s financial position and offer flexible repayment options.

The result? Less stress for the customer and better chances of successful repayments. And, when customers feel like their providers understand their needs and are making the effort to help them, they’re more likely to stay loyal customers.

Interested in what open banking can do for mortgage lenders? Check out this blog.

5) Reward data sharing

When it comes to sharing our financial data, it’s important we feel comfortable and in control. After all, our financial information is sensitive and we want to ensure that it’s being used responsibly. In fact, 30% of consumers in our report expressed concerns over data sharing.

One way to overcome this is by making data sharing a reward, rather than a demand. Like incentivising customers to share their financial data by offering exclusive deals, tailored promotions, or access to premium services.

Suddenly, data sharing becomes a two-way street with benefits for both sides. Customers feel valued and in control of their data… and businesses get lucrative insights.

But, businesses also need to earn customer trust by putting them in control of their data. Why? Because if they mishandle that data or use it in ways the customer didn’t consent to, it can lead to a loss of trust and, ultimately, churn.

Back to our report, we asked consumers if they were more or less likely to use a product/service if it was powered by open banking. While the majority were indifferent, 30% said less likely. Distrust in data sharing is the biggest challenge (30%), followed by concerns about data privacy (30%) and a general lack of knowledge about open banking (25%).

The key word here is transparency. Businesses need to position data sharing as a benefit for customers, give them full control over it, and ensure that they understand how their data will be used. By doing so, businesses can foster trust and retain customers in the long-term.

Bonus: scale revenue with customer retention

We’ve discussed five ways that open banking can help keep customers loyal and reduce churn, but how does it actually play out in real-life scenarios? Let’s take a closer look…

Word of mouth: When customers are happy, they love to share their positive experiences with others. This creates a ripple effect where more and more referrals become customers, resulting in revenue growth. It’s like a snowball rolling downhill… it gets bigger and bigger.

Upselling and cross-selling: Keeping customers engaged allows businesses to sell more. By identifying customer needs and preferences, businesses can offer personalised upsell and cross-sell opportunities, leading to increased revenue per customer.

Reduced costs: As we mentioned earlier, acquiring new customers is costly. Not only does retaining customers lead to increased revenue, but it also reduces expenses. By focusing on customer retention, businesses can lower their marketing costs and allocate those resources towards other important growth initiatives.

Data insights: As businesses collect and analyse customer data over time, they gain valuable insights into customer behaviour and preferences. As they say, “data is power” and the more businesses understand their customers, the better they can serve them.

Take the next step…

Need to convince your top line that open banking’s worth the investment? Check out this blog on how to build a compelling business case. Or, if you’re ready to take the next step, try our demo for free.


Image description


22nd March 2023

9 min read

10 reasons PSPs should adopt open banking

Open banking is transforming the payment landscape for consumers and businesses. But how do Payment Service Providers, the key players in payment processing, benefit?

Image description


16th March 2023

8 min read

6 products you didn't know were powered by open banking

Despite being around for over five years, open banking is still a relatively unfamiliar concept. In fact, the majority of consumers haven’t even heard of it. But many of us already use products and services powered by open banking… we just don’t realise it.

Image description


1st February 2024

6 min read

Open banking vs card networks: the future of payments

In the digital payments landscape, open banking and card payments often get compared. While open banking won’t replace everything about card payments, it can certainly improve its inefficiencies. We explore how in this article.

Build personalised financial experiences for your customers with Yapily. One platform. Limitless possibilities.

Get In Touch