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TrueLayer: Reimagining the Investor Customer Journey With Open Banking

It might sound counterintuitive for a wealth manager to make it easy for customers to take money out of the platform, but in a competitive market, customer preference usually wins. Open banking has allowed investment platforms to create an infrastructure across the customer lifecycle to root out friction and transform the user experience, while significantly reducing costs. 

Yasmin Bayat is the WealthTech lead at market leading open banking firm TrueLayer. She joined in 2019 after completing her MBA at INSEAD and focuses on the firm’s wealth, trading and investing clients. Yasmin previously held multiple client-facing roles in financial services at State Street and Franklin Templeton Investments.

Discussing how the investor customer journey has been changed by the introduction of open banking, Bayat said this:

Yasmin Bayat, WealthTech lead at TrueLayer
Yasmin Bayat, WealthTech lead at TrueLayer

The global pandemic has accelerated digital transformation in the wealth management industry, driven in part by high demand for online services. Platforms in the UK, Europe and the US have all seen a huge influx of new customers.

We’ve also seen more recent trends such as Wall Street Bets and memestocks off the back of the GameStop short squeeze sweep the globe. Our trading platform customers experienced four times their typical usage and many platforms experienced unprecedented levels of new customers signing up for their services.

While demand might be high, research from Capgemini Financial Services suggests that wealth management firms are failing their customers when it comes to user experience – 65% of investors in Europe were dissatisfied with their online experience.

So how can open banking help? Savvy online investment platforms like  Freetrade, Nutmeg, Stake and Trading 212 are applying open banking infrastructure across the customer lifecycle to root out friction and transform the user experience, while significantly reducing costs.

Why open banking?

As the first challenger banks entered the market most, like Monzo and Starling Bank, focused on delivering a simpler, smoother experience around the current account, or, like Chip and Plum, support automated savings by linking a bank account and allowing the user to set goals.

Perhaps unsurprisingly, their WealthTech cousins were not far behind. There are, broadly, four key moments and pain points in the customer journey where open banking can create a better experience for investors.

Onboarding: the moment of truth

Onboarding is the first interaction most users will have with a product, so building trust upfront with a simple, secure experience is key.

For the wealth manager, it can also mean the difference between a lost prospect and an activated user. Studies show that in financial services, 40% of consumers abandon bank applications before they’re complete.

Open banking offers a new path: investors can onboard onto a new platform instantly and securely, linking to their primary bank account, proving account ownership and supporting KYC and AML requirements, without having to manually upload documents, or leave the app.

For wealth managers, open banking removes the inefficiency in onboarding and lessens the likelihood that a customer will give up and go elsewhere. For providers offering credit for investments, it also enables instant credit checks, significantly reducing risk.

Account funding: getting money to market

Open banking offers a highly secure way for customers to transfer funds from their bank account.

If it’s the first payment that a new customer is making, there’s no need to verify account ownership again since that’s covered in onboarding. And because funds settle instantly, unlike card payments which can take anywhere from between 1 to 3 days, customers can make more timely investment decisions.

Stake, a global brokerage app that gives users from across the world direct access to trade US stock, offers open banking payments to customers. As COO and co-founder, Dan Silver, comments: “Slow processing times make it difficult for people to make nimble investments, so finding a partner that could enable instant settlement was extremely important for us.”

For wealth managers who see high volumes of Apple Pay or card payments, open banking presents an opportunity to make monthly savings of c.90% on transaction costs (based on switching 200 payments a month with average transaction value of £280 from cards to open banking, via a third party provider like TrueLayer). Since open banking payments are irrevocable, there’s also no chargeback risk or associated costs.

Meanwhile, for wealth managers who see a high volume of payment by manual bank transfer, open banking removes the headache of reconciliation, since references for open banking payments are locked.

In early 2020 Nutmeg became one of the first wealth managers to launch open banking payments, letting its users quickly initiate a bank transfer through its app. As Nutmeg Product Manager Charlie Masters comments: “It reduces a lengthy user flow to just a couple of taps, and delivers a simpler user experience and a faster payment into Nutmeg.”

Investment platform Freetrade, has also integrated open banking into its platform. Adam Dodds, CEO of Freetrade, commented: “Open banking integration is an essential step on our mission to get everyone investing, allowing customers to add funds seamlessly and with confidence.” Today, around 70% of Freetrade’s customers use open banking to fund their accounts, with an average 18% increase in deposit value.

A key reason that investors are opting to pay this way is speed. We surveyed 1,800+ users of online wealth management platforms across Europe last year and found that one in four had missed out on investment opportunities because funds didn’t appear in their accounts quickly enough, causing them to miss trading cycles. We also found that two thirds of investors are more likely to trust a wealth manager that offers instant payments.

Funding accounts could be made simpler still in the future, as API providers build on top of core open banking infrastructure to offer wallet-as-a-service propositions. With their own in-app wallet, investors would have instant access to funds for an even easier investment experience.

Account aggregation: holistic investment advice

By giving wealth managers access to investors’ financial data (with their consent), open banking allows firms to deliver more personalised investment advice.

Rather than relying on investors reporting their own income during onboarding, or asking them to upload documents to prove it, wealth managers can use open banking to find out instantly what a customer makes and when, and what they spend and when, so they can better target investment advice.

As different types of financial data, including investments and pensions, are brought into the scope of open banking in the future, wealth managers will be able to build an even more complete view of investor behaviour and risk appetite, for example looking at where else they are investing.

As well as empowering advisors, open banking can empower investors: giving them a more consolidated view of their finances, for example showing current account and savings information, alongside their investments on that particular platform.

Withdrawing funds: an opportunity to differentiate?

It might sound counterintuitive for a wealth manager to make it easy for customers to take money out of the platform, but in a competitive market, customer preference usually wins. It only takes one wealth manager to improve its payout experience in line with customer demands, to tip the market in its favour.

While open banking infrastructure itself doesn’t support payouts, providers like TrueLayer are building on top of open banking APIs to allow instant, secure payouts to any bank account, with a simple user experience (including payouts for amounts higher than the original investment).

The wealth management industry is being disrupted by technology in the same way as every other sector. As new customers turn to online trading and investing, providers will likely have to fight harder for loyalty, particularly for digital natives who have higher expectations of a frictionless user experience and no qualms about moving to a better provider.

The good news for those working in wealth management is that you haven’t missed the boat, yet. While open banking is starting to take hold in this industry, now is the perfect time to start investigating how it could help reshape the user experience across the customer lifecycle.


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