Open banking and AI in financial services: Bud’s 2024 UK predictions

In the UK and Europe, open banking has long been established as a convenient and trustworthy technology. Having been introduced to encourage financial services competition, open banking has also fueled innovation, through the likes of personal financial management services.

And as adoption figures continue to grow (with an 88% increase in open banking transactions from June 2022 to 2023), innovation shows no signs of slowing down. Now supercharged with AI technology, it’s clear that 2024 will be a transformative year for open banking.

Yet, it’s also obvious from previous banking trends that laggards will be left behind. That’s why we sat down with two of Bud’s UK team members to discuss their predictions for the industry and how organisations can maintain their competitive edge using open banking and AI.

Bud’s 2024 predictions: In conversation with…

With a five-year tenure at Bud, Sam Overton (VP of Sales) is the head of business development and facilitates qualified prospects through the sales process.

Jakub Piotrowski (VP of Product), on the other hand, heads up everything product-related, from strategy and roadmap to client feedback and product lifecycles.

What changes have you seen in the open banking and AI landscape in the UK?

When it comes to the biggest and most impactful changes to customer expectations, Sam explains:

“In 2023, we saw AI platforms like ChatGPT become more accessible to the everyday person, with growing access changing expectations in what AI can do for individuals but also what AI means – especially from a personalisation perspective. This ultimately feeds into the overall market from an open banking perspective and I’ve definitely seen organisations really begin to form defined projects in order to meet those expectations.

One example is the use of enriched data and how this benefits the customers, the banks or financial institutions themselves. Previously, many of these projects were experimental but now they’re innovation-led, becoming defined programs of work.”

But Jakub thinks that use of AI in financial services still needs improvement: “There’s a lot of research that suggests the banking industry could benefit the most from AI because of all its current inefficiencies. We’re seeing limited sandbox applications where customers can ask an AI chatbot for something specific, such as help with a credit application. But, at the moment, its impact is limited – partly due to lack of regulation and partly because of a lack of streamlined approach. This means that it’s only isolated cases that are handled with very constrained AI .”

How have those changes impacted financial institutions and consumers?

“It’s about quickly understanding the data and unlocking additional opportunities,” Jakub explains. “Financial institutions are now realising that both AI and open banking are tools that contribute to better financial products. Importantly, they’re also starting to see these developments not only in isolation as product-specific additions, but as something that can make the whole business better”. 

What changes do you anticipate we will see next year?

When it comes to changes on the horizon, Sam believes 2024 will bring innovation, albeit within the confines of potential regulatory requirements since many AI rules are not set in place just yet.

“We and our clients have got this interesting mix of incredible opportunity (that wasn’t necessarily there before) and an added layer of complexity with risk and regulation. So, I think in 2024 we’re actually going to see organisations begin to use generative AI within their institutions and, specifically, within the context of transactions.

Organisations, regulators and suppliers like Bud will all get to grips with the use cases that make sense, both from a customer and ROI perspective, and which fit regulatory or risk frameworks. For example, Consumer Duty has been huge for this type of consideration in 2023.”

And Jakub believes that while internal resistance is falling, implementing new open banking applications will not be without challenge. “There are limits to how much organisations are willing to invest in open banking-related technologies. That is, to some extent, also driven by the high cost of development. This means that interesting use cases are not brought to life because the margins are not high enough. As banks get better at delivering innovation, this will evolve toward greater adoption.”

In 2024, then, banks and financial institutions should focus on echoing this openness by operating with transparency and ensuring their customers have full faith and trust in their product innovations.

Do you anticipate AI will continue transforming financial services in 2024 and beyond?

With the paradigm shift towards AI in 2023, Sam shares two key predictions for financial services AI in 2024 and beyond.

“A lot of the publicity around generative AI has been under the guise of direct consumer services, such as ChatGPT,” says Sam. “In the financial services world that we operate in, there is an unusual convergence of demands.”

1. Heightened demand for hyper-personalisation from consumers

“A good example of this might be an organisation with a number of different credit cards, including one that’s particularly suited to those who travel through airports,” says Sam. “Now, if institutions can understand transactions in great detail across a cohort of customers, insights into customer behaviour can be gained and customers can be segmented.

“So, based on some of the metadata, enriched by Bud, you can spot individuals with a high spend in the ‘travel’ category, for example. Then, using generative AI, organisations can interrogate these insights in greater detail to manipulate the segment (perhaps to manage underwriting risk), or expand it to those who may be applicable in the future, and position the travel credit card. Generative AI helps institutions to be much more effective in product upsell or outbound marketing, thanks to enhanced customer insight.”

2. Banks will try use generative AI to reduce operational costs

“Banks are still working under the same kinds of macroeconomic pressures that we’ve seen this year, and many have publicly talked about cutting costs. As opposed to asking an employee with significant experience in data query writing, banks can use generative AI to gain the insights they need, almost immediately.”

Jakub agrees: “The most profound effect of recent innovation is being able to use AI-driven tools to provide direct advice for customers,” he says. “But we can’t move forward with that until clearer regulations are set out. Because it’s a highly regulated industry, we have to reach the point of consensus around what can and can’t be done with AI. Otherwise, the operational risk is too high.”

Jakub names Google as an example to follow when it comes to AI readiness: “From my experience, Google is ahead on this. They provide so much transparency and comfort to anyone using their technology, so once the industry-specific regulation is in place, most of the other obstacles are taken care of.”

What challenges might retail banks, lenders and fintechs experience next year?

Jakub continues with his thoughts around ‘advice’ and the challenges that it poses for industry: “You need to be a certified financial advisor to provide financial advice. So it’s almost impossible to get permission for a chatbot that can give customers financial advice unless there is a very clear algorithm that’s completely explainable, such as being approved by a certified body.”

“As with any quickly evolving and emerging technology, there’s always a risk of AI-based features that fail in a way that incurs reputational cost, possibly beyond a single organisation,” Jakub notes.    

On the other hand, Sam believes that an unstable economic landscape will pose a challenge for institutions in 2024. “I think there are still going to be macroeconomic changes for fintechs, banks and retailers. In the heyday, there were significant amounts of money available for exploratory projects, and we’re past that now.

“Focusing on open banking challenges in particular, it’s going to be determining ROI associated with open banking projects. Currently, ROI is based more on hypotheses as opposed to really granular insights from data.

“But, that’s where Drive is so powerful. The level of investment from a development or integration point of view is really low – hardly any barrier to entry. And the output is so high value and granular. It’s a product that enables institutions to really understand their customer base, segment it and prioritise the next actions.”

What will Bud’s key focus be in 2024 and beyond?

Explaining his excitement about our newest product launch, Drive, Sam describes how Bud's key focus over 2024 will be on boosting our clients’ access to valuable data.

“For the organisations already working with us at Bud, we’re thinking about how we can supercharge. How can we make the access and insights to the data even more valuable? Then, for organisations that don’t currently work with us, our focus will be on demonstrating just how powerful Drive is.”

In Jakub’s view, it’s also about Drive’s transformational impact.

“I want clients to say: ‘My employees now take fewer meetings, send fewer emails and raise fewer service tickets. We’re focused on unlocking additional opportunities for our clients, so that they can get things done using the data to an extent never seen before.”

A secondary focus is on nurturing the partnerships we have already made at Bud. “Many of our clients are now at the point where the first use case has been integrated and is demonstrating value. It’s a really exciting time. We’ve proven our capabilities and we can start tackling more challenges for our partners,” Sam says.

What will success look like in your role at Bud next year?

For Jakub, it’s about helping clients find operational efficiencies and savings: “I want to see Drive work in a way that brings tangible benefits. I want a client to say that their data analysis team is able to service internal customers 10 times faster. That means my role is focusing on the high impact use cases, something that is easily within reach with our technology."

Sam agrees that success for him in 2024 is all about proving the value of Drive, so that it speaks for itself. “It will involve working with clients to begin implementing generative AI in combination with the transaction AI that we’ve been working on for the last eight years.”

Will 2024 be your year?

At Bud, our focus for the coming 12 months is all about enabling businesses to get maximal value from their data.

With the explosion of AI in 2023, we predict that it will help financial institutions to enhance their relationships with customers in 2024. With minimal effort, financial institutions can not only maximise their operational efficiency through AI, but also truly deepen their customer understanding and act on actionable insights at the right time, every time.

If you’re ready to step into 2024 with industry-leading transactional data analysis and rich AI expertise, contact us today.