There are two things to understand before I answer this question.  

1. What will the regulator allow?    I am going with the laissez faire attitude of open banking in my assumptions over the paternalism of Pensions Dashboards
2. It’s all guesswork really.   predicting the future of technology is a mugs game.  But as I am a mug why not.  I have at least been looking at this for a few years now.

Financial aggregation tools

It’s a pretty safe bet that firms that already use open banking to provide information to customers will add open finance data on Pensions and ISAs.  Add a zoopla feed to estimate the property equity value and you can build a decent picture of a customers overall financial situation.  Perhaps a nice number at the top saying “Your overall net wealth is £X”  

This market will be split between independent apps, such as Emma or Moneyhub, and  services offered by existing financial service providers such as the banks and platforms.  One offers independence and the trust that brings, the other have millions of existing customers already using their digital services.

I predict these services will be pretty ubiqitous eventually but I am not convinced they are really transformative.   For that we need things that will change customer outcomes.

Consolidation

Firms will use open finance to go after new business, especially transfers of existing pensions and ISAs.  We know this because they want to do it for Pensions Dashboards but are not going to be allowed to by the FCA.  They will have to be a bit more subtle than a flashing “consolidate all of your savings to us”  button, but that’s the idea.

The thing is this doesn’t have to be a bad thing.  In fact with the amount of small pots we have in pensions in particular it’s probably necessary.  Even outside that I don’t see it a negative per se as people are more likely to move to savings with lower charges and potentially better investment governance than old pots will have.

So who will be active in this market?  You know I am going to say PensionsBee and you would be right but essentially every firm will be doing this as otherwise they may as well shut up shop.   

Transactions and updates

At the moment in order to update my address on my three pensions, two ISAs and bank account.  I have to log into five apps or websites.  But wouldn’t it be a lot easier to update in one place and it tells the different providers to update my address?  Well yes of course it would. It would be handy for all sort of other basic details too.

More specific to our industry how about I could instruct my pensions provider to increase or decrease my contributions from a personal finance app rather than that providers own website?  After all that app has a better idea of affordability etc than the provider will as it will have my banking details.

Much of this sort of capability may be phased over time as the IT standards get complicated quite quickly but I think core transactions, including the transfers needed to consolidation will part of open finance over time.

Using it to improve the product / wrapper

With open banking the more transformative benefits are in helping people achieve outcomes they could not before.  The best example I know is it allows those with a minimal credit history to access loans as they can use open banking to demonstrate they are a low risk through their spending behaviour.

So how could be use open finance to improve the customer outcomes in long term savings?  I the germ of a couple of ideas for you.

As a provider I take into account your attitude to risk and capacity for risk based on questions I ask the customer.   But I have no idea what other investments are or if I do what risk they take.   Now imagine I know the customer has 18 years of DB pensions, the very definition of lower risk.  Perhaps then I can take a more aggressive approach to the SIPP or ISA they have with me. 

When it comes to drawdown it’s very likely that the customer will be taking a set amount of money a month to live on. Based on a guess taken some time ago on what I will need to live on.  What if instead the provider took an open banking feed every month and topped up the bank account to an agreed amount.  I.e. If I spend £2000 in May then the account, I drawdown 2K at the end of the month and if I only spend £700 then I only bring over that much. 

Or, and this is contentious, how about I can just draw it down daily based on what I spent that day?  After all every investment platform hold some of the holdings in cash don’t they? 

There are lots of smart people in our industry I am sure dozens of other ideas will emerge to help people rather than just “hey give me the money we are 4bps cheaper” and that will be the real value in open finance.