Last month, the Lloyds Open Banking Challenge Hackathon, #BuildanOpenBank, took place, with 14 teams including SAP taking part. The goal was to show — within 48 hours — an open banking value proposition, how it would work, and a business plan.
SAP looked at how a bank might address the needs of people that are vulnerable or are becoming so, such as from Alzheimer’s disease. In the UK, one in 70 suffer from the onset of this debilitating yet predictable disease. The SAP team used the persona of “Glenda Wichita” to show a business case worthy of investment through APIs and intelligent management of the vulnerable person’s account.
Open banking, with its trusted third party (TTP) approach allows for providers to find, suggest, and evaluate a proxy process for Glenda. A proxy is an agent, TTP, legally authorized to act on behalf of another party.
The bank can identify the onset of Alzheimer’s or other changing financial risk by analyzing the change to usage patterns of the account holder; for example, forgetting to pay the rent, utility bills, or any regular payments. Banks currently use predictive analytics and case work processes for other activities. By using similar processes with the vulnerable, the bank can observe and confirm signs of deterioration, and gently nudge Glenda into seeking advice.
Once it is established that Glenda is at risk, a proxy process needs to be pursued — essentially, power of attorney over the account. Currently, the power of attorney privileges tends to be binary, the proxy having complete or no control over the account. The banking industry currently handles accounts manually with workarounds. For example, a bank sets up a joint account to cover a proxy added to that account, or the person at risk hands over their online details to a proxy to act as Glenda.
The onboarding of the vulnerable person into the proxy process requires sensitivity in its approach and handling from the bank. The solution provides great comfort and helps reduce risk to the financially vulnerable. The bank can also provide a view on the appropriateness of Glenda’s proxy.
A change to the proxy process is required and what is needed is a variable and increasing or decreasing level of control over an account based on the vulnerability. Each vulnerability is different — with Alzheimer’s, the condition of the person at condition is worsening and the proxy, in turn, needs more control over the account.
Open banking’s open APIs and cloud technology support the vulnerable on proxy banking. At the hackathon the SAP team demonstrated:
- Detecting anomalous events
- Showing how Glenda is becoming vulnerable
- Knowing Glenda’s circumstances and identifying a suitable proxy
The business case has a respectable return on investment (ROI) when including:
- Income for providing and servicing proxy banking
- Cost reduction by eliminating the manual workarounds
- Using technology to show the true size of this market within the client base
- No regulator fines as the bank is compliant to “fair banking” for the vulnerable
Through open banking, banks can help ensure that the vulnerable are protected, their needs managed, and that this process is financially rewarding to the bank and the trusted third party. By identifying and assisting vulnerable people in their financials, banks become an increasingly caring, trusted, and relevant part of the community.