Opening banking regulations came into force early last year which allows customers to give their bank permission to share their personal finance data with other businesses.

Since then Fintech start-ups have launched new apps that have mainly focused on financial services. Using open banking APIs to gain direct access to consumer bank accounts means faster credit, loans and mortgages but what can this new wealth of data mean for retailers?

Banks are now integrating third party services so that account holders who opt-in can share their purchase data with chosen retailers who can reward them with loyalty points, discounts and cashback.

As seen with banking integrations like Flux the customer can see basket level data of each purchase on their online bank statements not only showing when, where and how much but also what the individual purchase was.

Initially this type of open banking integration was done on mobile payment apps like Yoyo Wallet where loyalty rewards were collected as the customer paid in store by scanning their device. This has now progressed to enabling a customer’s payment card to collect rewards as they pay.

This level of data access is allowing hyper-targeted marketing taking a lot of the guess work out of campaigns. With separate cards for loyalty programs becoming a thing of the past retailers now consider how to get more customers to opt-in to share their banking data.

High street coffee shops and food outlets are amongst the first retailers to offer open banking payment integration. Places where you would normally expect to see loyalty programs are eyeing the potential of open banking to delight their customers and boost sales.

Devops engineer Tim Greening-Jackson of managed hosting provider UKFast explains “Along with the ubiquity of the cloud and mobile networking open banking enables a whole host of innovative products and services.

“This could involve providing more nuanced insights into customer habits, allowing finer granularity with a broader scope than that from a traditional loyalty card.

“The ability to track and analyse a consumer's own pattern of spending will drive highly innovative applications. This could particularly be the case when integrated with various existing application types.

“From a consumer perspective, security will also be paramount. Despite mobile banking applications being extremely secure, user vigilance with respect to the privileges granted to mobile apps will continue to be essential.”

One of the biggest challenges for adoption is trust. When brands are able to see exactly what their customers are buying at which stores and at what time their promotions should be far more relevant. In return for these tailored rewards consumers need to give each retail brand explicit permission to access their bank account.

A further incentive for both shoppers and merchants is that open banking can provide a faster payment option with lower fees bypassing the payment rails of the big payment companies and with no need for retailers to hold customer card details. In the case of online only retail, payment startups such as VibePay are set to take advantage of open banking with customers making payments through a portal that directly connects bank to bank.

The question still remains how much personal data are we willing to share? If open banking is set to give consumers a way to exchange their payment data with retailers for tangible rewards like cash back and free goods how will retailers continue to persuade their customers to share their bank data and how will this change retail in the long run?