Open banking is often spoken of as a way to improve banking and financial services for general consumers, but it can also be for specific groups of consumers, including employees. Employee services and benefits include payroll, retirement and savings plans, rewards and recognition, other services such as onboarding, documentation, performance bonuses, reimbursements and more. Open banking, by allowing for safe, secure and efficient processing of payments and data can help facilitate many of these employee benefits, and contribute to employee happiness and company culture.
In this article, we review some of the features that employers can roll out using open banking.
The evolving landscape of employee benefits
Employee benefits packages and delivery modes are changing as the workplace and employee demands evolve. Traditional packages often do not allow for much choice or flexibility. Once it is determined, all employees must agree to it. However, not all employees are the same, nor do they have the same goals. Modern benefit packages are becoming more customizable, allowing for financial and personal wellness options.
But with greater choice and flexibility comes more complexity.
Employers must find ways to update their human resources processes and technology in order to allow for greater choice and personalization. In doing so, companies can boost employee satisfaction and overall financial wellness, leading to greater retention.
Open banking, with a freer flow of payments and data, allows for the following:
- Access to real-time financial data
- Personalized financial planning
- Easy integration with savings and investment accounts
- Tax efficient strategies
- Updated security and data protection, among others.
While it has been rightly touted as a powerful new ecosystem for banking and financial services, those same capabilities can be channelled toward employee benefits. First and foremost, it can help employees budget and save towards financial goals, such as retirement and other investments. Secondly, it can allow for personalization of investment portfolios and allow for monitoring and adjusting. Third, open banking could expand the traditional employee reward and recognition system, making it more appealing and practical..
Open banking for employee savings
Employment income is usually the most prevalent, if not the only source of income for many individuals. This income ends up not only going to spending on housing, groceries, transportation, etc. but also to savings and investments, or the plans of tomorrow. The data that goes into this relationship through payroll is more important than many realize. It includes not just employee income, but also their benefits like 401Ks and health insurance, as well as taxes, contributions and identity.
One of the potential benefits of open banking is that it can allow employees to have access to not only their overall financial data, such as their banking and savings accounts, but also their future income. This view can be a huge boon for financial planning and meaningful budgeting. On top of this, employees can have access to their real-time financial data, which means they can track their progress against these goals daily.
Open banking for employee investments
With a full picture of their financial future, employees can more easily personalize their investment portfolios. They could decide how much to contribute to retirement or emergency funds, and monitor and adjust those investments as their situation changes, perhaps with after a promotion or bonus. Investment options through open banking can also be wider as fintech solutions could do a better job of aggregating brokerage offerings. Employees could also take more advantage of company matching solutions and optimize their investment contributions.
Deposit switching could allow employees to redirect their portions from their paycheck directly, allowing for automated saving and investment, a much lower friction process that would ultimately increase saving behavior.
A new way of recognizing employees
Different companies employ different methods of employee recognition - it may be in the form of performance bonuses, prizes, certificates, time off, accumulated points towards a gift, etc. However, across all these various types of recognition, three main problems stand out.
First, none of these programs are personalized. There is a one-size-fits-all approach to each of them, simply for convenience and organization. However, it is critical that employers consider how employees want to be recognized for their hard work, thereby truly showing that they are valued in the workplace.
Open banking, by allowing for consumer-permissioned data and a freer flow of payments, can create employee programs that are customizable. Through an employee benefits app or dashboard, for instance, employees can choose which types of reward they’d prefer to receive. The rewards can be sent and managed through the app, such as a bonus payment or a savings match.
Second, these traditional programs tend to be inconsistent. It’s not often clear which behaviors and achievements are being lauded and how the rewards are being calculated. This can lead to accusations of favoritism or unfairness, or confusion over how programs work. In particular, with points programs, employees may feel a lack of transparency over how to utilize points and where to go.
Finally, employee recognition may not be well-communicated. By highlighting top performers, employers reward behavior and performance that contribute to the company’s wellness and culture and, by doing so, encourage others to follow the same exemplary behavior. If the reward is only mentioned between managers, HR and the employee, this communication falls down.
An open banking-powered platform can not only provide the rules and guidance for such programs but also list who was recognized for what action, creating transparency as well as public recognition.
Transforming employee benefits with open banking
These are just a few examples of what open banking-powered solutions may look like, but it’s clear that there’s other potential features as well. For example, employees may be eligible for cashback at different businesses - perhaps utilize their employee discount at their own stores. Companies could use these systems to onboard employees quicker and faster with less paperwork. Employees could easily access key documents, such as for tax statements and payslips more easily in one location. The examples could go on and on.
It is important for businesses to consider how employee benefits are delivered. Open banking offers a progressive and transparent path that should be seriously considered.
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