On 15 November, techUK launched a major white paper, From Open Banking to Open Financial Services: The Long View.
To mark this publication, techUK brought together a panel of expert guests to examine what Open Banking will bring, what are the sticking points and what remains to be done.
Ruth Milligan, Head of Financial Services & Payments, techUK, author of the report, addressed the key issues of governance, customer communications and long-term funding. The report’s recommendations are:
- Long-term vision and collaboration: the UK Government must come together with regulators and industry to formulate a long-term strategy for creating an innovative financial services sector based on open data.
- Single digital ID to effect wide connectivity and customer access.
- New governance arrangements - open, transparent and inclusive.
- Positive customer communication to raise user awareness and understanding of new services.
The consensus from the session was an endorsement of the need to address long-term governance, engage cross-industry participation and set a strategy to capitalise on open API-technology, innovation and competition across the whole financial services sector.
Louise Beaumont, chair, explained that the scope of PSD2 and the Competition and Markets Authority (CMA) Order overlapped, but were not identical, yet both come into effect on 13 January 2018. In addition, rules on strong customer authentication (European Banking Authority’s Regulatory Technical Standards – EBA/RTS) will not apply until 18 months after publication. (The final text was published just after this event on 27 Nov).
The CMA Order tasked the nine big UK banks (CMA9) to set up the Open Banking Implementation Entity ((OBIE) to fulfil their order. But it is clear that not all the necessary work will be completed in time.
On communication to end-users, participants were agreed that this has been inadequate and often misleading. The notices of changes to terms and conditions sent by banks raised a number of concerns re confusing technical and legal language; implications that consumers will have little recourse if they encounter problems and lack of any mention of the benefits of open banking.
For Gavin Littlejohn, Chair of Fintech Stakeholder Group and a member of the OBIE Steering Group, Open Banking will bring a revolution for consumers, giving them full control of their data, introducing new services, improving portability and customer experience. Yet key issues of liability, dispute resolution, insurance for third party providers and the customer journey when making a payment still must be resolved. The OBIE and the CMA have agreed an ‘enhancement order’ to continue their work post Jan 2018 and Gavin took the firm view that it is now time for the tech sector to be fully involved in governance. But this would mean providing funding, currently, wholly provided by the CMA9. Views from the audience diverged on this point – some noting that a requirement to fund open banking could act as a barrier to new entrants.
Chris Gorst, Challenge Lead, Nesta Challenge Prize Centre, outlined the tremendous diversity of innovative fintech offerings amongst the participants in the Nesta Challenge, all of which were part of the CMA scheme. He highlighted the market entry obstacles fintechs still face.
In the second part of the session, the fintechs themselves, some Nesta Challenge Prize finalists, gave views from the coal face:
Kosten Metrewell, CCO, Modulr, noted that for his business, using APIs is the clear way forward. Modulr is a platform facilitating real-time end to end payments, designed to service the expectations of the 24/7 customer experience. For him it is essential that Open Banking ensures fast reliable APIs which work as well for fintechs as any screen-scraping option.
Caroline Plumb, CEO, Fluidly, highlighted the need for proper communication to end-users as to the benefits of open banking, particularly for small companies. Fluidly is a cash flow management tool, which solves the problem of uncertain cash flow for SMEs, partnering with leading accounting software partners.
For Jamie Campbell, Head of Awareness at Bud, open banking means a whole new approach to money management for customers currently poorly served by banks. Bud is a ‘plug and play’ financial services platform, which combines customer account data with machine learning and open APIs. It links together a wide range of financial services and will greatly improve how consumers and SMEs can manage their money.
Conrad Ford, CEO of Funding Options, felt that customer communication had to be all about the services. When SMEs see how quickly and easily they can gain access to credit through Funding Options, the benefits of Open Banking are obvious to them. Many of his clients are unable to access credit through traditional banking channels.
techUK’s Open Banking Working Group has a full programme of market and advocacy activities. Click here to register to attend our next meeting on January 17 2018.