Where are we at with open banking now and what needs to happen to ensure its success? These were the two questions addressed by a roundtable held at techUK on 17 September. Representatives from fintechs, techUK members, the banking sector and the FCA and NPSO filled a packed room to hear the views from the front-line: what do the UK’s innovative financial services firms think?
Tim Richards, Consult Hyperion kicked off with an overview of the state of play. There were certainly problems, he noted, but much progress has been made. ‘Open Banking is a baby; it will take time to grow up. When it does, we will see real competition,’ he concluded.
But others were more equivocal. Caroline Plumb, of Fluidly, said that her company, although AISP and PISP authorised, was not currently using open banking APIs as the commercial risk is too great, at present, for the following reasons:
- The coverage is still limited to current accounts. But her SMEs clients need data from across the range of accounts, from savings to corporate cards.
- The consent journey for users is cumbersome, slow and difficult to cope with, especially for SMEs where multiple directors are account signatories.
- API standards were meant to ensure consistency but in practice, each bank handles their customer flow differently, with no consistency of language, number of screens etc.
For Ashleigh Petrie of Moneybox, open banking should deliver great benefits, both to companies and users. She was looking forward to the extension to credit cards and the ability to use payment initiation instead of direct debit to collect monthly savings.
However, not all was rosy. She went on to list major difficulties in connecting to Santander bank. She illustrated a seven-step process for customers, different from their online banking and involving several passwords/numbers. Since Moneybox has no sight of the process after the customer leaves their app, assisting customers has been problematic and drop-off rates high. She contrasted this with Starling Bank, which has a 3-click process using biometric authentication. Yet, she acknowledged that the process was far easier for a digital bank operating only through mobile platforms.
Moneybox is not intending to link to any further banks immediately, as the process is too long and troublesome for a small company to manage.
Martin Threakall from Modulr Finance was very positive about open banking. He noted the obvious: it is only insiders who are debating success or failure – the public knows little about it and are unconcerned at slow progress. He believed open banking will really deliver when it has achieved full scope and payment services are up and running. Modulr is preparing an open banking service to allow their lender customers to collect moneys owed. He agreed, however, that the process must get much easier if consumers are to adopt.
For Ryan Edwards-Pritchard, Funding Options, speed and convenience for customers was paramount. Currently the speed of APIs across the CMA 9 varies from 3 to 22 seconds and although he didn’t expect a seamless process, it does need to be swift and standard. Likewise, the customer journey must be standardised, using language that informs and does not scare the customer off. In his view, a trust-mark is needed, both to reassure customers and to give banks something to aspire to over and above the letter of the law.
The last speaker, Stefano Vaccino from Yapily presented what may be a solution for many TPPs – the integrator option. Yapily streamlines the process between TPPs and all banks – UK and internationally. It does not require FCA licence under current rules but works with regulated companies. For Stefano, the main issue was how to ensure EU and international standardisation and interoperability, both of regulation and process.
The roundtable discussion, moderated by Louise Beaumont, focussed on payments. The fintechs were keen to use open banking for payments to provide immediacy and enhance competition. Yet several barriers were identified:
- The technology is currently clunkier than cards and, unless this changes, they will not be used.
- Push payments do not carry the guarantees that credit cards do.
- The must-have use-case for PISP is not yet clear – fintechs need to unearth opportunities where PISP will come into its own.
- Payment initiation will be more interesting when it also covers future and variable payments.
Overall, the conclusions were:
- It is too soon to say: open banking is not fully developed, many TPPs are waiting to see, but this will change. Banks also need more time to improve their processes.
- As the market grows banks will better recognise the opportunities.
- There is likely to be a key role for integrators to smooth over connection issues.
- The success of open banking depends on customer adoption, which will require fewer steps, consistent user journeys, clear language and easy authentication (biometric). A trust mark would help.
- Standardisation in the UK is not enough – we need international standardisation.
- The ‘killer’ use-cases still need to emerge – especially for payments.