Open Banking Expo Magazine Issue 3 by Open Banking Expo

OPEN BANKING EXPO IDEAS, CONNECTIONS AND DEALS IN OPEN BANKING MAGAZINE LAUNCH PARTNER

Issue 3_May/June 2019 OPENBANKINGEXPO.COM

DUE NORTH IS CANADA READY FOR OPEN BANKING? PAGE

BEYOND BANKING

SME FOCUS

BIG AMBITIONS

THE BIG INTERVIEW

The innovators creating a buzz with customers

Funding Options’ CEO on communication failure

Will the world’s tech giants be taking on the banks?

ClearBank on challenging traditional UK banking

Truth through insight. Trust through delivery. bjssbusinessconsulting.com

Editorial

PUBLISHER’S WELCOME

Kelly Stanley Publisher & Co-founder kelly.stanley@openbankingexpo.com

Here at Open Banking Expo, we are particularly interested in banging the drum to help vulnerable customers beneﬁt from Open Banking.

A lot has happened since we went to press with Issue two. The Brazilian Central Bank has set out information sharing guidelines for an Open Banking framework, which it expects to introduce in 2020, while closer to home we have seen the Open Banking Implementation Entity (OBIE) publish its latest version of the Open Banking Standard (p8). NatWest announced it is to roll out its Open Banking app Mimo for customer testing (p7), and as we went to press Shawbrook Bank revealed its marketplace banking tie up with Monzo, which means it can now offer its savings products to Monzo customers (p7). Here at Open Banking Expo, we are particularly interested in banging the drum to help vulnerable customers benefit from Open Banking. As I write, we’re in the middle of Mental Health Awareness Week and it was great to see Nationwide Building Society select seven fintechs as a part of its £3m Open Banking for Good challenge last month. The companies will develop Open Banking -based applications in a bid to find a solution for financial capability issues, which are strongly linked to mental ill-health.

In this issue, we take a special look at Canada where the banking sector is in the middle of payments modernisation and a government consultation is underway to explore the benefits of an Open Banking framework. Canada is renowned for its quick adoption of new technologies, but is it ready for Open Banking? Find out in our feature on pp26-28. If you are reading this in Canada and are interested in meeting up with peers to discuss the opportunities that Open Banking presents, consider joining us at Open Banking Expo Toronto on September 18, 2019. For more information turn to p29. Thank you to ClearBank for opening its doors for this issue’s Big Interview. We asked its chief operating officer and chief technology officer how their plan to establish the organisation as a major player in the domestic market is going. Find out what they had to say on pp14-16.

Enjoy the issue!

Editorial

CONTENTS Issue 3_May/June 2019

Regulars

Cover Story

06 News

26 DUE NORTH: IS CANADA READY FOR OPEN BANKING?

The latest industry news: Bankers question customer security commitment; NatWest announces latest partnership; Shawbrook joins Monzo marketplace.

With a government consultation underway and the banking sector in the middle of payments modernisation, is the door open for Open Banking in the great white north? Geordie Clarke reports

Insights 22 25 32 33

Yvonne Dunn, Pinsent Masons Fouad Husseini, Open Insurance Initiative Faith Reynolds Liz Oakes, Mastercard

Features

18 Big ambitions

24 View from the Top

Through lending and payments, the world’s technology giants have already taken a piece of the financial sector but so far have stopped short of becoming banks. What’s holding them back?

Chris Michael: The OBIE’s Head of Technology on regulation.

37 SME Focus Conrad Ford: The founder and CEO of Funding Options says communication is key.

41 Global Spotlight Andrew Moor: Equitable Bank’s CEO comments as Canada prepares for Open Banking.

34 Not about banking As Open Banking evolves beyond apps that collate customer accounts, the incentives for customer adoption are becoming clearer. Joe McGrath takes a look at some of the innovators creating a buzz in the marketplace - attracting the right kind of attention.

42 Payments Punch-Up How can firms cater for all ages and levels of technical awareness?

44 Open Banking & PSD2 Hub Your directory of leading suppliers in the market.

50 The Last Word Emma Steeley: Those doubting the industry risk missing the revolution as it happens. 04 O P E N B A N K I N G E X P O . C O M

34 May/June 2019

Editorial

The Big Interview

14 Nigel Walder Chief Operating Officer, ClearBank

Chris Smith Chief Technology Officer, ClearBank

Can ClearBank break the UK banking oligopoly?

We are trying to allow other businesses to get their ecosystem up and running quickly.

38 The next wave While regulation can be credited with driving the speed of development of Open Banking in the UK, concerns lurk that more rules are coming. Jennifer Turton reports.

CO NTR I B U T O R S

Edit o ria l Joe McGrath Senior Reporter Geordie Clarke Reporter Jenny Turton Reporter Ellie Duncan Reporter

Heather Greig-Smith Sub Editor editorial@openbankingexpo.com Pr od u c t ion & M a r k et in g

Commercial & Events Kelly Stanley Event Director kelly.stanley@openbankingexpo.com +44 207 993 5159

Christian Gilliham Art Director christian@cgcreate.co.uk

Adam Cox Director adam.cox@openbankingexpo.com +44 207 993 5159

Lauren Linfield Head of Marketing lauren.linfield@openbankingexpo.com

Sophie Carus Content Director sophie.carus@openbankingexpo.com

@OpenBankingExpo in Search for Open Banking Expo BOROUGH BENCH MEDIA The Open Banking Expo is organised by Borough Bench Media, registered in England and Wales. Registered Office: Kemp House, 152-160 City Road London, EC1V 2NX T: +44 207 993 5159 hello@openbankingexpo.com

OPEN BANKING EXPO IDEAS, CONNECTIONS AND DEALS IN OPEN BANKING MAGAZINE LAUNCH PARTNER

Issue 3_May/June 2019 OPENBANKINGEXPO.COM

DUE NORTH IS CANADA READY FOR OPEN BANKING? PAGE

BEYOND BANKING

SME FOCUS

BIG AMBITIONS

THE BIG INTERVIEW

The innovators creating a buzz with customers

Funding Options’ CEO on communication failure

Will the world’s tech giants be taking on the banks?

ClearBank on challenging traditional UK banking

News

T H E L AT E S T NEWS FROM THE OPEN BANKING ECO SYSTEM

Bankers question commitment to customer security

ess than a third of bankers believe companies in the Open Banking ecosystem are working “diligently” to be “compliant and resilient” on matters of customer security. That’s the conclusion from Accenture’s Banking Technology Vision 2019 report, which surveyed the opinions of 784 business and IT executives working for global banks in Africa, North America, Europe, Asia Pacific and South America. The respondents were C-suite executives and directors. The report found that 92 per cent of those polled recognised the importance of customer trust, but only 31 per cent believed companies in their ecosystem are working to protect customers with robust security protocols. “Customers trust their banks and are willing to provide their personal data in exchange for relevant products and services,” said Alan McIntyre, global head of Accenture’s banking practice. “To maintain this trust, banks must

rethink their approach to network security, focusing on the broader ecosystem, not just the bank. This will require a shift from a compliance-centred approach to an active cyber security stance.” However, the survey revealed that bankers are largely optimistic when it comes to future market opportunities. Of those polled, 85 per cent said they believe that digital demographics will allow them to identify new market opportunities and meet customer needs, while 83 per cent said they thought new approaches would assist in understanding their customers.

Customers trust their banks and are willing to provide their personal data in exchange for relevant products and services. Alan McIntyre, Global Head, Banking, Accenture

“Digital tools can provide banks with new, near-real-time information about their customers and help them identify unmet customer needs,” McIntyre added. “Creating a rich view of customers’ digital and technology-driven activities is a powerful tool that banks can use to get closer to tailoring their products and services to the elusive segment of one.” Almost half of those in the group polled said they believed that artificial intelligence would have the greatest impact on their businesses over the coming three years. However, the survey also identified that 20 per cent of banks were not planning on implementing AI, or considering it for wider adoption. Of the sample group, 74 per cent said they thought bank employees were more “digitally mature” than the organisation for which they worked, stating that their employers need to catch up with the digital views of those working for them.

Unisys releases Open Banking platform update Unisys Corporation has announced the latest version of its omnichannel banking software platform that allows financial institutions to take advantage of Open Banking benefits. Unisys Elevate, which originally launched in 2017, is an end-to-end digital banking software platform. The latest version, released in April, now includes data management via an analytics platform and security across multiple touchpoints. In addition, the platform now features an API portal to aid integration of third party data and services into a bank’s platform without disruption to the 06 O P E N B A N K I N G E X P O . C O M

institution or the customer. Open APIs allow banks to integrate new products and services without having to perform a “rip and replace” of legacy applications. However, blending legacy infrastructures with modern tools and technologies via Open Banking requires changes to existing architecture and increases the complexity of the IT ecosystem. Maria Allen, vice president and global head of financial services at Unisys, said: “What makes this new version of Elevate truly unique is that it takes the new transaction channels made available by Open Banking and allows banks

to seamlessly integrate them into their offerings. “Not only does this enable a truly omnichannel experience where the customer can securely complete a transaction from any location and from any device, but it establishes the bank as an integral part of the customer’s life – a ‘one-stop-shop’ where they can get personalised products and services they want, when they want them.” Monmouthshire Building Society and Sutherland Mortgage Services have already signed agreements with Unisys to use the Elevate banking platform. May/June 2019

News

NatWest expands trial of personal finance app Retail bank NatWest is planning to roll out an app which uses Open Banking APIs, artificial intelligence and data analytics to help customers keep track of their money. The personal finance app, Mimo, is being trialled as a companion to the existing NatWest mobile app. NatWest said Mimo has been designed to help customers budget, as well as remind them of financial tasks. Mimo will provide customers with “proactive and personal insights into their money”, by looking at their bills and day-to-day spending, as well as their spending on insurance, subscriptions and utilities. Calvin O’Brien, Mimo lead at NatWest, said: “Our aim for Mimo is that it will help customers have a better overview of their financial life and help them achieve their financial goals from the ease of their own phone. It’s important that the app reflects customers’ needs, to be as useful as possible.” O’Brien explained that the bank has already trialled Mimo with 50 colleagues, adding: “I hope that by extending the trial our customers will tell us what they think of it, and where we can improve it”. The app is now being tested with a select group of customers, who will provide feedback before the bank rolls out the app later this year. At the moment Mimo is separate from the bank’s main banking app. A spokesperson for NatWest added: “This ‘test and learn’ approach will

SOUND BITE

inform us what customers think and how best to take this kind of functionality forward, so in the future we may choose to integrate some or all of the Mimo features into the main app.” NatWest said its research and customer feedback had shown that failing to manage financial admin often resulted in customers forgetting to pay a credit card bill and incurring unnecessary charges, or simply missing a chance to save some money. Frans Woelders, chief digital officer for NatWest, said: “We know that customers want to keep better track of their money, but find it hard to find the time or the motivation to manage the admin around that, so we’ve developed Mimo to make it easy, simple, and as straightforward as possible to keep on top of their finances.” In March this year, NatWest also announced a biometric fingerprint technology pilot, with 200 customers set to take part.

QUOTE OF THE MONTH

Treating people nicely is a shift we will increasingly see in the finacial services market. Marko Sjoblom Chief Executive Officer, Fiinu

NatWest partners Swedish fintech Swedish banking platform Tink is to help NatWest develop its personalised mobile banking offering. Tink’s Personal Finance Management and Data Enrichment products will be integrated into the bank’s mobile app. The features will go live by the end of 2019 and will give customers a personalised insight into their finances based on transaction history. Tink already works with several European banks, including BNP Paribas Fortis, ABN Amro, Nordea and Klarna.

Shawbrook joins Monzo’s digital marketplace Shawbrook Bank has teamed up with Monzo to offer its savings products to the digital bank’s customer base. Through the Monzo app, customers are now able to open and access Shawbrook’s savings products. The challenger bank has launched a Flexible Easy Access option, Easy Access Cash Isa and 12-month fixed rate bond product, each with a minimum deposit requirement of £500. The Flexible Easy Access product and Easy Access Cash Isa pay a rate of 1.12% AER and have a £5 minimum withdrawal limit.

Monzo’s marketplace has been built through partnerships with third parties. Shawbrook Bank is the third savings account provider to join the marketplace, alongside fellow challenger bank

OakNorth, and Investec. OakNorth joined Monzo’s digital marketplace in March and launched a range of seven savings products. Monzo has said that over coming months it will be adding more savings partners to provide its customers with quicker access to their savings, which currently takes up to one working day. The challenger bank has also hinted that it would like to implement ‘rules’ that allow savers to sweep unspent money into a savings pot at the end of each month.

News

Updates to Open Banking standards to help with PSD2 compliance

Monese customers reach one million milestone The Open Banking Implementation Entity (OBIE) has published the latest version of the Open Banking Standard which it said will help banks move beyond basic compliance with the Revised Payment Services Directive (PSD2) and Regulatory Technical Standards (RTS). Version 3.1.2 of the standards, announced on 1 May, sets out updates to customer experience guidelines and operational guidelines. The update includes enhanced functionality related to Proposition P2, which is the two-way notice of revocation, to allow account servicing payment service providers (ASPSPs) to notify account information service providers (AISPs) in real-time whenever a customer revokes access to their account. An enhancement to Proposition P8, which relates to trusted beneficiary exemptions under strong customer authentication (SCA), will enable ASPSPs to accept a payment initiation without SCA for payment initiation service provider (PISP) payments to a trusted beneficiary.

OBIE welcomes the opportunity to play its part in developing the potential that variable recurring payments could bring – which could ultimately lead to simpler, speedier and more secure payments for customers. Imran Gulamhuseinwala, OBIE Trustee

08 O P E N B A N K I N G E X P O . C O M

SCA requires two or more elements that only the user knows, such as a password, a possession (such their phone) and their fingerprint or iris pattern. Propositions P2 and P8 are included in release four of the published roadmap, which was originally due to be implemented in September 2019, although the OBIE said implementation timelines had not yet been confirmed. Further updates on release four are due to be provided by the Open Banking Testing Working Group. Other functionality improvements included in version 3.1.2 were to Proposition P9, concerning status of payment, and an upgrade to the functionality of Proposition P, which relates to corporate accounts. This means it will now be able to cater for accounts where more than one person needs to authorise access. The OBIE said the minor changes and clarifications to both sets of guidelines had been made in consultation with a number of stakeholders, including fintechs, banks and trade bodies, through workshops, meetings and online forums. At the end of April, it was announced the OBIE would join the fifth cohort of the Financial Conduct Authority’s regulatory sandbox to test products and services. Imran Gulamhuseinwala, a trustee of the OBIE, commented: “OBIE welcomes the opportunity to play its part in developing the potential that variable recurring payments could bring – which could ultimately lead to simpler, speedier and more secure payments for customers.”

Customer growth at mobile banking provider Monese has more than tripled over the past year, surpassing the one million mark. In the past six months, the majority of new customers have originated from mainland Europe, with demand from the region outpacing the UK in both November and March. Outside the UK, France and Germany are the largest markets for the banking service, with 100,000 and 80,000 sign-ups, respectively. The one million-user milestone follows a number of partnerships and product developments. In April, Monese enabled Apple Pay across 12 European countries, having previously announced a current account tieup with loyalty currency Avios. Meanwhile, it said roughly 70 per cent of incoming funds into its current accounts are from salary payments, showing customers are using the service as a primary account. “Back in 2015, we launched Monese with two beliefs. First, banking should be truly global. The second, technology should give everyone access to modern, convenient and affordable banking services,” said Norris Koppel, founder and CEO of Monese. “Today, we feel closer to both of these goals.” Koppel added: “The past 12 months alone has seen the business not only announce an incredibly successful Series B fundraising, but also the launch of Monese Business, opening of new offices in Lisbon and Berlin, customer service in 12 languages, enabling Apple Pay and launching our exclusive partnership with Avios, and this is only the beginning.’ May/June 2019

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Canadians cite security as main Open Banking concern Three-quarters of Canadians are wary about the concept of Open Banking due to security concerns, a survey has found. In the Accenture survey of 1,564 Canadians, conducted in February 2019 by Leger, 62 per cent said the security and privacy of financial data was among their top concerns, followed by trusting large technology companies with their data (52 per cent). Of those surveyed, 44 per cent admitted they did not believe Open Banking would “deliver enough value to drive a change in their current behaviour”. The Department of Finance Canada launched a consultation in January on the merits of Open Banking, following the appointment of the Advisory Committee on Open Banking in September 2018.

According to the Accenture survey, 40 per cent of Canadians do not understand the benefits of Open Banking enough to provide third parties with access to their financial information, and 20 per cent would want to know more about consumer protection from potential fraud before deciding. Bob Vokes, who leads Accenture’s financial services practice in Canada, said: “A critical element to Open Banking’s adoption is the right regulatory framework to ensure that consumers can decide which parties safely receive access to their financial information on a case-by-case basis – but to do that they’ll need to be convinced of the benefits. The Accenture survey found 34 per cent of Canadians surveyed “could warm” to the idea of Open Banking if additional access procedures, such as an authentication password and security questions, were one of the measures taken. Other measures they would want to see included the use of biometric technology, such as fingerprint or facial recognition (33 per cent), and real-time analysis of their payments (32 per cent). Despite their concerns, 21 per cent of respondents confirmed they would be willing to share banking account data with registered non-banking third parties in return for a better deal or other benefits, while 14 per cent liked the idea of tailored offers, such as a better mortgage rate or higher savings interest rate.

Financial firms still slow to implement Open Banking Less than a third of financial firms are currently adopting Open Banking, research from TransUnion and Forrester has found. The white paper investigated the UK’s changing financial landscape and the value exchange of Open Banking. It found 99 per cent of firms expect to benefit from Open Banking through faster customer onboarding, time saving and improved customer experience. However, just 28 per cent

10 O P E N B A N K I N G E X P O . C O M

of firms are currently adopting Open Banking. For 56 per cent of respondents, improving the customer experience is driving their decision to implement, while 53 per cent cited the need to innovate products as the main reason. David Firth, head of product for TransUnion Open Banking, said: “A smooth customer journey is essential, and this has to involve fully informing consumers of their rights and what the data will be used for.

METRICS Open Banking Implementation Entity on how account providers (ASPSPs)* Open Banking APIs are performing with key performance metrics. Mar 19 *Account providers (ASPSPs) are currently made up of the following banks, building societies and sub brands: Allied Irish Bank, Barclays, Bank of Ireland, Bank of Scotland, Danske, First Direct, First Trust Bank, Halifax, HSBC, Lloyds Bank, Marks & Spencer, Nationwide, NatWest, Santander, The Royal Bank of Scotland and Ulster Bank.

96.97% Average API availability

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Average API response time

2.79% Failed API calls

97.20% Successful API calls

May/June 2019

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News

BIAN adds definitions to API Exchange The Banking Industry Architecture Network (BIAN) has announced additions to its API Exchange. The independent not-for-profit standards association will now include 22 new API definitions in its digital library, designed to help banks tackle key business challenges in the areas of payments, cards and fraud. According to BIAN, the new APIs allow banks to introduce more modern payment processing and KYC (know your customer) capabilities. Specifically, they will allow more effective on-boarding of new card accounts, faster transferring of funds between accounts, device administration and management, and ease the process involved in transitioning physical cards into virtual wallets. With these functions in place, banks will be able to offer their customers a better user experience and increased security when using their cards, BIAN said. Hans Tesselaar, executive director of BIAN, said: “The team has continued working hard, after the portal launched last October, to develop new definitions designed to address the pressing business challenges banks are facing. “We remain on target with our goal to create an accessible repository of high-quality APIs and microservices, to help banks modernise quickly and more cost-effectively.” The organisation said customers are increasingly favouring digital when it comes to banking, with 22 per cent of consumers using mobile apps or online banking more than 10 times a month. By comparison, just two per cent of consumers claim to visit a physical branch that often. Ondigital banking has been driven by a combination of the changing needs of the consumer, a rise in competition from challenger banks and increasing fraud across the industry accelerating more modern services, it concluded. 12 O P E N B A N K I N G E X P O . C O M

ClearScore and Raisin UK partner for saving account distribution Online savings platform Raisin UK has announced its first distribution partnership, with credit checking service ClearScore. The strategic partnership gives more than eight million ClearScore customers access to a wide range of savings accounts through the Raisin UK marketplace. They can access the accounts directly through ClearScore mobile apps on Android and iOS, and via the ClearScore website. New and existing ClearScore customers will be able to register, apply for and manage high-interest savings products from any of Raisin’s partner banks, including Gatehouse Bank, Shawbrook Bank and Axis Bank. Justin Basini, CEO and co-founder of ClearScore, said: “We want to support everyone in improving their financial well-being and, by partnering with Raisin, we’re helping more people save for a rainy day.

With interest rates at their lowest level for many decades, finding the right account can be a minefield, but whether they’re saving £10 or £10,000, our users can now seamlessly compare accounts through their ClearScore app. Justin Basini, CEO and Co-founder, ClearScore

“With interest rates at their lowest level for many decades, finding the right account can be a minefield, but whether they’re saving £10 or £10,000, our users can now seamlessly compare accounts through their ClearScore app.” Kevin Mountford, CEO of Raisin UK, commented: “Since launch, ClearScore has successfully disrupted the market to educate UK consumers on a better way to manage their financial information – making them an ideal partner for Raisin.” He added: “Our main goal is to empower UK savers with a better way to secure their financial future.” Raisin UK’s other partner banks are Agribank, Bank & Clients, FCMB Bank, ICICI Bank, QIB UK and Wyelands Bank. In March, Berlin-based Raisin announced it had closed a Series D funding round of $114m, which will be used to expand its offering, bringing the total amount raised by the company to $200m. It confirmed that existing investors Index Ventures, PayPal, Ribbit Capital and Thrive Ventures all participated in the round. Raisin has said it plans to add at least two new markets to its platform this year, following launches in the Netherlands and UK. Raisin UK previously announced a strategic partnership with challenger Starling Bank which means all new customers benefit from Starling’s account opening and transaction processing API infrastructure.

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May/June 2019

News

Huawei and Forms Syntron join forces with Fincube

Nationwide takes stake in payment service Ordo

Nationwide Building Society has invested a minority stake in a new payment request service. Ordo, which is due to launch later in the year, is aimed at helping businesses send and receive payments securely, using Open Banking and faster payments to do so. It will work by allowing businesses to securely send payment requests directly to their customers via its app, which customers are notified of. They can then use the app to make the payment. Tony Prestedge, deputy chief executive of Nationwide Building Society, said: “Ordo helps businesses get invoices paid while at the same time allowing consumers to maintain control of how and when they pay their bill. “This seemed a natural fit for Nationwide as a brand which helps its members manage their money and which is entering the business banking market later this year to offer an alternative for small and medium-sized businesses to the big banks.” The investment in Ordo is part of a £50m Venturing Fund set up by Nationwide to make strategic investments in and partner with early-stage start-ups to develop products and services. Ordo has been designed so there is no need to share bank account details between billers and customers, and the biller always gets back the reference they provided with their received payment. Ordo will also allow businesses to include an invoice attachment as part of the end-to-end encrypted message. Craig Tillotson, CEO and co-founder of Ordo, commented: “Nationwide’s investment is not just about the money, although that will really help us to make Ordo a reality, but demonstrates the appeal of our innovative proposition. “This is a great opportunity for SMEs and their customers, and will deliver significant benefits to the economy as a whole.” The team behind Ordo were, until recently, part of the leadership team at the Faster Payments Scheme. Ordo has applied for funding from Pool D of the Alternative Remedies Package Capability and Innovation Fund, the aim of which is to improve the financial products and services available to UK small and medium-sized enterprises. Nationwide’s Venturing Fund will support its recently announced multi-billion pound tech investment, which it claims will put it at “the forefront of digital innovation”. The building society has committed to investing a total of £4.1bn in technology over the next five years.

FAST STATS

75%

of Canadians still have concerns with Open Banking Source: Accenture

£360m

Invested via the Capability and Innovation Fund Source: Banking Competition Remedies Limited

Chinese technology group Huawei and bank solutions provider Forms Syntron have launched Fincube – an Open Banking platform for financial services companies. Fincube has been designed to help banks at various scales better meet challenges, reduce innovation costs, optimise technologies and improve service openness capabilities. The Forms Syntron solution is built on Huawei’s high-density integrated distributed technology solution FusionCube. It has a smart, simplified, open, secure, and efficient distributed IaaS (Infrastructure as a Service) platform. “These products enable financial institutions to achieve strategic transformation based on the Fincube product system, and fully prepare for the challenges facing banking services in the new era,” said Zhou Zhiqun, chairman and general manager of Forms Syntron. “At the same time, we will work with Huawei to bring the innovative achievements of the Chinese financial industry over the past decade to the global market.” Cao Chong, president of Huawei’s EBG Financial Services Business, added: “The financial industry solution jointly released by Huawei and Forms Syntron is based on the open capabilities of Huawei Fusion Cube hyper-converged infrastructure and a deep understanding of the financial industry. “It can meet users’ diversified requirements for mobile banking services and internet financial services, eliminate performance bottlenecks, while flexibly expanding capacity to help commercial banks quickly build digital cores and reconstruct core competitiveness in the mobile era.”

The Forms Syntron solution is built on Huawei’s highdensity integrated distributed technology solution FusionCube. 13

Up Close

THE BIG INTERVIEW Nigel Walder & Andrew Smith ClearBank

The bank of the future A multi-million pound grant, an experienced and well-connected management team and a corporate strategy to be envied. Could ClearBank be the ﬁrst to break the UK banking oligopoly? Joe McGrath reports

learBank hit the jackpot earlier this year. In February, Banking Competition Remedies – the body established to stimulate competition in the market – awarded it a cool £60m, in partnership with challenger brand Tide, to take on the legacy players in the UK business banking market. The two parties said they intend to match the grant with further investment over the next five years to fully establish themselves as major players in the domestic market. But they face a mammoth task. The UK has not had a new clearing back in more than 250 years, and the existing players are deeply intertwined with customers, policymakers, trade groups, government and crucially, investors. However, Open Banking and speed of technological change in the sector means that the current market environment is perfect for challengers to step in and shake things up.

More than a service ClearBank styles its strategy as a ‘banking infrastructure play’. It allows companies operating in the banking market to launch new products and services quickly, and piecemeal, without having to develop, own and service all of the necessary infrastructure in-house. The industry will be more familiar with this approach as “Banking as a Service” (BaaS). “We see an opportunity to help other financial institutions,” says Nigel Walder, the recently-appointed chief operating officer at ClearBank (far right). “We already have a set of services that are live. The next generation of that product allows our customers to offer additional services to their customers, such as current accounts.” Walder joined ClearBank in December as chief operating officer after a career which included stints at major global players. Previously CIO (Corporate Functions) at Barclays, he has also held senior positions at Deutsche Bank, ›

We see an opportunity to help other ﬁnancial institutions. We already have a set of services that are live. The next generation of that product allows our customers to offer additional services to their customers, such as current accounts. Nigel Walder Chief Operating Ofﬁcer, ClearBank

14 O P E N B A N K I N G E X P O . C O M

May/June 2019

Up Close

› Royal Bank of Scotland and NatWest Markets. Having seen everything that the legacy players have to offer, Walder is convinced that ClearBank’s proposition will prove irresistible to customers. ClearBank’s customer base is vast, ranging from fintechs who are challenging in one or two banking product areas, to the traditional banking giants who are looking to update their payments infrastructure. “They come to us for different reasons,” Walder explains. “We have got fintechs on board, but we are also seeing, in terms of pipeline, customers seeking to immunise themselves against considerable cost and effort updating their payments infrastructure. “Larger, traditional players are starting to look at those challenges. If they have a payment infrastructure themselves, they are asking whether they should continue down that trajectory or outsource it to a specialist.” Tech savvy Another member of the ClearBank team is chief technology officer Andrew Smith, who has been a part of the executive team since April 2016. A cloud computing expert with nearly two decades of experience, Smith mastered his trade at blue-chips such as Vodafone, GE, Aviva and Credit Suisse. For Smith, the attraction for customers is simple. “They are able to consume our APIs very quickly,” he says. “We offer a subscription-based service for anyone who wants to come on board. I see different banks utilising us for a plethora of services. Fintechs will maybe use

16 O P E N B A N K I N G E X P O . C O M

We offer a subscription-based service for anyone who wants to come on board. I see different banks utilising us for a plethora of services. Fintechs will maybe use more services than traditional banks, but that kind of Software as a Service model is being applied to all of our customer base. Andrew Smith Executive, ClearBank

more services than traditional banks, but that kind of Software as a Service model is being applied to all of our customer base. “We are trying to allow other businesses to get their ecosystem up and running quickly. Institutions that want to make better credit decisions can use Banking as a Service to enhance those. Each one of our customers can utilise our services to really understand what Open Banking is all about.”

DID YOU KNOW

ClearBank was included in the 2018 Fintech 50 selected from over 1800 Fintechs across Europe.

Wider understanding Smith is intrigued by the industry’s ongoing predictions that the world’s tech giants will aggressively enter the market, but says he isn’t at all surprised that they haven’t so far. “We have already seen Amazon and Google becoming PISPs. They are semi-regulated in terms of payments. They will likely become increasingly interested. That said, if I was on their side, I wouldn’t go the full hog. You don’t have to be fully regulated in the same way as a bank is, to feel like and act like a bank. “It is easy to foresee an area where big tech companies utilise Banking as a Service to enrich customer experiences in shopping or in payments. They will increasingly start to look like, or act like, a bank.” When it comes to competing, the ClearBank executive team are certainly not shy in laying down their ambitions. “We want to become the dominant player that provides Banking as a Service in the UK,” says Walder. The company has also applied for a European licence to complement its UK registration. “I have spent over 30 years within big banks. A lot of the technology within these large institutions is very old, batch processed and, candidly, it is not necessarily a particularly profitable part of the business. “There is a consequence of that, when it comes to sitting at the top table and going through your budget. You don’t see a lot going into payment infrastructure. That is why I have found it so exciting coming to ClearBank.”■

May/June 2019

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F E AT U R E / T E C H G I A N T S

Big ambitions Through lending and payments, the world’s technology giants have already taken a piece of the financial sector. But so far, they’ve stopped short of becoming fullyfledged banks. What’s holding them back?

Joe McGrath reports

n Open Banking circles, the prospect of Google, Amazon, Facebook and Apple (GAFA) entering the mainstream banking market was always thought to be likely. But what was once debated as a theoretical possibility is increasingly becoming a reality. While none of the so-called GAFAs are yet fully regulated as banks, they are stealthily taking a major foothold in financial sectors, offering an increasingly impressive array of facilities, ranging from credit cards and loans to payments and even back office servicing. ›

18 O P E N B A N K I N G E X P O . C O M

TECH GIANTS

F E AT U R E / T E C H G I A N T S

› Investors in the financial sector say that the global tech giants are likely to continue to build their banking presence through partnerships, due to the regulatory cost and reputational risk of establishing a fully-ﬂedged banking operation in-house. “Do they want the reputational damage that comes with credit collections,” asks George Barrow, a fund manager with London investment house Polar Capital. “Once they become the actual institution that is lending the money, that is a massive change in terms of the relationship with the customer and the regulatory burden they will have to bear.” Barrow adds that the GAFAs are also likely to be mindful of the investor implications of being perceived to be a mainstream financial services player as opposed to a tech giant. “They probably don’t want the valuations associated with the financial sector,” he says. “We have seen tieups with incumbents, and a focus on distribution. It is not clear whether they are going to adopt that approach in banking, but that is the evidence we have to date.” So, where have the tech giants so far focused their attention? Facebook’s retreat Market commentators excited about Facebook’s venture into the payments space were dealt a blow in April when the social networking group announced it was discontinuing its European peer-to-peer payments service through Facebook Messenger. The company said it would no longer allow individuals to pay each other through the service from 15 June 2019 in the UK and France, but it is planning to continue offering the option to US customers. Facebook’s announcement wasn’t a complete retreat from payments in Europe, however. The company was keen to stress that other financial transactions will still be possible. “While you won’t be able to exchange money with friends and family, you’ll still be able to complete other transactions through Facebook, such as making donations to charitable organisations,” it says. While the rejigging of operations in the payments arena was surprising to 20 O P E N B A N K I N G E X P O . C O M

some, the company has continued to make waves through investments elsewhere. It has long been the subject of rumours relating to its development of a crypto-currency, but in May press reports highlighted that its ambitions in this area were stepping up a notch. The Wall Street Journal reported that the company was recruiting financial services companies to help its imminent launch of a crypto-based payments system. Visa, Mastercard and First Data were among the companies said to have been approached. Amazon’s interest Amazon is arguably the most fancied to launch a full-scale banking operation in the near-term, according to a host of reports over the past 12 months. Last year, the Financial Times claimed that Amazon was “in talks” to offer current accounts to the US market. The report suggested that the tech giant had thrashed out plans to offer Amazon customers an account through JP Morgan Chase. In the US, the company already has an established partnership with JP Morgan Chase, with the latter running account management services for the Amazon Rewards Visa Signature Card. Forbes Magazine reported that $100 billion of bank deposits could move if the company decided to launch a US current account. No estimate was given on the potential disruptive effect of Amazon taking a retail banking proposition worldwide. However, market commentators suggest that Amazon is more likely to partner with an established banking brand than leap into the market on its own. The company already has established links with major financial groups through the success of Amazon Web Services, its cloud computing division. The tech giant has a mix of A-list brands including Starling Bank, credit card behemoth Capital One and US insurance giant Liberty Mutual. Management consulting group Bain & Company probed consumer attitudes towards Amazon as a potential provider of current accounts in a survey of 6,000 US customers, conducted in September last year. The company scored significantly better than regional

and national banks when it came to customer loyalty and the survey found that customers potentially interested in banking with Amazon would be younger, with a higher income than average. Away from consumer finance, Amazon also has huge potential in the business banking market, thanks to the established customer links it has through its retail channel. The business already offers small, targeted business loans through Amazon Lending. Google’s charge In the past six months, global tech giant Google has been doing a little housework to ensure its future presence in the European financial services market is assured. The company’s Google Pay brand has been registered to trade with the UK’s Financial Conduct Authority May/June 2019

TECH GIANTS

Do they want the reputational damage that comes with credit collections? Once they become the actual institution that is lending the money, that is a massive change in terms of the relationship with the customer and the regulatory burden they will have to bear. George Barrow, Fund Manager, Polar Capital

since February 2018, but amid the ongoing drama of Brexit, the brand has pivoted to ensure it has regulatory permissions in a host of other European jurisdictions too. In December 2018, Google Payment secured a European-wide licence under PSD2 to operate as an electronic money operator from its registration in Lithuania. Then, at the beginning of 2019, it landed authorisation from the Irish Central Bank for Google Payment Ireland to operate as a payment institution from a base in Dublin. While the corporate tinkering shows commitment to the group’s aspirations in the payments sector, it doesn’t suggest that Google is preparing an all-out assault on the European banking sector. Well, not on its own anyway. Open Banking commentators have

long argued that Google doesn’t currently have the appetite to become a rival to the major retail banking giants (outside of payments) because the company – like its rivals – benefits from having the banks as customers. Appetite for cloud-computing services by retail banking groups has been fastgrowing in recent years. If revenues in this area are increasing, Google would need to navigate any potential losses caused by going head-to-head with the big banks. It could still happen. While many predictions of Google’s likely behaviour in an Open Banking environment have been focused on financial services it might launch from scratch, there is always the chance that it might just acquire what it needs to get a foothold. Google has been extremely acquisitive over the past 15 years, hoovering up smaller disruptive businesses to complement its in-house operations. Most recently, acquisitions such as Alooma, Cask and Velostrata have been centred on big data and cloud migration. While it may not currently wish to compete with the banks, there is certainly scope for it to become more of a ‘core player’ in the market. One Google alumnus, who has been beavering away since leaving the company in December 2013, is Paul Taylor, the chief executive of Thought Machine. Taylor’s previous company, Phonetic Arts, was acquired by Google in 2010. No doubt, his former employer will be watching his latest venture, following the news that Lloyds Banking Group is planning to move half a million customer

accounts to its cloud-based banking platform. In April, Atom Bank announced that it too has signed an agreement with Thought Machine. Apple’s bite When it comes to making waves, Apple knows exactly what it’s doing. The company’s branding and marketing is among the best in the world. Developing a more substantial financial services presence would support its brand strength, and give greater access to customer relationship data. The framing of its recent Apple Card launch with investment banking giant Goldman Sachs, aligned its financial messaging with that of its products – that being an Apple customer will make your life easier. In its announcement at the end of March, the company said it would be offering the card in both physical and mobile payment forms, saying it was designed to help customers lead a healthier financial life”. The new credit card is designed to appeal to a younger audience and is marketed on the basis that there are no fees, less interest to pay and higher levels of privacy and security. Jennifer Bailey, Apple’s vice president of Apple Pay, says customers would find it easier to live a healthier life if they had a better understanding of their spending. “[It] starts with a better understanding of their spending so they can make smarter choices with their money, transparency to help them understand how much it will cost if they want to pay over time, and ways to help them pay down their balance.” ■ 21

Insight Yvonne Dunn Partner, Pinsent Masons

“The pace of growth is exciting, as is the potential breadth of opportunity that arises. However, there are still issues to be ironed out.”

pen Banking is ushering in a brave new world, with many possibilities as to how it could develop. Already parts of the industry are expanding the discussion from Open Banking to Open Finance – looking beyond banking to additional applications. Open Banking is also creating opportunities for related services, such as digital IDs and tokenisation. It is the catalyst for collaboration among established financial services businesses and fintechs. Meanwhile, the big technology providers are exploring how to capitalise on these developments. So far, so exciting… but we must make sure that Open Banking is running on the right rails before moving too fast to expand it. Since its launch in the UK in 2018, a lot has happened in Open Banking. Much of it has been putting in place technology and processes to meet regulatory requirements. There are many opportunities to develop products and services based on Open Banking. These apply to third party providers (TPPs) who want to enter the market as well as established banks who want to develop new products or services for their customers, rather than being pushed into the role of a ‘data pipe’ by fintechs. There are also indirect opportunities. In identity, solutions are springing up to assist with digitally verifying a customer; customer authentication whenever they choose to engage with digital financial products; and evidencing customer consent to the sharing of data. 22 O P E N B A N K I N G E X P O . C O M

Open Banking is a catalyst for a revival in developments around digital IDs. If these new solutions are to work, it is important that access to digital products and services is simple. Trusted, verified digital IDs controlled by customers, which can be ported from one financial provider to another, could offer a solution. Already talk is shifting from Open Banking to Open Finance, applying Open Banking principles to financial products outside the current account model. There is also the possibility of wider data integration, including data from wearable devices and smart homes, all of which can combine to offer more tailored products for customers. The pace of growth is exciting, as is the potential breadth of opportunity that arises. However, there are still issues to be ironed out. In particular, ensuring that customers have a frictionless experience and that account data is secure. It is essential for the customer journey that bank-powered APIs are reliable: they need to be available when required and return quick responses. The rules on strong customer authentication (SCA) come into force in September. If Open Banking is to catch fire, it is important that this runs smoothly.

If the customer journey is ‘clunky’ because the bank’s authentication processes take too long or don’t work properly, customers will lose patience and default to traditional payment means. Currently, the third parties offering new products and services are dependent on the banks for that authentication step, and more work is needed to smooth it. Communication between banks and TPPs must be secure and comply with the European Banking Authority’s regulatory technical standards (RTS). Those RTS state that APIs need to use eIDAS certificates for identification. eIDAS has been around since 2016 and is intended to provide a regulatory environment for electronic identification and electronic trust services. There seems to be consensus that eIDAS can provide the solution for a trust framework around Open Banking, but is there time to get this running smoothly before September? Adopting eIDAS when the market is not ready might be worse than the current framework. Open Banking offers some fantastic opportunities, including many which go beyond banking. To make sure that customers come along on the journey, it is important underlying teething issues are dealt with. Otherwise there is a risk that the positive impact is delayed. Assuming we can do this, the possibilities are exciting. ■

➽ If you would like to comment on this opinion piece, please email us at: editorial@openbankingexpo.com

Yvonne Dunn leads the financial services technology practice at law firm Pinsent Masons. May/June 2019

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VIEW FROM THE TOP

Ready for regulation Chris Michael Head of Technology, Open Banking Implementation Entity

he Open Banking ecosystem has been growing rapidly in the UK over the last couple of years. There are now over 230 third party providers (TPPs) and 55 Account Servicing Payment Service Providers (ASPSPs) enrolled – over half of which are regulated entities, with the remainder pending authorisation. There is a growing number of Open Banking-enabled propositions on offer, and these are already delivering real value to individuals and businesses. ASPSPs in UK and Europe now need to apply to their National Competent Authority for an exemption against having a ‘contingency mechanism’ in place in case a dedicated interface fails. For exemption, ASPSPs are required to demonstrate three months’ wide usage of their dedicated (API) interface before PSD2’s Regulatory Technical Standard (RTS) deadline of 14 September. Version 3.1 of the OBIE’s Standard for Open Banking APIs now covers all PSD2 in-scope accounts and requirements. It covers around 92 per cent of the UK’s banking market, with 38.2 million API calls made in March 2019. We are working to on-board the remaining eight per cent by September. ASPSPs who implement the Standard should increase the likelihood of TPPs engaging with them in testing and wide usage, and hence reduce their compliance risk in applying for an exemption. OBIE and UK Finance have also published example answers for the FCA forms.

Over the last year, OBIE has been working with the OpenID Foundation (OIDF) to develop a Security Conformance Tool, and has developed a Functional Conformance Tool for the Read/Write API Specifications. It has also published checklists for both Customer Experience Guidelines and Operational Guidelines. These are all open source and available for anyone to download without registration. Both OBIE and OIDF have taken further steps in offering certification services. Although these are based on self-certification, they offer an independent validation for ASPSPs to share with TPPs and regulators. When the roll out of Open Banking began in 2018, OBIE developed a trust framework called the Open Banking Directory. Over the last year, the Directory has evolved and developed further, offering additional benefits over and above relying on eIDAS certificates alone for identification. OBIE also offers a comprehensive support service for enrolled participants, including technical support and participation in regular Testing Working Group meetings for discussion of issues and problem solving. Critically, the testing team provides a ‘buddy-up’ support service to ensure that ASPSPs and TPPs can collaboratively test connectivity.

➽ If you would like to comment on this opinion piece, please email us at: editorial@openbankingexpo.com

The core infrastructure being put in place by firms enables competition within the market: ultimately helping consumers and small and medium businesses. We are starting to see the narrative shift: beyond regulatory/ compliance programmes to embracing the commercial opportunities that an API economy can offer customers. Therefore, OBIE has recently published Version 3.1.2 of the Open Banking Standards, enabling additional functionality over and above the requirements of PSD2, including two-way (push) notifications, SCA exemptions for trusted beneficiaries, and enhanced payment status. We are now working on a suite of ‘premium API’ standards for use cases which are not explicit PSD2 requirements, but where there is significant market demand. Initially the focus is on propositions covered under the CMA Order Roadmap – such as variable recurring payments (VRPs) and refunds – and recommendations from the API Evaluation Group. The CMA’s foresight – requiring OBIE to develop a robust standard and then work with the CMA9 to implement APIs consistently, 18 months ahead of PSD2 deadlines – has been of real value to the market. While still in the early stages, the vibrancy of the UK Open Banking ecosystem is a testament to many months of hard work. So much has been achieved, and more remains to deliver a mature, market-driven platform for innovation, competition and customer-centric service. ■

Both OBIE and OIDF have taken further steps in offering certification services. 24 O P E N B A N K I N G E X P O . C O M

May/June 2019

Insight Fouad Husseini Founder, Open Insurance Initiative

“Collaboration is the foundation of ecosystems, allowing start-ups and incumbents to fundamentally upgrade their game plan and play a primary role in the digital era.”

he quickly-rising number of conferences, InsurTech (insurance technology) hubs, podcasts and online InsurTech magazines across the globe is indicative of an industry that is looking to reshape its image, products, and customer experience. A report by Capgemini said 67 per cent of InsurTech executives agree that the ability to collaborate and integrate into ecosystems is a distribution strength. Incumbents are in alignment, with 57 per cent agreeing that co-operation could unlock significant value. Collaboration is the foundation of ecosystems, allowing start-ups and incumbents to fundamentally upgrade their game plan and play a primary role in the digital era. That is precisely where Open Insurance comes in. The Open Insurance Initiative (OPIN) has sought to redefine the economics and mechanics of serving large numbers of customers, in the belief that insurance ecosystems hold much of the transformation hoped for by consumers and financial services. The real value of Open Insurance is unlocked through developing specific use cases and applications. Incumbents should identify and crystallize relevant use cases for their own business needs. Additionally, companies in other sectors can become part of this financial services ecosystem if they bring in orthogonal data which includes non-financial data to provide a more comprehensive and detailed view of the customer. These players may have large customer bases and advanced analytics capabilities created

for their core businesses, and they can use these advantages to make rapid moves across sector boundaries. An ecosystem enabled by open APIs is, in many cases, a system of unification, leading to services powered by an aggregation of different APIs, from different suppliers across multiple ecosystems. New products introduce businesses to new markets and to customer segments that were previously uninterested in existing offerings. Archetypal signs of disruptive use cases driving hyper-scale growth could be characterised by the following developments: • Real-time processing and decision-making, unhindered by human intervention • Sharp personalisation, matching needs to products, driven by accurate prediction systems • Data integration and analytics capabilities driving opportunity (use case) discovery • Rapid moves within the insurance sector and across sector boundaries to capture new opportunities. Technically speaking, the current InsurTech domain can be divided into three spheres; the first includes digital distributors of various forms including: marketplaces, B2B2X distributors, digital brokers, personal financial apps and other digital interfaces providing auxiliary services. The second includes businesses that provide highly-technical services to incumbents, InsurTech and other third parties involved in the ecosystem, for

example, data analytics-as-a-service, claims management, VR and AR systems, policy administration solutions etc. The third is composed of fully-digital insurers, which now also includes Usage Based Insurers, micro-insurers and P2P insurers. The long-term survivability of any of the new ecosystem participants, incumbents and InsurTech alike, will ultimately depend on the profitability and the scalability of their operating models and the amount of play that regulators allow for new business models to emerge and flourish. OPIN is a product of both worlds and an enabler of deep integration between incumbents and third-party providers. The OPIN white paper discussed at length the need for global standardised APIs and enabling standard data design within the insurance industry to create networks that can scale. We will shortly introduce a new white paper that aims to define and clarify the main components of Open Insurance in addition to tackling the thorny issues of data sharing, security and intellectual property rights. Fulfilling this promise as an industry initiative, on a global scale, has meant engaging in highlevel discussions with regulators, insurers, start-ups, consumer agencies, technology vendors and international initiatives. We are determined to continue building momentum towards creating, adopting and sharing common standards in insurance. ■ Fouad Husseini is a writer and thought leader on insurance innovation. 25

L E A D F E AT U R E / C A N A D A

26 O P E N B A N K I N G E X P O . C O M

May/June 2019

CANADA

DUE NORTH

Is Canada ready for Open Banking?

With a government consultation underway and the banking sector in the middle of payments modernisation, is the door open for Open Banking in the great white north? Xxxxxxxxx reports With a government consultation underway and the banking sector in the middle of payments modernisation, is the door open for Open Banking in the great white north?? Geordie Clarke reports

anada is often viewed as a leader when it comes to fast consumer adoption of new technology. It was quick to adopt contactless payments and embraced chip and PIN long before other large economies, such as the US. Electronic payments have become so popular that Canada is widely considered a cashless society. â&#x20AC;ş

L E A D F E AT U R E C A N A D A

on Open Banking delivered a consultation document identifying the pros and cons of the technology. With a stakeholder consultation ongoing, there are expectations it will lead to some form of legislation to formalise the system, but no timeline has been provided. “The risk of Open Banking breaking out in Canada is not imminent,” says Clayton Weir, co-founder and strategy lead at Fi.Span, a ﬁntech serving the business banking market. The advisory committee has sparked activity in this area, but it’s still not widely understood by the public and there is an upcoming federal election to consider. “I think we’re a few years out from having a deﬁned Open Banking policy,” he says.

› Indeed, data from Payments Canada show that electronic payments accounted for 65 per cent of transaction volumes in 2018, while the use of cash and cheques fell by 30 per cent between 2012 and 2017. Yet when it comes to rolling out Open Banking technology, Canada is not there yet. While banks and fintechs are dabbling with apps and application program interfaces (APIs), there is still no regulatory framework to tie it all together. Making matters more complicated is the fact the banking sector is in the midst of modernising its payments system, which is seen as essential for Open Banking to work effectively. Nevertheless, there are clear signs that all these elements will come together – it will just be a matter of time. Gathering momentum To some minds, Canada already has a significant amount of Open Banking activity. “If you define Open Banking from the point of view of an environment where end-users are able to control and give permission to access their information, that’s already taking place,” says Yassir Jiwan, digital innovation lead at Equifax Canada. “But if your definition is a regulated framework that puts in place key guidelines and regulations, a formal structure of who is participating and who is not, as well as a dispute resolution processes, that is still a ways away.” Data from the EY Open Banking Opportunity Index show that, compared with its peers, Canada ranks eight of 10 when it comes to readiness for adopting Open Banking, sitting behind the UK, China and the US. While it is ranked mid-pack for its innovation environment, it came last for adoption potential and its regulatory environment. This will come as little surprise to those in the Canadian financial services sector. In January 2019 the Canadian government’s Advisory Committee

If you deﬁne Open Banking from the point of view of an environment where end-users are able to control and give permission to access their information, that’s already taking place. Yassir Jiwan Digital Innovation Lead, Equifax Canada

Payment modernisation Several factors are holding the industry back. First is the lack of cohesion and a policy framework. But another issue is Canada’s antiquated payments system. While consumers beneﬁt from modern payment systems and instant transfers through the Interac system, so far there is no faster payments system for bank and business transfers. Payments Canada is in the process of developing a realtime payments system, but it is still a few years away from delivery. Weir says this could pose problems for Open Banking initiatives. At present, only Schedule One banks have direct payment systems. “Payments is where the rubber meets the road for Open Banking. This is impinging the ability of ﬁntechs to deliver a service.” While he says it’s a positive step to see major banks making APIs available for developers, so far they are only doing this with card data. Weir explains that this will only becoming meaningful for consumers if banks start opening up APIs for payments. “For a successful Open Banking platform, it will require payment modernisation to be successful and offer adequate access to third parties.”›

May/June 2019

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0 D

T EE E D

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EXPERT SPEAKERS CONFIRMED

Julien Brazeau Senior Director & Special Advisor Finance Canada

Carolyn Burke Head of Enterprise Payments Royal Bank of Canada

Yassir Jiwan Head of Innovation Equifax Canada Co.

Roy Kao Managing Director MaRS Fintech

Yves-Gabriel Laboeuf Chief Executive Officer & Founder Flinks

Michael Legare Vice President, Digital Transformation National Bank of Canada

Andrew Moor President & Chief Executive Officer Equitable Bank

Lisa Nelson President Equifax Canada Co.

Jennifer Reynolds President & Chief Executive Officer Toronto Finance International

Eyal Sivan Senior Director APIs & Microservices CIBC

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L E A D F E AT U R E C A N A D A

› Industry-driven adoption There are reasons to be optimistic. Several of the largest banks have launched their own technology and API projects, in some cases providing APIs to fintechs that are developing new products. For instance, Royal Bank of Canada launched its API developer portal in 2018 as part of its effort to promote Open Banking technology. For Diana Halder, Canadian payments practice lead at consultancy Capco, the problem is that firms are taking a tentative approach. “The big banks are rolling out open APIs that dip their toe into Open Banking without true exposure,” she says. “While each bank is experimenting with the technology, value propositions and governance of Open Banking in a methodical manner, they are doing so while still protecting their valuable data.” Halder says these APIs don’t expose or use customer, account or payment data, as would be the case under PSD2. As a result, they may seem tame in comparison to what is available in the UK. “The fact that they are exploring Open Banking is a positive step. We just need a healthy dose of market demand to get them to accelerate their implementations.” The banking industry appears broadly supportive of Open Banking. The Canadian Bankers Association (CBA) says it strongly supports innovation and competition in the financial services sector and welcomes the opportunity to participate in the Open Banking consultation with Finance Canada. In its response to the government consultation, the CBA highlighted risks associated with consumer protection, privacy and confidentiality, financial crime and financial stability. “Addressing these risks will help set the necessary pre-conditions for success in order for Canadians to truly benefit from Open Banking,” the CBA concludes.

“We see API banking as an opportunity to work collaboratively with ﬁntechs and software developers on innovative tools and experiences for our clients,” an RBC spokesperson explains.

Meanwhile, Royal Bank of Canada (RBC) says it supports innovation and competition within a safe and sound framework, suggesting it anticipates the government will put in place regulations similar to the UK and Europe.

Lessons from abroad In Europe and the UK, the introduction of PSD2 served to propel the Open Banking sector and legitimise the technology. Nick Caley, vice president of financial services and regulatory at digital identity company ForgeRock, says this legislation served to kickstart a movement. “By forcing banks to give third-party service providers direct access to their customers’ financial data, PSD2 will transform the financial services payments landscape,” he says. This may provide some inspiration for Canada’s legislators, but the European experience is not without its shortcomings. “PSD2 defined the participants, their roles and even mandated Open Banking, but lacks a standardised way to communicate results in a proliferation of unique communication methods, varying degrees of quality and the lack of ubiquitous adoption,” Halder says. “One of the key things we can do in Canada is standardise Open Banking. Standards that take the best from other jurisdictions, are in lock-step with ISO, are curated for our financial services ecosystem, and can be leveraged and are compatible with the work we are doing for payments modernisation.” While legislation is one way to solve this problem, the answer may lie in industry co-operation. “If the Big Six could agree upon and adopt a standard without waiting for one to be mandated by the regulators, we could leapfrog other countries and focus our energies on realising value-added services rather than just the more commoditised elements of Open Banking, such as communication methods,” Halder says. ■

May/June 2019

OPEN BANKING EXPO

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Insight Faith Reynolds Independent Consumer Representative for Open Banking Implementation Entity

“The evolution of Request to Pay will give people the option to pay their bills in chunks as their budget allows, offering much more ﬂexible ways to pay, in keeping with the growth in the gig economy.”

t’s conference season! Earlier in the month I sat on a panel with Catherine Miller from think tank Doteveryone at the UK Regulators Network conference to discuss regulation and innovation. Catherine shared the results of research conducted across the tech industry that shows a real tension between the enormous opportunities that tech provides and the potential harm it can inﬂict. The research found that 59 per cent of interviewees working in AI confessed they’d experienced decisions that could lead to negative consequences for people and society and 29 per cent of this group had left as a result. There’s a growing feeling among techies that tech – like Open Banking – should be a force for good. In fact, 63 per cent want more opportunity to consider the impact of their work on people and society. More than three quarters (78 per cent) of respondents want help by way of practical resources, workshops etc that help them build technology in a way which considers its impact. This backs up research by the Code Collaboration on a code of conduct for Open Banking – people want help to navigate the ethics landscape. I was pleased then to contribute to a new playbook by consultancy Greater than Experience on rebuilding trust in financial services. This is a free, practical resource that provides a framework for firms. It starts by putting consumers at the centre, follows by offering tools to support clearer and more effective communication of the product and finishes by looking at how to 32 O P E N B A N K I N G E X P O . C O M

operationalise data ethics. This involves being clear about what your firm believes in, fighting to defend it and optimising your organisation’s activities for socially-preferable outcomes. Social and financial inclusion were hot topics at other conferences too. Open Banking is seen as a key enabler, especially in developing countries, where firms are utilising the mobile telecoms network to grow access to credit for small businesses and consumers. Mobile money transactions can be shared to allow for better credit checks, allowing businesses, typically starved of credit, to grow and benefit the community. Closer to home, the Treasury Select Committee’s Access to Cash review was published. The headline finding is that the UK isn’t ready to go cashless because digital payments don’t work for everyone. This suggests the UK has a lot to learn from other countries and could be further exploiting the mobile network to reach under-served areas of the country. The results of a research project by Andra Sonea at Warwick University, part of the Think Forward Initiative, will be published later this Summer. They will show the financial and digital ‘void’ in the UK. Access to Cash has recommends that government, industry and regulators prioritise digital inclusion in payments, which should offer another boost to Open Banking. The risk of overspending and getting into debt is one barrier to the take up of digital payments. PISP work on real-time can offer much greater transparency of what’s left in people’s accounts. The evolution of Request to Pay will

give people the option to pay their bills in chunks as their budget allows, offering much more ﬂexible ways to pay, in keeping with the growth in the gig economy. It’s great to see that Open Banking is working with the FCA Sandbox on payment initiation service (PIS-based) variable recurring payments to test the consumer protection framework and make sure it’s fit for purpose. Variable recurring payments could give people much needed control over stopping and starting payment arrangements – something missing from other options, such as continuous payment authorities. One of the challenges highlighted in discussions over the last month was the commercialisation and monetisation of Open Banking. Regulators and industry representatives both cited difficulties getting firms to focus on the social inclusion aspects of Open Banking. Similarly, Doteveryone found that revenue, growth targets or incentives were a key barrier to looking at the social impact of tech. But most did not see financial success and responsible practice as being in conﬂict – it is possible to be both financially successful and deliver socially preferable outcomes. The challenge then is one of innovation: innovation in thinking, prioritising and working, as well as in product. ■

➽ If you would like to comment on either of these opinion pieces, please email us at: editorial@openbankingexpo.com May/June 2019

Insight Liz Oakes Executive Vice President (Market Development) New Payment Platforms, Mastercard

“By collaborating rather than competing with alternative service providers, financial institutions can leverage the vast amounts of data at their disposal to secure and expand their positions within the value chain.”

pplication programming interfaces (APIs) have overwhelmingly become banks’ preferred mechanism to meet their PSD2 obligations, but a year on, much of the conversation is still centred on their ability to deploy them effectively. Perhaps a better question is not how financial institutions comply with new technological obligations, but rather how they use APIs to drive revenue. Financial institutions possess a tremendous amount of consumer data that is not covered by the PSD2 mandate — data that can be monetised by making it available to merchants and subscribing third-party providers via premium APIs. Under such a model, financial institutions would become ‘hubs’ of capital and consumer data, creating an open marketplace for third party propositions while shielding themselves from the downside of any failed investment. Unlocking the opportunity, and doing so early enough, will enable them to secure their position at the centre of an ecosystem that is becoming increasingly open and fragmented. Use cases exist in credit financing, where APIs can be used to return improved and faster credit decisions by sourcing – with consumer consent – relevant data from multiple sources in real-time. Third party credit financers and a number of larger retailers offer the option to pay in instalments directly to the consumer, but by doing so open themselves up to potential fraud and credit risk. Now, the credit finance proposition is maturing. Bringing together

banking and credit data can help lenders determine a consumer’s eligibility for finance when they can’t prove their credit history, such as those who have moved to the UK or have ‘thin files’. Open Banking account information service providers (AISPs) are becoming active in this space, promoting financial inclusion for those previously overlooked. By using an accurate and transparent scoring system based on data that the consumer has consented to accessing, it provides a fairer presentation of the individual’s creditworthiness. For business lending, premium APIs can provide access to business, director/owner information and credit scores directly into a third party provider’s application to speed up commercial credit decision-making. The ability to provide services in this way is key for banks to thrive in the digital economy. Beyond this, opening up access to consumers’ bank data could accelerate financial inclusion and equality for unbanked, underbanked and ‘unhappily-banked’ populations: solutions that leverage data analytics can help consumers better understand their spending habits, improve their decision-making, and automate certain actions on their behalf, such as transferring money between accounts to avoid overdraft fees. Predictive analytics could be used to project a consumer’s future financial health so they can plan and prepare for retirement, for example. They could even help to identify if a consumer might start to struggle with their

finances, enabling preventative measures to be taken. All this is likely to result in a changing role for banks. While incumbents will continue to be active in high-yield sectors like mortgages, doing nothing could see them retrench to peripheral propositions within their API ecosystem. But by collaborating rather than competing with alternative service providers, financial institutions can leverage the vast amounts of data at their disposal to secure and expand their positions within the value chain while dynamically integrating offerings from other players. This presents an opportunity for them to expand into adjacent industries, such as retail, travel and health. We would expect to see a shift towards consumer experiences facilitated rather than orchestrated by finance; where banks play a deeper role in consumers’ digital lives. While financial institutions and third party providers wrestle with the challenges and opportunities of Open Banking, they’re looking for trusted partners to support them. Mastercard has developed a suite of solutions, including a connectivity hub, a dispute resolution mechanism and a fraud monitoring service which provides real-time verification of third-party registration status, combined with fraud monitoring and alerts. With pilots in the UK and Poland, the first connectivity hub customers are expected to go live in June.■ For more information please contact OpenBanking@mastercard.com 33

F E AT U R E / E M E R G I N G S U C C E S S O R S

Not about banking As Open Banking evolves beyond apps that collate customer accounts, the incentives for customer adoption are becoming clearer. Here we look at some of the innovators creating a buzz… Joe McGrath reports

s the wider potential from Open Banking begins to be more commonly appreciated on the global stage, the financial industry and its investors are keeping a close watch on those companies ripe to become the stars of tomorrow. Legacy players in the banking sector have realised that the traditional operating model of offering current accounts will be insufficient to remain competitive over the long-term and have started looking at complementary services they can buy or build. “You are seeing quite a shift in terms of the old school,” says Cliff Evans, Capgemini’s digital lead for Europe (financial services). “You are seeing huge amounts of energy coming from

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EMERGING SUCCESSORS

‘how do I go to the customer’ and ‘ what are the new propositions that I need?’” Evans notes that the legacy sector’s light bulb moment was captured perfectly in the 2018 branding campaign of Singaporean bank DBS, which has since adopted the tagline “live more, bank less”. DBS’s campaign underscores the sector’s growing appreciation that it will have to offer a range of services which use customer data to improve their overall financial wellbeing. This has also been reflected in the latest wave of Open Banking growth businesses. Lower household bills Youtility is a service founded in 2016, which uses information from customer bank accounts to identify whether they are paying too much for their utility bills. The app looks at the current deals available on the market and flags what it considers to be high bills or large payments, compared to other customers with similar household credentials. The company estimates that billions are currently being needlessly spent by UK households on the wrong utility contracts. Research conducted by the business found that more than 80 per cent of Britons are on the wrong contract for at least one utility and that price comparison sites only serve a small fraction of the market. Charlie Quigley, co-founder of Youtility, says information contained within customer bank accounts could be better used to enable customers to get a better deal. ›

F E AT U R E / E M E R G I N G S U C C E S S O R S

› “Price comparison websites have been around for 15 to 20 years and yet only 20 per cent to 25 per cent use them. The key information that is held by a bank can be used to improve the experience of someone looking to change utility provider,” he says. “For us, it is essential to have access to that data to understand when the best time is to prompt a user, providing a notification at the right point.” Youtility has already been the recipient of several UK government grants to fund its development and has worked with non-profit organisations such as Citizens Advice and Ofgem. So far it has focused on energy switching, but is looking to expand to broadband internet, digital television and mobile phone contract comparison services. Credit rehabilitation Future banking challenger Fiinu is the brainchild of Marko Sjoblom, an academic and champion of plug-in banking. At the time of writing, Fiinu was in the pre-application phase to become a registered bank with the Bank of England. The bank, which promises to put “people before profits”, will target consumers with poor credit scores who have been refused access to an overdraft. It will offer a bolt-on overdraft facility as an alternative to high cost short-term credit options. Sjoblom says that his business model will succeed because of the emergence of two key trends: the rise of plug-in banking and the growing importance of ethical behaviour in financial services. “Plug-in banking is going to be the transformative model,” he says. “You could already think of the Transferwises, Paypals and Revoluts of this world as forms of plug-in banking. The banking industry is turning into more of a utility.” He adds: “One must be able to make money to have a sustainable business, but treating people nicely is a shift we will increasingly see in the financial services market.” Sjoblom has already built a rich knowledge of the short-term credit market, having worked with the UK’s Financial Conduct Authority on the introduction of new regulations to the lending sector. 36 O P E N B A N K I N G E X P O . C O M

Cheaper TV and gym membership The introduction of pay-per-use subscription services has taken off in recent years. Contract-free television services such as Netflix and Now TV are prime examples. Similarly, contractfree gym services and mobile phone packages are increasingly popular. But, while consumers have signed up for these services with no strings attached, they may be losing out financially, with contract-based suppliers having since lowered their prices to try and regain market share. Financial monitoring app ‘Emma’ aims to spot such money-saving opportunities by looking at the regular spending patterns in a current account and advising whether better-value alternatives may exist. The app also monitors other banking services, such as overdrafts, to see whether a bolt-on alternative might be cheaper than a customer’s current bank. The company behind Emma – Emma Technologies – offers a subscription service called Emma Pro, which subscribers can buy from £3.49 a month. The supercharged version of the app allows more intricate budgeting in

Our users can now manage and track their Chip savings alongside more traditional finances to make wiser and more transparent decisions. Edoardo Moreni Chief Executive, Emma

customised categories and the ability to rename transactions from customer bank accounts. Edoardo Moreni, chief executive of Emma, says the app was built to “empower millions of individuals to live a better and more fulfilling financial life”. Emma launched in January 2018, raising £500,000 in an initial seed round six months later. Among the investors was Kima Ventures, known for its investment in Transferwise. In April, the company partnered with emerging fintech brand Chip to enhance the available analysis through the app. The company said that Chip customers save around £7m every month by using its analysis service. “Our users can now manage and track their Chip savings alongside more traditional finances to make wiser and more transparent decisions,” Moreni says. Improved corporate finances Personal finance is only part of the Open Banking story. Business banking is seeing huge investor interest in new players entering to challenge the status quo. Once the monopoly of only a handful of card issuers, most notably American Express, the world of corporate purchasing cards is also on the brink of change. Challengers such as Brex in the US are hoping that a unique underwriting algorithm and API link to corporate bank accounts will allow them to win a segment of this potentially lucrative payments market. The company identified that young businesses applying for charge cards often find approvals are linked to the founders of that business. Unlike traditional credit profiling of SMEs, Brex uses a link to corporate bank accounts to inform its own proprietary underwriting process. Over time, it uses this and data from Experian and Dun & Bradstreet to monitor a company’s on-time payment history and improve the business’s credit standing. In 2018, the company secured $57m in funding from major investors, having attracted more than 1,000 customers. Among the investors published in a list by Business Insider were Paypal co-founders Peter Thiel and Max Levchin. With such high-calibre backing, these propositions could be stars of the future. ■ May/June 2019

Open for business? Don’t forget to tell the businesses

SME FOCUS

Conrad Ford Founder & CEO, Funding Options

s with so many innovations in the world of finance and technology, Open Banking was going to revolutionise the way consumers and businesses manage their finances and access financial services. It was going to make everyone a winner: consumers would get smoother, more comprehensive and secure access to finance; financial companies had a new way to offer their smooth, comprehensive and secure services to customers; and the financial and technology sectors would benefit overall from increased competition from scrappy up-and-coming providers able to offer their rich variety of products and services. But it’s no secret that Open Banking has had a slow start to life. It has yet to penetrate the public’s consciousness enough to fundamentally change the way people think about their finances. Research carried out by the Unlimited Group in October 2018 found that only a quarter of people have heard of Open Banking. Unlimited also found that less than one in ten people have actually used Open Banking and that understanding of it is “simplistic and confused”. What’s interesting from Unlimited’s research is that what some people said they liked most about Open Banking was precisely what others said they liked least about it. People were impressed with the clarity, transparency and simplicity of the highest-rated services (we can assume these comments came from people who had used Open Banking). Meanwhile, other respondents expressed their concerns and mistrust of “AI technology being deployed” and of the system’s perceived bias and complexity. What this tells us is that those services using Open Banking well are getting the message of simplicity and security across to users. The issue is that the public at large just isn’t aware enough of Open Banking to use it

confidently. The message of Open Banking’s benefits needs to be spread further, wider and more persistently. One of the sticking points we’ve noticed has been the challenge of evolving the relationships between businesses/consumers and their banks. Despite the 2007/08 financial crisis and the undercurrent of mistrust people still have towards the banks, they are reluctant to do anything that might break that long-standing relationship. Banks should feel more obliged to educate their customers about Open Banking. While one of the aims of Open Banking was to increase competition in financial services, that doesn’t mean people will desert their banks. Apps like HSBC’s Connected Money rate well among users, proving that the big banks can use their innovation and resources to better serve their customers. There’s also something to be said for digitally-native younger generations who are leading the shift in how we manage our finances. For example, Millennials and Generation Z are far more likely than older generations to open accounts with digital-only challenger banks. We expect this trend to be reflected in business too, with

“What’s interesting from Unlimited’s research is that what some people said they liked most about Open Banking was precisely what others said they liked least about it.”

those same entrepreneurial under37s being equally open-minded about alternative finance and the more personalised and nuanced service that Open Banking offers. We also believe that much more could be done by the accountancy profession to help their business clients manage their finances through Open Banking. We spread the message to the accountants we work with that Open Banking is a gamechanger and gives their clients better access to the finance that’s right for them. More than 70 per cent of smaller businesses would prefer to forgo growth than borrow external finance. If the virtues of Open Banking were communicated more widely, particularly the points around its robust security and ease of use, businesses would be more willing to delve into what external and alternative finance can offer them. Businesses want to grow and succeed – you don’t have to be an industry insider to glean that. Entrepreneurs have the confidence and ability to start their businesses and run them well, and Open Banking makes their lives easier and gives them the time to focus on running their business. We’ll continue to do everything we can to tell small businesses about how Open Banking can help them, and we hope other finance and tech companies will do the same. We can discuss Open Banking until the cows come home. But if we don’t communicate it well enough to our customers, we’ll fail them and we’ll fail ourselves. ■

➽ If you would like to comment on this opinion piece, please email us at: editorial@openbankingexpo.com

Conrad Ford is Founder and CEO of Funding Options, an online marketplace for business finance across Europe. 37

F E AT U R E / R E G U L AT I O N

The next wave While regulation can be credited with driving the speed of development of Open Banking in the UK, concerns lurk that more rules are coming. Jennifer Turton reports

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R E G U L AT I O N

he Open Banking sector is yet to reach the final Payment Services Directive 2 (PSD2) compliance deadline of 14 September, and already there are discussions about the potential for ‘follow-up’ regulations. It is widely predicted that MiFID III and PSD3 will, at some point, become a reality, along with other new rule sets. To date, regulation has been a key component in the speed of Open Banking development, but experts are warning that innovation could be stifled by the introduction of further rules. They say it could lead to the industry being overcomplicated and have a negative impact on innovation from smaller players. Chris Allen, digital and innovation director at financial services consulting firm Axis Corporate, says there should be a lighter touch regulatory regime for emerging players in the banking sector. “While Open Banking and sandbox schemes have proven valuable, as banking becomes more widely distributed through a proliferation of firms offering banking-like services, the regulator will need to think about how they engage

with a range of smaller businesses.” Regulators face a dichotomy between applying sufficient and proportionate regulation which is fair and rigorous, and promoting competition through enabling innovation. They have to do this while avoiding stifling measures that penalise sub-scale operators or reward legacy scale. “The sandbox is helpful for start-ups but less so for challengers who are already in the market,” says Allen. “There is a need for ‘growth phase’ regulation where the intensity increases, but not to the degree that the systemic risk players receive. This could provide the appropriate balance to prepare challengers for scale regulation without putting the brakes on innovation or aspiration.” Rules for the long-term Regulation, particularly PSD2, has been a driving force for change and innovation in financial services. What remains to be seen is whether this is a long-term benefit or cost to established players. According to Matt Stroud, managing director EMEA at fintech Flybits, half of retail bank customers who buy financial services products from ‘the competition’

There is a need for ‘growth phase’ regulation where the intensity increases, but not to the degree that the systemic risk players receive. This could provide the appropriate balance to prepare challengers for scale regulation without putting the brakes on innovation or aspiration. Chris Allen Digital and Innovation Director, Axis Corporate

say they would have bought from their bank if only they’d been asked. However, 83 per cent of customers delete marketing e-mails from their banks without reading them. “Banks are on the horns of an engagement dilemma,” Stroud says. ›

F E AT U R E / R E G U L AT I O N

› “With the next generation of regulations already being discussed, the major financial services players will need to move quickly.” Allen agrees that high street banks need to operate and think differently. “Forcing them to construct their businesses around their customers rather than the products they offer will be the necessary change that could unlock a range of customer-focused innovation,” he argues. “It is very difficult to achieve this in an environment that views the world through a product lens. We need cars – not faster horses.” This debate of product-centric versus customer-centric has resulted in established banks being increasingly wary of firms such as Facebook, Amazon, Apple, Netflix and Google. “Even though, Facebook and Apple aside, the others don’t have a product to speak of and instead curate or distribute other peoples´ content, they obsess around the customer and the experience they receive,” says Allen. “Applying this to banking could revolutionise the customer experience – people rarely comment on the Google search experience as it has become intuitive and frictionless.” Constantly evolving As with all regulations, any new guidance will require continuous reviews and revisions as the industry changes. Robert McKechnie, Open Banking expert at credit reference agency Equifax, points to international banking standards Basel I-IV as a good example of how regulation can be adapted to drive new insights and transparency as organisations evolve. “The same principle applies for PSD regulation,” he says. “The intent will undoubtedly change as more external factors are considered, such as Open Banking access to more than just online current accounts, and as new financial institutions come on board.” However, McKechnie warns that these developments are not without their headaches. “It’s important to achieve consistency in development

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Banks are on the horns of an engagement dilemma. With the next generation of regulations already being discussed, the major financial services players will need to move quickly. Matt Stroud EMEA Managing Director, Flybits

standards from a UK-wide perspective first, and then look to align these with global regulatory requirements.” He adds: “As non-banking organisations enter a sector dominated by traditional banking players, seasoned in the rules and compliance mechanisms, the demand for clear oversight from government and regulators will increase. These changing market dynamics could be a catalyst for further guidance and rule changes.” Marketplace model While Open Banking encourages nonfinancial organisations to work with fintechs and banking institutions, the regulator has a role to play in increasing confidence and promoting awareness among consumers. For now, guarantees such as the Financial Services Compensation Scheme, which protects up to £85,000 of customer deposits, provide some reassurance, but for many the high street bank is fast becoming an entity that isn’t considered a necessity. Research conducted by fintech Bud indicates a prevailing disconnect between millennials and their financial services providers, in part because of the technology-focused world in which they have grown up. Ed Maslaveckas, CEO at Bud, says: “The financial services industry isn’t fully meeting the needs of this generation. To solve this issue, the industry must work collaboratively with innovation specialists

to create solutions that support people with actual problems and ambitions – whether they are hunting for unique life experiences or planning for the future.” While there is rumoured to be an Open Banking Code of Conduct already in the pipeline, for third party firms operating in the space, Allen suggests the regulator could help further with the introduction of a banking quality kitemark. “The regulator is rightly focused on supply chain risk - banks cannot outsource problems by getting an external partner to provide the service and pointing the finger at them if it goes wrong. “The bank is the regulated entity and therefore has a duty of care to ensure that any services it provides are fit for purpose. This gets more complicated in a distributed banking structure where the bank is more of a distribution channel and less responsible for the full design and manufacture of products and services.” This, according to Allen, will encourage more collaboration with fintechs and other businesses, as banks must oversee the end-to-end process. However, this evolving ecosystem creates further complications for the regulator, particularly when it comes to tracing any potential failure points for customers. “The emerging model may mean that a single bank offering all the services becomes a dated concept. Monzo has set itself up as a ‘hub’ through which customers access their financial services. This is taking marketplace banking to the end state, while many heritage banks are not yet even comfortable with offering competitor products.” Banking is increasingly following an Amazon marketplace model, where the banks ultimately own the customer but provide fewer of the products and services that the customer consumes. “They have less control over quality and their skillset needs to change from owning to managing the service delivery,” says Allen. “This is becoming a more prevalent characteristic of the new banking order to which the regulator is reacting, albeit arguably more slowly than the pace of change itself.”■

May/June 2019

Preparing to take the leap Canada Focus

GLOBAL SPOTLIGHT

Andrew Moor CEO, Equitable Bank

n last year’s federal budget, Canada’s Finance Minister committed to studying the merits of Open Banking. Understandably, his decision triggered intense discussion among industry insiders and policymakers but we are now gradually seeing a broader conversation take place in the media. As a supporter of Open Banking but also an industry insider, I believe broad public engagement in this potentially game-changing framework is an absolutely crucial next step in its possible adoption. Like others, I anxiously await the report from the Advisory Committee on Open Banking to understand the advice the Minister is receiving on moving this project forward. Since the Minister’s announcement, many forums have discussed Open Banking, offered use cases, looked at case studies from other countries, and examined the challenges in embarking on this journey. My big-picture view is the deeper you look, the more compelling the case for adopting the principles of Open Banking in the Canadian financial services industry. How will Open Banking benefit our country? Equitable Bank examined the possibilities in preparing our submission to the Minister and our conclusion is that Open Banking has the ability to help Canadians in all walks of life, from individuals to businesses, including the small business sector that is the lifeblood of our economy and a key client constituent of my bank. For Canadians with fewer financial resources, Open Banking could help them to fully access their government benefits. For Canadians with deeper resources, Open Banking may help them to better manage their affairs with a number of financial services providers. Regardless of economic station, advice would be easily provided in an Open Banking environment where everyone’s financial position can be easily

consolidated and viewed from a single perspective, and financial literacy could also be improved. For small businesses, the ability to integrate multiple banking services with accounting systems has real potential to dramatically improve cash flow forecasting and reduce administrative burden, allowing entrepreneurs to focus on their core mission of servicing their customers. As we look around the world, the impetus for Open Banking seems to come from two main drivers: fundamental policy issues around consumers’ rights to their own data; and a desire to create a more competitive environment for financial services. Although Canada has yet to lay out a clear public policy rationale for Open Banking, it is easy to see how Canadian society can benefit both from a dialogue on data rights and greater transparency on pricing and products in what, by global standards, is a concentrated financial services sector. As the conversation on Open Banking has evolved, it is clear that there are as many different views as there are well-meaning people who have thought about the issues involved. Some, for example, put a lot of emphasis on the cyber-risk created by Open Banking while others see it as a solution for migrating four million Canadians away from the inherent risks caused by their use of screenscraping technology to a safer approach to consolidating data. Wildly different views are even expressed by people working in the same financial institution, which only proves that perspectives on Open Banking differ depending on the

seat you occupy I believe there is a bigger risk in doing nothing than there is in creating a properly controlled environment using APIs to give more security over customer data. Change is always hard, but Open Banking seems like change that is well worth making as we try to move Canada forward to an advanced digitally-enabled society. Other powerful advancements being made in payments modernisation and developments in digital identity will also improve the utility of the banking system. At Equitable Bank, and through our digital EQ Bank platform, we expect Open Banking to allow us to deliver new approaches that will make our customers’ lives better. I do not expect adoption of Open Banking to be quick, but believe that over a 10-year period it will be a game changer that fundamentally improves the financial services sector in Canada. Finally, there is debate about the role of government in advancing the Open Banking agenda. While industry needs to be involved and engaged in the process, success will only be achieved if there is a concerted political and regulatory effort applied in leading the way. Without such an effort, it will be hard to get the nation’s financial institutions together to agree on complex technical matters like data standards for APIs. A combination of the insight from industry experts and a cleareyed view from regulators with the authority and the force of will to push the industry to adopt appropriate solutions is required to make this project successful. ■

➽ If you would like to comment on this opinion piece, please email us at: editorial@openbankingexpo.com

Equitable Bank is a challenger bank offering residential lending, commercial lending and savings solutions in Canada. 41

Punch-Up

THE GLOVES ARE OFF The payments arena is fast becoming one of the most competitive subsectors of the banking industry, full of companies with vastly different backgrounds. Here we get some expert insight around the future of payments.

Bertrand Lavayssière Partner, Managing Director (UK) Zeb

With innovation at the height of the payments industry we checked-in with Bertrand Lavayssière, Managing Director at consulting firm Zeb, and asked which organisations will flourish over the next decade.

SINK OR SWIM?

WHAT TYPE OF ORGANISATION WILL DOMINATE THE PAYMENTS SECTOR IN 10 YEARS? Andrea Dunlop CEO, Merchant Acquiring, Europe Paysafe

Consumer cash payments are reducing while contactless payments are on the rise, presenting a challenge for the payments industry. We caught up with Andrea Dunlop, CEO, Merchant Acquiring, Europe to get her view.

CUTTING OUT CASH?

HOW CAN FIRMS CATER FOR ALL AGES AND LEVELS OF TECHNICAL AWARENESS?

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Punch-Up

It is very hard to say. There are banks that are extremely active in this environment, such as BBVA or BNPP. These banks have said they know they need to be proactive as well as compliant. They have recognised the risk of losing revenues and market share and have prioritised a digital strategy for payments. With ﬁntechs, there is a question mark for me. Yes, they are very technology-driven, but sometimes they lack understanding of banking processes; regulatory reporting; and the complexities that come with the composition of existing bank systems. When it comes to the global technology companies, I don’t believe Google will be dominant. It has tried three or four times to put together a payment wallet, but so far has tested and stopped several times over. It is a bit confusing where it is heading. It is reﬁning its strategy, but the outcome is not yet clear. Of course, there are other players, such as Visa, Mastercard and Swift.

Swift is a big machine. It has already gone through a big transformation, launching several major payments projects. Most recently, there was the launch of the New Payments Platform in Australia. It is moving slowly because of governance requirements but is now in a very strong strategic position for the long-term. It has also embraced blockchain technology, which some of the global banks, such as JP Morgan and Goldman Sachs, have signalled they are also keen on. Mastercard has become much more of a technology player. In Open Banking it is extending its businesses to value-added services and has very deep pockets. Visa, meanwhile, is a bit behind but is potentially more innovative than Mastercard. It has a larger client base, for starters, and is more focused on servicing for banks. I perceive Mastercard to be a little bit more technology-driven. Visa is innovative, but historically, more US-focused. The payment systems in the US is very behind in terms of infrastructure and innovation compared to the European market and some Asian markets. ■

According to reports, contactless transactions have now surpassed chip-and-pin sales in UK retail stores, hitting 51 per cent of all in-store card transactions in June 2018. This growth is being driven by both contactless cards and mobile wallets. According to our latest consumer research, 54 per cent of UK consumers habitually use a contactless card and 10 per cent use a mobile wallet. Of mobile wallet users, 84 per cent say that it is more convenient than cash, and 77 per cent agree that it is more convenient than making a payment with a contactless card. In addition, 61 per cent of UK consumers prefer to shop in stores that accept contactless payments and 45 per cent would like to see the £30 contactless limit raised. That is not to say cash doesn’t remain popular. Although consumers are carrying less cash on average than in previous years, 83 per cent of consumers still habitually use cash to make payments.

As it is online, the in-person payments ecosystem is fragmenting as new payment methods continue to gain traction. Merchants must respond to demand from customers for greater ﬂexibility and more choice when it comes to payment methods, and they will need a payment service provider (PSP) that can be adaptable and mindful of the bigger picture of solutions as the market evolves. ■

Mastercard has become much more of a technology player. In Open Banking it is extending its businesses to value-added services and has very deep pockets. Zeb is a strategy and management consultancy in the ﬁnancial services industry.

83 per cent of consumers still habitually use cash to make payments. Paysafe is a specialist payments company for the global ﬁnancial services industry.

Hub

The Open Banking & PSD2 Hub Global industry expertise facilitating the Open Banking ecosystem

Email: dennis.collet@bjss.com Company: BJSS

Telephone: +44 7894 230895

Contact: Dennis Collet

Website: bjss.com

BJSSS, the UK’s leading privately-owned IT & Business Consultancy. Winner of a Queens Award for Enterprise Agile, we work with major organisations, delivering IT solutions that millions of people use every day. BJSS delivers end to end solutions – from Design & Concept, Business Strategy & Product Development to IT delivery & implementation. Open Banking standards provide the platform to develop groundbreaking propositions for banks. BJSS can help drive value from these propositions harvesting consumers’ vast appetite for more convenience. BJSS Business Consulting highly experienced & skilled industry experts who are pragmatists & innovators who work at the intersection between technology & business.

Email: newmembers@cifas.org.uk Company: Cifas

Telephone: +44 20 3004 3600

Contact: Lee D’Arcy

Website: cifas.org.uk

Cifas is the UK’s leading fraud prevention service and has been for over 30 years. Through Cifas, over 500 member organisations from across the sectors share data and intelligence to protect their business, employees and customers from fraud and financial crime. Our method of collaboration and cooperation, bringing together sectors and organisations, is the most effective way to tackle financial crime. In short – fraudsters don’t discriminate, so neither should we. And as a not-for-profit member organisation, all our income is reinvested into creating new technology and innovations: continually improving your ability to detect, deter and prevent fraud and financial crime.

richard.johnson Email: @computershare.co.uk Company: Computershare

Telephone: +44 7711 856483

Contact: Richard Johnson

Website: computershare.com/uk

Computershare Loan Services (CLS) is a leading international third-party mortgage service provider. We currently administer around £100 billion of assets globally and support hundreds of thousands of customers throughout the lifecycle of their loans. We apply our expertise, experience and advanced technology to provide insight and a variety of mortgage services, including loan administration and the management of large volumes of complex data, to help mortgage l enders and investors optimise the performance of their portfolios within a highly regulated environment.

44 O P E N B A N K I N G E X P O . C O M

Retail Banking

AI & ML

API Development

Fraud prevention

Data sharing

Financial crime

Mortgage Servicing

Market-leading Analytics

Optimise Portfolios

May/June 2019

Hub

Want to see your company listed here? Contact Adam at adam.cox@openbankingexpo.com or call 020 7993 5159 calum.stephens@ Email: emergingpayments.org Company: EPA

Telephone: +44 20 7378 9890

Contact: Calum Stephens

Website: emergingpayments.org

The EPA connects the payments ecosystem, encourages innovation and drives profitable business growth for payments companies. Its goals are to strengthen and expand the payments industry to the benefit of all stakeholders by delivering a comprehensive programme of activities which addresses key issues impacting the industry including: A programme of 70 events annually, Annual Black-Tie award ceremony, Leading industry change projects, Lobbying activities Training and development, Research, reports and white papers. The EPA has over 130 members from across the payments value chain; including payments schemes, banks and issuers, PSPs, and more.

Email: robert.mckechnie@equifax.com Company: Equifax

Telephone: +44 7973 713723

Contact: Robert McKechnie

Website: equifax.co.uk

Equifax is a global information solutions company that uses trusted unique data, innovative analytics, technology and industry expertise to power organisations and individuals around the world by transforming knowledge into insights that help make more informed business and personal decisions. We believe in the power of partnerships, to help our clients use Open Banking to provide better experiences and better products for their customers. By combining our data assets, analytical expertise and innovative digital technologies, our partnership with Account Score and their AISP consents.online delivers real-time, end-to-end Open Banking solutions to enhance customer on-boarding processes and drive growth through better decisioning.

Email: aurelie.dousset@experian.com Company: Experian

Telephone: +31 70 440 4000

Contact: Aurelie Dousset

Website: experianplc.com

Experian is the world’s leading global information services company. During life’s big moments – from buying a home or a car, to sending a child to college, to growing a business by connecting with new customers – we empower consumers and our clients to manage their data with confidence. We help individuals to take financial control and access financial services, businesses to make smarter decisions and thrive, lenders to lend more responsibly, and organisations to prevent identity fraud and crime. We have 16,500 people operating across 39 countries and every day we’re investing in new technologies, talented people and innovation to help all our clients maximise every opportunity. We are listed on the London Stock Exchange (EXPN) and are a constituent of the FTSE 100 Index.

Payments industry

FinTech events

FinTech community

Open Banking as a Service (OBaaS)

Transaction categorisation & analytics

Improved online customer journeys

End to end open banking capabilities on demand Granular insights with cross border categorization as-a-service Next generation of credit and affordability to fuel frictionless digital journeys

Hub

The Open Banking & PSD2 Hub Global industry expertise facilitating the Open Banking ecosystem

Email: info@fintechnorth.co.uk Company: FinTech North

Telephone: +44 113 834 3133

Contact: Julian Wells

Website: fintechnorth.uk

FinTech North is an events-based initiative operating in the north. Founded in Leeds in 2016 by Whitecap Consulting and White Label Crowdfunding, it has now expanded into a series of conferences and events across multiple locations. FinTech North has hosted over 30 events attracting over 3300 delegate registrations from over 600 different companies, with speakers drawn from 20 countries. Open Banking is a central theme of many of the events.

Email: keith.hale@gdslink.com Company: GDS Link

Telephone: +44 3303 115116

Contact: Keith Hale

Website: gdslink.com

GDS Link is a global provider of credit risk management solutions. Our decision engine allows credit risk teams to simulate, test and deploy models, rules, strategies and policies quickly and accurately. This is backed by our data engine which incorporates connections to all major sources of data in the UK, allowing aggregation of credit and Open Banking data to be used for expenditure classification, customer identity and verification, and affordability. Our case management solution case centre uses a browser front-end backed by a NoSQL database to allow for rapid processing where manual intervention is required.

Email: enquiry@konsentus.com Company: Konsentus Ltd.

Telephone: +44 7785 388867

Contact: Brendan Jones

Website: konsentus.com

Konsentus provides Third Party Provider (TPPs) identity & regulatory checking ensuring Financial Institutions (FIs) are PSD2 open banking compliant. Delivered through a SaaS based solution using restful APIs with no set-up fee Konsentus operates across all 31 National Competent Authorities and works with the EBA TPP Register and 70+ QTSPs to ensure FIs never provide data to unregulated TPPs. Working both through partners including Mastercard, or providing services directly, Konsentus is the leading SaaS based TPP identity and regulatory checking solution in Europe.

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Regional FinTech

FinTech events

FinTech community

Credit Risk

Decision Engine

Open Banking

PSD2 open banking Compliance

SaaS based, plug and play TPP identity & regulatory checking TPP identity & regulatory checking for ASPSPS

May/June 2019

Hub

Want to see your company listed here? Contact Adam at adam.cox@openbankingexpo.com or call 020 7993 5159

Email: david.coghlan@openwrks.com Company: OpenWrks

Telephone: +44 7917 131478

Contact: David Coghlan

Website: openwrks.com

OpenWrks make Open Banking work. Our mission is to help everyone understand what they can afford to invest, save, borrow and repay. Using Open Banking, we make it easy for people to securely share their ﬁnancial information with companies they trust, so those companies can provide better, more personalised products, support and advice. We reduce costs for our clients by automating affordability assessments as well as increasing revenues by helping them provide the right ﬁnancial products and advice, at the right time, for their customers.

Email: molly.rosedale@token.io Company: Token Inc.

Telephone: +44 7554 663340

Contact: Molly Rosedale

Website: token.io

Token’s universal Open Banking platform, TokenOSTM, allows banks and third parties to interact in a digital global ﬁnancial services ecosystem. Token’s turnkey service helps banks comply with PSD2 in less than 90 days and launch new Open Banking propositions. Third parties, such as payment processors, merchants and developers, have access to account data and payment initiation at over 4,000 European banks through a single API, and the tools to deliver best-in-class use cases. Token.io is authorised as an AISP and as a PISP by the FCA in the UK and has passporting rights in an additional 20 countries.

Email: david.firth@callcreditgroup.com Company: TransUnion

Telephone: +44 7802 799501

Contact: David Firth

Website: transunion.com/uk

TransUnion is a leading global risk and information solutions provider to businesses and consumers. The company provides consumer reports, risk scores, analytical services and decisioning capabilities to businesses. Businesses embed its solutions into their process workﬂows to acquire new customers, assess consumer ability to pay for services, identify cross-selling opportunities, measure and manage debt portfolio risk, collect debt, verify consumer identities and investigate potential fraud. Consumers use its solutions to view their credit proﬁles and access analytical tools that help them understand and manage their personal information and take precautions against identity theft.

Income and Expenditure

Transaction categorisation

API

Frictionless bank direct payment

PSD2 compliance

End-to-end security

Easy-to-integrate end-to-end Open Banking solution

Granular categorisation and insight engine

Purpose-built solution for affordability and creditworthiness

Hub

The Open Banking & PSD2 Hub Global industry expertise facilitating the Open Banking ecosystem

Email:presse@ndgit.com Company: NDGIT

Telephone: +49 89/99 82 413–11

Contact: Stefanie Milcke

Website: ndgit.com

NDGIT stands for Next Digital Banking. The company provides a proven API platform for banking and insurance. Connecting banks and fintechs with digital ecosystems, its technology opens banks up to digital partners with Open Banking APIs and PSD2 solutions. The NDGIT fintech platform forms a technological backbone for new applications and IT landscapes in banking and insurance. NDGIT implemented Switzerland’s first open banking solution in 2017 and was awarded the Euro Finance Tech Award 2017 for the best collaboration between bank and fintech. In 2018 the NDGIT API platform won the CEE Fintech Challenge, the largest FinTech competition in Central and Eastern Europe.

COMMERCIAL CLARITY

Email: info@whitecapconsulting.co.uk

Company: Whitecap Consulting

Telephone: +44 113 834 3133

Contact: Julian Wells

Website: whitecapconsulting.co.uk

Whitecap Consulting is a strategy consultancy based in Leeds, Manchester, Milton Keynes, Bristol and Newcastle. It is particularly active in the digital, technology and FinTech sectors, with Open Banking and PSD2 being a common theme across many projects. Whitecap’s clients have included banks, building societies, technology providers, outsourced service providers, FinTechs, retailers, universities.

Open Banking Platform

World leading technology provider for bank’s connection

Trusted by 30 well-known banks

FinTech strategy consulting

Open Banking opportunity mapping

FinTech partnership strategy

Want to see your company listed here? Contact Adam at adam.cox@openbankingexpo.com or call 020 7993 5159 48 O P E N B A N K I N G E X P O . C O M

May/June 2019

Letâ&#x20AC;&#x2122;s make Open Banking work So everybody knows what they can afford to invest, save, borrow or repay. At OpenWrks we empower people to securely share their financial information with the businesses they trust and help those businesses deliver the right product at the right time for their customers. Find out how we can help your business better manage risk, reduce costs and increase revenues.

OpenWrks.com

THE LAST WORD

2019 is the year Open Banking goes back to the future

ver the last few months, I’ve seen and heard a lot of stories in the press about how the Open Banking revolution is yet to come or, more cynically, is never going to come; at least not in the way imagined. It’s an interesting view. When PSD2 took effect a little over a year ago, there was an expectation that a whole new era of bank innovation would sweep the market and the entire retail banking sector would be turned on its head overnight. The nay-sayer’s view, therefore, is that because there hasn’t been a sudden tidal wave of change, the Open Banking revolution hasn’t happened, isn’t happening, or possibly won’t happen. The reality is, while many are sitting and wondering when the Open Banking revolution will actually come, they’re missing the fact that it’s already happening. It’s worth pointing out that the purpose of the reforms was not to completely change the way everybody banked and interacted with financial institutions on a daily basis, unlike when everyone in the UK switched from signing for card payments to entering a four digit pin. The Competition and Market Authority’s objective with the reforms was to help open the market and drive competition and innovation, as well as give consumers the option and ability to save money, make better financial choices and lead to greater financial empowerment. The tech, the actual systems that allow Open Banking, are the technical rails that are allowing these changes. In the same way that consumers don’t talk about 3-D secure all the time, there’s not a lot of interesting conversation to be had about Open Banking itself.

However, what is interesting, and where the revolution is happening, is where new ground is already being broken when it comes to financial enablement and the benefits that Open Banking technology can have for consumers. Last year we provided the architecture to allow HSBC to create the first live use case by a tier-one bank to make a lending decision through Open Banking, and onboarded over a further 40 banking and alternative lending clients onto our Open Banking platform. These offerings are now being expanded into use cases across their portfolios of products and business. Examples include M&S Bank becoming the first lender to offer an Open Banking enabled mortgage journey in the UK, and First Direct Bank being the first provider to use Open Banking across all of their unsecured products, including personal loans and credit cards as well as overdraft applications. The technology was also used for the first Open Banking ID verification tool in the world, going significantly further than the basic requirements of Strong Customer Authentication required under PSD2. By integrating our online platform consents.online with Equifax’s Bank Account Verifier, lenders and AISPs can match individuals to their bank account in real time. And because the Bank Account Verifier has extensive coverage of all types of UK bank accounts and checks the device and the fraud data base, it’s able to add an extra measure of validation to provide robust security. We also launched the first Open Banking solution for the debt advice and debt solutions sector, working with The Insolvency Panel to allow the financially vulnerable to share their data with financial institutions, securely avoiding repeated and lengthy processes to provide their full income and expenditure over the phone. I’d say that’s all pretty revolutionary. And it’s offerings like this, being developed across different financial institutions and other sectors through the application of technology, that the revolution is actually all about. It’s here. It’s happening. And so, in reality it’s only now a matter time until people stop questioning when the revolution will actually come, and wonder how they missed it. ■

“When PSD2 took effect a little over a year ago, there was an expectation that a whole new era of bank innovation would sweep the market and the entire retail banking sector would be turned on its head overnight.”

AccountScore provides clients with access to bank transaction data through Open Banking and delivers cutting-edge transaction analytics.

Emma Steeley CEO, AccountScore

50 O P E N B A N K I N G E X P O . C O M

May/June 2019

E t E s R fa F ak fing re e B Br i

OPEN BANKING EXPO

Register now to supercharge your Open Banking knowledge Want to supercharge your Open Banking knowledge? Then secure your FREE PLACE to attend Open Banking Expo Magazineâ&#x20AC;&#x2122;s breakfast briefing for senior executives taking place on 3 July 2019 in London, brought to you in association with Equinix.

The agenda will deep dive into: Whether the sector is harnessing the opportunities presented by the PSD2 directive Latest regulatory update from the Open Banking Implementation Entity API- economy and navigating the magnitude of third-party relationships The latest Open Banking strategies across the FS landscape and whatâ&#x20AC;&#x2122;s required to ensure their success A review of the latest market partnerships and connected ecosystems

Speakers include:

Nilixa Devlukia

Irina Tsyganok

Andrew Kemp

Ireti Samuel-Ogbu

Eleni Coldrey

Paul Clark

Head of Regulatory, Open Banking Implementation Entity

Global VP Engineering Open Banking Lloyds Banking Group

Senior Open Banking Lead HSBC

EMEA Payments & Receivables Head, Treasury & Trade Solutions Citi

Director, Equinix

Chief Technology Officer, Tandem Bank

Space is limited for this exclusive event, so we urge you to book now to avoid disappointment!

Visit www.openbankingexpo.com/breakfast-briefing/ to secure your FREE place today!