Open Banking Expo Magazine Issue 1

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

Issue 1_Jan/Feb 2019 OPENBANKINGEXPO.COM

Survival of the fittest BANKING REVOLUTION IS HERE PAGE

28

FUTURE VISION

PEOPLE FIRST

BLISSFUL IGNORANCE

BIG INTERVIEW

Credit reference data in the Open Banking world

first direct on fulfilling customer desires

If you build it, will they come?

Danske Bank’s chief digital officer speaks

DRIVING INNOVATION IN OPEN BANKING THROUGH PARTNERSHIP

First authorised AISP to go live to market*

At Equifax we believe in the power of partnerships, to help you use Open Banking to provide better experiences and better products for your customers.

By combining our data assets, analytical expertise and innovative digital technologies, our partnership with Account Score and their AISP consents.online is already delivering real-time, end-to-end Open Banking solutions to enhance customer on-boarding processes, improve customer experiences and drive growth through better decisioning.

First live use of Open Banking in a credit journey Talk to us about how our Open Banking partnership could help you gain a competitive edge.

First Open Banking solution for ID verification

Email us at openbankinguk@equifax.com

Better understanding, better decisions and better products, enabling better customer relationships

Equifax Limited is registered in England with Registered No. 2425920.

Registered Office: Capital House, 25 Chapel Street, London NW1 5DS. Equifax Limited is authorised and regulated by the Financial Conduct Authority. *Open Banking Implementation Entity (OBIE) report on ‘the first 6 month of Open Banking’

Editorial

PUBLISHER’S WELCOME

W

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

In a sea of fintech media we will be 100 per cent focused on Open Banking.

elcome to the first issue of Open Banking Expo Magazine!

The audience at our recent London event was composed of highly-engaged lenders, fintechs and industry experts – all with the Open Banking revolution on their minds. Some were further along their journey than others, but what became clear at the event, and in subsequent social media interaction, is that there is much more to say.

We are already hearing from a large community of Open Banking and PSD2 global influencers who want to keep the conversation going, with more people joining the debate every day.

You only have to look at the Open Banking Implementation Entity’s analysis (pp22-23) to see the progress in just 12 months but there is much further to go. Open Banking Expo Magazine is your platform to keep that discussion going. We will ensure you have access to the most up-to-date case studies, news and analysis in the sector. In a sea of fintech media we will be 100 per cent focused on Open Banking.

Huge thanks to Equifax, our magazine launch partner, for supporting the first issue. Equifax has launched its consents.online Open Banking service which HSBC is now testing. You can find out more in our Q&A with their banking and financial institution expert Jake Ranson (pp24-25).

One year in, we are beginning to see a shift in the relationships between incumbent banks and fintechs in their quest to innovate for customers and keep pace with agile digital-only and ‘challenger’ banks. As we go to press, Mastercard has announced its appointment of regulatory technology firm Konsentus to deliver Third Party Provider (TPP) identity and regulatory checking solutions (p7).

It is not only consumers who will benefit from the product innovation Open Banking is enabling: small and medium-sized enterprises (SMEs) will also gain easier access to finance, something the government desperately needs to keep the economy bubbling away in uncertain times. This issue features Christoph Rieche, chief executive of online SME lender iwoca.

He makes a powerful case for the potential of Open Banking to unleash small business lending (p47).

2019 is going to be a busy year for Open Banking. We look forward to bringing you everything you need to know.

Enjoy the issue!

PS. Open Banking Expo London returns this November. Look out for the Europe event which will launch in Amsterdam this October.

03

Editorial

CONTENTS Issue 1_Jan/Feb 2019

Regulars

Cover Story

06 News

28 SURVIVAL OF THE FITTEST

he latest industry news: Customer T awareness falls short; TransUnion launches early adopter programme; and news from the first Expo.

Some predict that Open Banking will eventually lead

to the end of retail banks as we know them, but how are the legacy players protecting their businesses?

Joe McGrath investigates

Insights 26 33 42 43

Faith Reynolds, FSCP member Nick Harrison, first direct Leon Muis, Yolt Matthew Ford, Tandem Bank

Features

20 View from the Top

Imran Gulamhuseinwala OBE

16 Is ignorance bliss?

Why 2019 will be the year that Open Banking makes an impact.

41 Global Spotlight

Claudia Del Pozo

The C Minds head of operations on what Mexico is doing to harness the power of changing technology.

16

24 Equifax: Q&A

47 SME Focus

Christoph Rieche Open Banking offers ideal solutions for SMEs says iwoca’s chief executive officer.

Your directory of leading suppliers in the market.

50 Soapbox

s banks and fintech start-ups A launch tools that help people manage their finances, thoughts turn to the potential to tackle financial inclusion.

44 The battle for supremacy

Louise Beaumont

It’s time to plug more petals into the ‘data daisy’.

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

Jake Ranson, Equifax’s chief marketing officer, explains what the credit reference agency is doing in the Open Banking field.

34 Vulnerable customers

48 Open Banking & PSD2 Hub

year on from the launch of A Open Banking in the UK, consumer adoption levels are low and awareness of its potential lower still. Should we be worried?

44

Payments providers are spending big to protect market share from new entrants. But will it be enough?

Jan/Feb 2019

Editorial

The Big Interview

There are around 50 ideas I see again and again.

Not just here, but in other countries too.

14 Søren Rode Andreasen

Chief Digital Officer Danske Bank UK s competition between UK banks A builds, we talk to the man leading the fintech charge for Danske Bank in Northern Ireland.

22 Analysis

A look at some of the highlights of the first year in Open Banking, from the first successful transaction to the current state of play.

36 Viewpoint: Cifas

38 Brave new world

raud prevention service Cifas F knows all too well that fraudsters are always changing tack. Letting them in the door could cause catastrophic damage to personal finances and consumer trust in Open Banking.

s the UK celebrates a year A since the first Open Banking regulations came into force, the world is watching its progress.

But not every country is taking the same approach.

We consider the differences.

38

CO NTR I B U T O R S Edit o ria l Joe McGrath Senior Reporter editorial@openbankingexpo.com

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

Events Kelly Stanley Event Director Kelly.Stanley@openbankingexpo.com +44 (0)7970 641599

Geordie Clarke Reporter editorial@openbankingexpo.com

Christian Gilliham Art Director christian@cgcreate.co.uk

Commercial

Jenny Turton Reporter editorial@openbankingexpo.com

Laura Smith Head of Marketing marketing@openbankingexpo.com

Adam Cox Director Adam.Cox@openbankingexpo.com +44 (0)7825 295222

@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 (0)20 7993 5159 hello@openbankingexpo.com

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

Issue 1_Jan/Feb 2019 OPENBANKINGEXPO.COM

Survival of the fittest BANKING REVOLUTION IS HERE PAGE

28

FUTURE VISION

PEOPLE FIRST

BLISSFUL IGNORANCE

BIG INTERVIEW

Credit reference data in the Open Banking world

first direct on fulfilling customer desires

If you build it, will they come?

Danske Bank’s chief digital officer speaks

05

News

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

Customer awareness of Open Banking falls short

C

onsumers lack awareness of Open Banking technology and adoption has fallen short of expectations, according to industry experts.

In a panel discussion at the Open Banking Expo in November, executives from across the banking sector agreed more needed to be done to encourage consumers to adopt Open Banking in larger numbers.

Imran Gulamhuseinwala, trustee of the Open Banking Implementation Entity, said while Open Banking offers a unique opportunity, its launch in January 2018 was not as good as it could have been and this has had a negative effect on the customer journey.

“Open Banking has tremendous potential but we’ve got to get it right.

We created a great API that worked, but the customer journey was not great. It worked but was a little bit hairy,” he said.

“2019 will be the year we realise the full potential of Open Banking.

There’s been a change of sentiment.

The banks are getting behind it, launching their own products and bringing them to the market.”

Matt Ford, product and marketing director at Tandem Bank, said progress has been slow. “There have been a lot of disappointments – adoption and innovation haven’t been realised.

“Customer awareness and comfort, the things we as an industry should drive, haven’t been achieved yet.”

However, while Becky Moffat, head of personal banking at HSBC UK, agreed customer uptake has been slow, she said this is part of the process of implementing a major shift in the banking sector.

“What we’re doing is leveraging a change in the regulatory zeitgeist – we couldn’t have done this otherwise,” Ms Moffat said.

However, she said Open Banking should be seen as more than a technology and instead a tool through which customers can build a better relationship with their

money. Technology is simply a way of enabling this relationship.

She said: “Only one in four people has any concept of what Open Banking is.

The real positive for me is we are already seeing a positive impact on people’s relationship with money because of Open Banking. We are seeing that with [our app] Connected Money.”

Panel members at the event also agreed that a major hurdle is in making consumers feel comfortable sharing their personal data through Open Banking technology and the apps being launched by banks and fintech companies.

Mike Haley, chief executive of Cifas, said: “There’s a trust issue. If you get breaches of data, it can reflect badly on the industry. If a bad party gets in that abuses data, it’s important to identify who they are early on. There needs to be an end-to-end consumer data protection process. It’s a whole environment and ecosystem they need to create.”

TransUnion launches early adopter programme Credit reference agency TransUnion has launched its Open Banking early adopter programme after receiving regulatory permission to operate as an account information services provider (AISP) from the Financial Conduct Authority.

The TransUnion Open Banking service assesses the income, expenditure, affordability and creditworthiness of consumers, which it says will allow people to do more with their personal financial data. The service has been designed to enable greater consumer engagement and more informed lending decisions.

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

TransUnion is already working with property companies on smoother tenant vetting processes and using rental payment history to demonstrate mortgage affordability.

“There has been a lot of noise about Open Banking but many in the market have been left wondering what to do,” said Will North, core credit director for TransUnion.

“We’ve already tested a number of use cases with multiple businesses, including leading financial services providers, and are now launching an early adopter

There has been a lot of noise about Open Banking but many in the market have been left wondering what to do.

Will North, Core Credit Director, TransUnion

programme which means clients and their customers can benefit almost immediately.”

TransUnion purchased the UK credit reference agency formerly known as CallCredit in April 2018.

Jan/Feb 2019

News

SOUND BITE

SME struggle to inspire lending innovation

Small and medium-sized enterprises (SMEs) could benefit most from emerging technologies in Open Banking, particularly those that struggle to access the lending they need, according to an online comparison service.

“In many ways, Open Banking is most suited to the small business population,” Conrad Ford, chief executive of Funding Options, told delegates at the Open Banking Expo in London in November. “In many ways the sector is more suitable and more fertile for Open Banking in the early days.”

Ford said the major breakthrough for SMEs in Open Banking is that businesses can receive the capital they need in a shorter period of time than traditional bank lending.

“The fastest we’ve ever lent to a business from landing on the website, applying for a loan and getting a response, was less than an hour,” he said.

When it comes to lending, the initial use case for Open Banking is focused on automating the process of acquiring a business’s bank account data, which historically is in the form of printed statements, Ford said. Prior to Open Banking technology, this may have involved a fintech company taking printed bank account statements and digitising them.

Martin McCann, chief executive of banking platform Trade Ledger, agreed with Ford, saying SMEs will likely fuel a significant amount of innovation.

“Companies require services that support their trading relationships.

Working capital and growth capital is the golden service of the short term that, through Open Banking, will create easy access to credit,” he said.

McCann added: “We expect SMEs to be the engine of our economy, but it’s hard for them to get working capital.

We’ll see huge amounts of innovation in the SME sector because of the unlocking of that data.”

Meanwhile, Rob Straathof, chief executive of alternative lender Liberis, said the smallest businesses are suffering the most from a lack of credit, but new technology may make it possible to increase the options available to them.

“With Open Banking, a client that was turned down for an overdraft at one bank may be able to get it from another,” he said, adding that the technology needs to create a frictionless process where customers can easily find out which providers will lend to them.

Mastercard seeks Konsentus

QUOTE OF THE MONTH

Before I moved to the UK, I had never seen a cheque in my life.

Søren Rode Andreasen Chief Digital Officer Danske Bank UK

Mastercard has selected regulatory technology firm Konsentus to deliver third party provider (TPP) identity and regulatory checking solutions. Konsentus will work with the global payments firm to deliver services including a sophisticated fraud monitoring service, dedicated dispute resolution mechanism and a connectivity hub. Jim Wadsworth, senior vice president at Vocalink, a Mastercard company, said Mastercard works with innovative, best-inclass fintechs around the world.

FPC appoints Dames Bowe and Gadhia Dame Collete Bowe and Dame JayneAnne Gadhia have been appointed to the Bank of England’s Financial Policy Committee.

Bowe is the chairman of the Banking Standards Board and Gadhia was the chief executive officer of Virgin Money between 2007 and 2018. They will serve as external members.

“As chair of the Banking Standards Board, Colette has led the way in developing and embedding better standards of conduct across the

banking sector,” said Bank of England governor Mark Carney. “Jayne-Anne brings deep and relevant experience in retail banking and her successful business career. In her public policy she has championed the transformative impact of adopting new technologies and of greater diversity within the workforce of the financial services.”

Bowe and Gadhia will replace Richard Sharp and Martin Taylor, who are stepping down at the end of Q1 2019 and Q2 2019 respectively.

Dame Jayne-Anne Gadhia

Dame Collete Bowe

07

News

Fintech 100 firm accuses banks of ‘passivity’

A fintech group that has worked with the Queen’s bank, Coutts, has called on incumbent banking institutions to do more to promote the Open Banking movement.

In a media statement released on the first anniversary of the Open Banking initiative, CREALOGIX accused high street banks of “passivity”, saying that too many traditional banking institutions are paying lip service to Open Banking.

Jo Howes, UK commercial director of CREALOGIX, said: “We’re still seeing passivity, perhaps even resistance, from the biggest banks to embrace the wider Open Banking movement, ever since the majority failed to hit the initial 2018 compliance deadlines.

“Almost a quarter of Millennials and Gen-Z’s are now using a challenger bank account. The incumbent high street banks have been reluctant to promote Open Banking, despite the success of mobile-only challenger banks such as Monzo and Starling.”

Almost a quarter of Millennials and Gen-Z’s are now using a challenger bank account.

Jo Howes UK Commercial Director, CREALOGIX

CREALOGIX is a Swiss Fintech 100 company, which works with financial institutions to develop digital banking strategies.

Howes said that banks have a role to play in educating the public and encouraging consumer adoption, but noted that many are experiencing issues in developing their own technology.

She said: “In reality, most traditional banks are struggling technologically to comply with all the complex facets of PSD2 regulation, let alone engaging proactively with the wider fintech ecosystem.”

Financial inclusion could be ‘key benefit’ of Open Banking, say experts Open Banking technology will play a major role in helping consumers without bank accounts and those facing financial distress, industry experts believe.

“Open Banking has a contribution to make to financial inclusion,” said Chris Pond, chairman of the Lending Standards Board.

“Around 1.5 million to two million people don’t have a bank account at all.

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

Here we are in the global hub for financial services and we have 14 million people who wouldn’t last a month on their savings and half don’t have contents insurance.”

Pond said these stark statistics reflect a lack of resilience for the British public and the UK economy as a whole.

Joanna Elson OBE, chief executive of the Money Advice Trust, said she believes Open Banking technology will revolutionise the way people receive debt advice and help them to get their finances back on track.

“Open Banking is a significant opportunity to prevent many of the challenges people face across the UK and also to help them when they are facing challenges,” she said, adding that the technology will help to identify financial stress early on and allow action to be taken.

“Income and expenditure is an important aspect of how things work.

In debt advice, it’s a big part of what we do. But when we talk to people about their debt, they can’t remember all their spending, so having the access to that information will make a big

difference,” she said. “The thing that would make that happen is putting vulnerable customers at the front of the process.”

Part of the challenge facing many consumers is the increase in flexible working arrangements and fixed hours contracts, which are not always compatible with fixed payment plans, said Stuart Bungay, managing director of digital budgeting adviser Fair Way Forward.

He said while Open Banking is not a silver bullet, it can make it easier for consumers who have variable incomes to manage payments on a month to month basis.

Elson said a major challenge for the not-for-profit sector, which currently works with many of the most vulnerable consumers, is that it does not have the deep pockets required to keep up with the pace of change.

“It’s about working together.

Working with banks, fintechs and notfor-profits such as the Money Advice Trust. If we’re going to have a service that works for everybody, we’re going to need some pooled investment.”

Jan/Feb 2019

OPEN BANKING EXPO

HEADLINE PARTNER

2019

Anne Boden CEO & Founder, Starling Bank

WATCH THE LONDON 2018 EVENT HIGHLIGHTS OPENBANKINGEXPO.COM/HIGHLIGHTS

Open Banking Expo is all about talking about it, being comfortable with it and planning for the future.

News

UK Plc to see Open Banking benefits in two years

Access to credit hotly debated as industry mulls side-effects of adoption Greater consumer adoption of Open Banking applications will only be achieved when people fully understand the benefits.

That was the message delivered

by Olly Betts, chief executive at OpenWrks, during an address at the Open Banking Expo in London in November.

“There’s one big problem we haven’t talked about, and that’s the fact people don’t really buy Open Banking,” he said, adding that the real benefit of Open Banking is the technology that can improve financial inclusion.

“It’s about real people and about making people feel more competent about their money,” he added.

Betts said there are several areas where the technology can be used for social good, including access to credit and financial inclusion, improving capabilities and confidence, and taking the stress out of debt.

A major area of debate at the Open Banking Expo focused on how technology can provide consumers with better access to credit products and help them to avoid getting into bad debt.

In a panel debate on where Open Banking will take finances in the future, Ireti Samuel-Ogbu, head of payments and receivables, treasury and trade for EMEA at Citibank, said there is a need to develop a “pay later standard”

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

in order to make Open Banking more appealing for consumers.

“If you start to build other offerings on top of Open Banking, such as the ability to pay later and to have credit, and to have a trusted beneficiary, those services to my mind will increase the value of Open Banking,” she said.

However, Becky Moffat, head of personal banking at HSBC UK, said increased access to credit presented problems for the banking sector as it may not always be in the best interests of consumers.

“The more we make it easier to access credit, the more we get questioned if we are doing what’s right for consumers,” she said. “The more friction we remove, we also have a responsibility to bring friction back in.”

She added: “How accessible do we want it to be? We need to help people understand their money so they make an informed decision and not snap decisions.”

In his presentation, Betts said people who are in debt are often underserved by innovation, and this is an area where Open Banking technology has the potential to be powerful.

“Open Banking allows people to have a more flexible repayment term,” he said. “What we can enable them to do is have them pay a fixed percentage of their available money each month.

This can help people change the way they think about debt.”

Businesses could be seeing the benefits of Open Banking within two years, according to threequarters of UK companies, though many remain in the dark about the initiative.

In a survey by payments and foreign-exchange specialist Centtrip, 64 per cent of decision makers from medium and large businesses said the initiative would save them time.

An additional 58 per cent said Open Banking would save them money, with 42 per cent already noticing a positive impact on their payments and expenses.

However, despite a considerable amount of development having taken place behind the scenes to make Open Banking available for wider use, eight per cent of businesses still have no idea what it is, according to the survey.

Brian Jamieson, chief executive officer and co-founder of Centtrip, said Open Banking had huge potential to shift the way financial data is shared and managed, but admitted that take up from business leaders had so far been slow.

Just 28 per cent of respondents aged 55 and over said they had a firm grasp of Open Banking compared to 85 per cent of those aged between 18 and 34.

“A year on from its launch, we are just starting to understand its benefits and the way it may reshape the financial sector,” said Jamieson.

“Even so, many business leaders have yet to reap its rewards and realise its potential.”

A year on from its launch, we are just starting to understand its benefits and the way it may reshape the financial sector.

Even so, many business leaders have yet to reap its rewards and realise its potential.

Brian Jamieson Chief Executive Officer & Co-Founder, Centtrip Jan/Feb 2019

PROTECT YOUR ORGANISATION FROM FRAUD AND FINANCIAL CRIME

Leaders in fraud prevention

Cifas is a not-for-profit member association that protects over 500 organisations from across the sectors from fraud and financial crime.

Find out more at www.cifas.org.uk

Search and identify fraud and risk through Cifas’ real-time databases.

Share intelligence and data with hundreds of organisations from across the public and private sectors.

Safeguard employees, customers and clients against internal and external threats.

Save, combined with other members, over £1bn in prevented fraud losses.

SAVE THE DATE: 18 JUNE

CIFAS ANNUAL CONFERENCE 2019 “The Annual Conference is an excellent opportunity for fraud education, networking and finding out about innovation.’ – 2018 Delegate, American Express ‘A great and informative conference – a positive step in the collaborative, multiagency, multi-disciplinary approach.’ – 2018 Delegate, V12 Retail Finance

TO BE THE FIRST TO HEAR THE LATEST PROGRAMME NEWS: REGISTER YOUR INTEREST AT

EVENTS@CIFAS.ORG.UK

News

Technology solutions ‘must be meaningful’ Trust and service will be Open Banking battleground

Brits think digital banks rates better Around a quarter of Britons will have a bank account from a digital-only bank within five years, according to research published in January.

The poll of 2,000 British adults by personal finance website Finder.com found that 24 per cent of Brits will have an account from a digital challenger bank by 2024, while one in ten are believed to have already opened a digital account.

The poll found that nearly a third of people (31 per cent) believe they will get better interest rates from digital banks than from traditional players.

“However, our research also showed that a lot of Brits still aren’t interested in taking all of their finances online,” said Jon Ostler, chief executive of Finder.com.

“Open Banking is only a year old and some people may not be comfortable with having their data shared between companies yet.”

The fate of Open Banking’s future will depend on companies being able to earn consumers’ trust and deliver meaningful services, said the co-chair of the Open Banking & Payments Working Group at techUK. In her keynote address to the Open Banking Expo in London in November, Dr Louise Beaumont said major technological advances in recent years have changed people’s behaviours, attitudes and expectations, meaning service levels will be the main competitive battleground with Open Banking technology.

“There are four main competitors, some of whom haven’t woken up yet.

Incumbent banks, disrupting tech start-ups, major tech titans and then the dog that hasn’t barked yet, the energy, telco and retail space,” Beaumont said. “They have loads of data and they are doing nothing with it.”

Beaumont said another factor that will move Open Banking forward is changing regulation, which is taking place around the world in different ways, whether to increase competition or innovation, or to promote financial inclusion.

“It might be all three, but there tends to be a priority in the minds of the regulators and it depends on the culture of your country whether it works or not,” she said.

However, Beaumont said regulation will only be effective at promoting a change in behaviour if companies can provide a service that people appreciate.

She said customers are more likely to share their data with companies that can do something useful, whether it is a taxi service such as Uber or an online retailer such as Amazon.

Another benefit of Open Banking, she added, is that companies will be able to ‘look down the opposite end of the trust telescope’ with customers.

This means they will be able to demonstrate loyalty to the customer and provide them with a continuing service they need.

“No longer is it about consumers trusting companies to deliver a service, it’s about companies demonstrating their trust in the consumer,” she said.

However, she added that the difficult part of the equation is that companies will need to find ways to make this work best for consumers. This means eliminating problems entirely, rather than offering solutions to problems, such as creating a taxi service that comes to you, rather than requiring you to stand in the rain until one comes along.

She said consumers will continue to give their business to companies that are successful at providing useful services.

Are conscre musquid eperturat, publicae tem omniquam antiocat.In publicaete is.

At rei parivatque propte consimus, qui

Open Banking is only a year old and some people may not be comfortable with having their data shared between companies yet.

Jon Ostler Chief Executive, Finder.com 12 O P E N B A N K I N G E X P O . C O M

Jan/Feb 2019

News

Bluestone teams up with Experian in mortgage pilot

Mortgage lender Bluestone has rolled out a pilot of its Open Banking solution. It claims the move makes it the first specialist mortgage lender to use the technology in its underwriting process.

The company’s Open Banking solution will be piloted by a select group of financial advisers on its panel, with a national launch expected in due course.

Bluestone is working in conjunction with Experian, the credit reference agency, to develop the solution. It allows customers to provide their bank transaction data to Bluestone within a matter of minutes, which the company said should reduce the time it takes to process mortgage applications.

Peter McGuinness, chief executive of Bluestone, said: “Open Banking is going to change the landscape for specialist lending, particularly in areas of affordability assessment and

METRICS

Small and medium enterprises could benefit most from emerging

expenditure patterns, while at the same removing a lot of friction associated with a traditional mortgage application process.

He added that Open Banking will provide customers and advisers with a more efficient credit application process and give Bluestone access to high-quality information that can support a mortgage approval.

Tom Blacksell, managing director of B2B at Experian, said Open Banking technology can help people prove they can afford a mortgage, such as those who have worked as contractors.

“Experian’s service automatically categorises consented bank account data, so that lenders can assess how much they have coming in and going out each month, all in just a few seconds.

Putting this information at the fingertips of Bluestone helps them to make more informed lending decisions in a much shorter time frame.”

Plea to focus services on struggling consumers Leading figures from the Open Banking world took to the stage at an event in London this month to encourage financial providers to do more to help vulnerable customers.

Speaking at an event organised by MHP Communications, entitled “Open Banking: Living up to the hype?” Joanna Elson, chief executive of the Money Advice Trust, said it was now time for providers to look at how they can help struggling consumers.

“Open Banking needs to show it can help people in financial difficulty, to build trust in the technology,” she told the audience.

Open Banking Implementation Entity on how account providers (ASPSPs)* Open Banking APIs are performing with key performance metrics. Nov 18

FAST STATS

34%

think traditional banks as we know them will effectively cease to exist by 2023.

*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.

96.34% Average API availability

Source: Israeli bank Pepper

58%

of decisionmakers at banks stated that Open Banking had a negative impact on their organisations.

Source: Retail Banker International

17.55m Successful API calls (actual)

1015

MILLISECONDS

Average API response time

Phil Gosset, senior innovation manager at Nationwide, added that Open Banking would eventually allow people who are “numberphobic” to better understand their finances.

2.25%

Open Banking needs to show it can help people in financial difficulty, to build trust in the technology.

97.73%

Joanna Elson Chief Executive, Money Advice Trust

Failed API calls

Successful API calls

13

Up Close

THE BIG INTERVIEW Søren Rode Andreasen Danske Bank UK

The ideas man As competition between banks builds across the UK, Open Banking Expo Magazine caught up with the man leading the fintech charge for Danske Bank in Northern Ireland.

Joe McGrath reports

I

n December 2018, Danske Bank became the first of the ‘big four’ Northern Irish banks to offer account aggregation in a mobile banking app.

Initially, Danske Bank customers with a personal current account with Santander were able to view their balances and transactions from the other bank.

Since then, work has started on rolling out the service to further banks throughout 2019.

The man driving much of the digital innovation for Danske Bank UK is chief digital officer Søren Rode Andreasen.

Andreasen has spent much of his career in Copenhagen, working for Danske Bank for more than a decade before moving to Belfast to take up the role of chief digital officer. For such a digital native, the cultural differences between the UK and the Danish financial services markets were notable.

“Before I moved to the UK, I had never seen a cheque in my life,” Andreasen jokes. “For three years before moving to the UK, I hadn’t had a coin or a note in my hand.”

His observations highlight how the UK’s legacy systems and its citizens’ attachment to traditional payment methods influence behaviours in financial services today.

But the slow and steady approach of traditional financial brands has been disrupted in recent years, with regulations relating to Open Banking and the second Payment Services Directive (PSD2) stimulating innovation and forcing organisations to work more closely together.

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

For Danske Bank – one of the nine UK high street banks tasked with implementing Open Banking by the Competition and Markets Authority (the CMA 9) – partnering with outside organisations is not a new thing.

However, Andreasen believes that the company’s innovation and experiences in other European markets can give the business a commercial advantage when it comes to seizing the opportunities arising from Open Banking.

“We were one of the first three in the UK to launch Open Banking,

which gave us an insight as to where we are at, at a maturity level,” he says.

“We have launched aggregation here, but we have also launched aggregation in the Nordics. We are experimenting with it.”

The UK digital boss says, while widespread investment in technology throughout the sector has created the potential for lots of exciting new ideas in Open Banking, the continuing lack of consumer demand has held back creativity and led to lots of companies focussing on the same initiatives.

Jan/Feb 2019

Up Close

You can already see, in e-commerce, search patterns and what value you can deduct from that. This is untapped potential in how we can use Open Banking.

“We haven’t seen the real killer applications from a consumer perspective,” he explains. “I go around to all the co-working spaces, so I know what people are working on. It is the same things again and again – all commodity products.

“There are around 50 ideas I see again and again. Not just here, but in other countries too. It’s all about providing consumers with a good overview of their finances. [In future] customers will just expect their bank to do this.”

DID YOU KNOW

Danske Bank acquired the Northern Ireland operation of National Australia Bank in 2004, previously operating under the Northern Bank brand. In 2012 the Northern Irish operation assumed the Danske brand.

If providing a consolidated view of accounts is not the commercial future of personal banking, what is?

Andreasen suggests that the real value will evolve from big data analysis of consumer shopping patterns, payment trends and the application of technology beyond financial services.

As a result, Danske Bank UK is already considering how future revenue sources may be generated outside its current area of operations.

“We are looking at the periphery of what you would normally call ‘banking’,” he says. “How can we use this technology outside of our business lines, so we can deliver new [revenue] streams.”

Such areas of interest include “deal comparisons” where customer purchases are monitored against the best deals on the market and consumers are advised where savings can be made.

“When you use your card, you will get a more itemised view of what you bought.

In the future, we will be able to go one level below on what you spend. You will be able to go a step deeper into what you have bought.

“You can already see, in e-commerce, search patterns and what value you can deduct from that. This is untapped potential in how we can use Open Banking.”

When asked to appraise his competitors for innovation – both traditional banks and fintechs – Andreasen says many UK banks are adopting a “wait and see” approach to prevent any damage to their business

models from throwing their weight behind new launches which later prove costly.

“You get the whole spectrum, from those that ignore [Open Banking] to those that are experimenting, building up capabilities and are looking at what works,” he says.

“We saw Barclays launching their aggregation at almost the same time as us. HSBC is experimenting with their Connected Money app, using screen scraping, which I’m not a big fan of, and Starling Bank has done some interesting things too.”

Andreasen explains that the label traditionally given to “fintechs” is becoming increasingly tricky for industry figures to define, but warns that it is inevitable that many will fail because of the cost of customer acquisition and a need for consolidation in the market.

“There are some good ideas out there, but implementing them is a bit more difficult, and getting them to market is even more difficult,” he explains.

“I know how much it costs to acquire a customer. Getting someone to download and use your app every week is very difficult. Most people don’t want a lot of apps to do their financial stuff.”

He concludes that a lot of fintechs have been focussing on the financial technology element when they should be focussed on developing a successful route to market.

“A lot of fintechs don’t have the trust of consumers,” he says. “If you are co-branded with a bank, you get that trust immediately.”■ 15

F E AT U R E / C O N S U M E R A D O P T I O N

Is ignorance bliss?

A year on from the launch of Open Banking in the UK, consumer adoption rates are low and awareness levels are lower still. Should we be worried?

Joe McGrath reports

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

Jan/Feb 2019

CONSUMER ADOPTION

G

etting consumers to buy into the benefits of Open Banking has been a tricky business for British financial groups. A year since the Competition and Markets Authority introduced its reforms, most banks, fintechs and consultants are still optimistic about the long-term prospects for the initiative, even if they admit that consumer adoption has, so far, been poor.

In November, law firm TLT published research conducted with 130 financial services professionals at banks, building societies, payment service providers and fintechs. It found that less than half of bank workers (47 per cent) consider the pace of consumer adoption good.

Consumers have not switched on to the potential of Open Banking because the largest financial institutions have spent much of the past year focussing on compliance and internal project deadlines, claims the report.

It also suggests that while challenger banks had done more to encourage consumers, the size of their customer bases means that this hasn’t translated into mass adoption.

“The majority of consumers don’t know what Open Banking is,” Hamish Thomas, UK advisory banking technology leader at EY, told Open Banking Expo Magazine.

“There is a need for coherent, simple messaging across the industry to help people understand what it means, the potential it brings, and how their money and personal data will be kept safe.”

Thomas says the industry must do more to develop the appeal of Open Banking from a concept to something which people understand will help their day-to-day lives.

“Consumers are interested in support to achieve improved outcomes in how they live their lives, enabled by more responsive, accessible, easy to use and relevant services which are trusted and secure,” he says.

“This desire to achieve outcomes, and banks’ ability to support those outcomes, will drive demand. So, in essence this isn’t demand for Open Banking but demand for better, digitallyenabled services.”

Building approval In December, financial services research group Cardlytics published a survey of more than 3,000 UK banking consumers to try to isolate what the industry could do to drive up Open Banking interest and adoption rates.

It concluded that there were four key factors which financial firms need to address if they are to get the British public onside: Trust, Awareness, Customer Experience and the muchdiscussed “Value Exchange”. The researchers found that consumer trust has been dented in recent years by a vast number of data breaches and incidents of data misuse.

Much of the power to address this issue lies with the legacy players, according to the Cardlytics report, because “providers with whom consumers already have a financial relationship, are most likely to succeed with the consumers tempted

by Open Banking propositions”.

Dave Tonge, chief technology officer at Moneyhub, says legacy financial players should be doing more if consumer adoption rates are to increase significantly.

“A lot of the main banks have offered a pretty poor experience so far which has held things back. It is difficult to build good adoption when apps have been down for a couple of days or there has been an unfriendly consumer experience.” ›

There is a need for coherent, simple messaging across the industry to help people understand what it means, the potential it brings, and how their money and personal data will be kept safe.

Hamish Thomas UK Advisory Banking Technology Leader, EY

17

CONSUMER ADOPTION

› Despite this perceived slow start, the legacy banks still top the trust ratings among consumers, according to the Cardlytics survey. Apart from banks, the most trusted non-banking providers in the UK were found to be utility providers, healthcare providers and loyalty schemes.

Building awareness Raising awareness of Open Banking among consumers is an issue that divides market commentators. The Cardlytics research found that 74 per cent of the 3,000 surveyed hadn’t even heard of Open Banking, but this isn’t necessarily a problem, according to many in the industry, who believe that adoption rates will improve naturally as products and services improve.

“It is about solving actual customer needs and problems, rather than just building stuff for the sake of it,” explains Jack Burrows, managing principal at technology consultancy Capco.

“Everyone is building aggregators and money managers. Five years ago, banks were building these and were really excited they would help people.

People didn’t want them. Five years later and they’ve done it again and people still don’t want them.”

Burrows also recognises the importance of trust and says that the recent high-profile data scandals from

outside the industry have added to consumer suspicion, which may have harmed the speed of adoption.

“Open Banking launched at the time of major data scandals like Cambridge Analytica, which was pretty poor timing.

Customers wanted to share their data with the least companies possible.

We need to explain to customers how they can use Open Banking to their benefit.”

Lessons from overseas The frustrating issue of consumer adoption is not one that is unique to the British Open Banking marketplace.

Studies conducted overseas show similar problems in raising awareness of the benefits of the initiative.

In December, research commissioned

by EY found that consumer trust in the Netherlands was also hindering the speed of development of Open Banking.

The Dutch research is interesting, given that Dutch customers are widespread consumers of mobile banking, with 78 per cent of smartphone users switched onto mobile banking. However, this level of digital sophistication also means consumers are wary when it comes to data sharing.

Researchers measured consumer sentiment and found that it was 50/50 as to whether Dutch consumers would adopt Open Banking services, based

No consumer is interested in Open Banking for the sake of it.

But there is a steady uptick in consumers adopting. It is early days.

Dave Tonge Chief Technology Officer, Moneyhub 18 O P E N B A N K I N G E X P O . C O M

on their current behaviours, with consumers highly reluctant to share their data.

“Dutch consumers are primarily concerned about what Open Banking means for them in terms of data protection,” the researchers said.

“They are also worried about cybersecurity, and express scepticism about the need for, and benefits of, both consumer control and choice.”

When consumer sentiment in the Netherlands was measured against global attitudes, it was found to be broadly in line, which poses a significant challenge for champions of Open Banking in the UK market.

Those developing services are less concerned. “No consumer is interested in Open Banking for the sake of it,” says Moneyhub’s Tonge. “But there is a steady uptick in consumers adopting. It is early days.”

Tonge’s view is echoed by others in the sector. “I’m alright with people not ‘knowing’ about Open Banking.

They just need to understand the value proposition,” explains Capco’s senior consultant Jacob Rebuck.

Rebuck argues that there is too much focus on consumers knowing about the concept of Open Banking, when the thing that should be measured is their adoption of Open Banking products, apps and services.

New year, new attitudes 2019 may be the year when customer use of Open Banking starts to take off. Open Banking supporters claim there are more forward-thinking apps starting to emerge that will stimulate consumer interest.

At the start of the year, Imran Gulamhuseinwala, the governmentappointed implementation trustee for Open Banking, said that more products and services for consumers, and businesses, are in development.

“Consumers are gradually being offered products and services which will securely help them move, manage and make more of their money,” he said.

“In short, it is clear that there are signs of an emerging dynamic, vibrant and developing ecosystem, which is rapidly becoming more sophisticated, and expansive, in its coverage. But with the line of sight we have into the Open Banking pipeline, this is going to considerably ramp up in 2019.”■ Jan/Feb 2019

VIEW FROM THE TOP

Putting the ‘rev’ in revolution Imran Gulamhuseinwala OBE Trustee of the Open Banking Implementation Entity (OBIE)

T

wo years ago, Open Banking was regarded by many as a compliance exercise championed by a handful of fintechs - rather than investment based on a business case or customer need. This is no longer true.

Banks have very firmly moved from viewing Open Banking as a compliance exercise to an opportunity to compete and innovate. They have worked hard to implement our Open Banking Standards despite many challenges and an ambitious time scale. Already we have seen some impressive early signs of new technologies powered by Open Banking – even though we are only mid-way through our roadmap.

Consumers are gradually being offered products and services which will securely help them move, manage and make more of their money. The often-overlooked, hard-working population of small and medium-sized enterprises (SMEs) – now totalling over five million businesses – are also benefiting from technologies that help boost profit, performance and productivity. We are seeing some early and exciting signs of how Open Banking can power technologies to help address some of society’s issues, in particular in the debt advice area.

In short, it is clear that there are signs of an emerging dynamic, vibrant and developing ecosystem – an ecosystem which is rapidly becoming more sophisticated and

expansive in its coverage. But with the line of sight we have into the Open Banking “pipeline”, we know this is going to ramp up considerably in 2019. Today, we have over 100 regulated entities enrolled in Open Banking with more than 100 waiting to join. We expect the ecosystem to develop with even greater momentum and pace, not least as we see greater conformance with the implementation of the Standards as well as greater innovation in the market.

User experience All of this is encouraging. However, our focus for 2019 is firmly fixed on an enhanced user experience. What we have today is a step in the right direction but it does not yet meet the high standards of conformance and performance we expect. After March and the implementation of version three of our Standards, I am confident that 2019 will bring a mobile-enabled and frictionless customer journey.

The word “revolution” is often used in conjunction with Open Banking and I truly believe that Open Banking can, and will, prove

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

to be just this. It is certainly leading the world in setting the standard in secure data sharing and is already proving to be extensible to other sectors, markets and geographies.

I’ve travelled across many countries to talk about our Standards – Canada, Australia, Hong Kong, Singapore to name a few – and one thing we are all crystal clear on is the importance of ownership of data. We are way past the point where we debate who owns customer data. The customer owns his / her data. That data is valuable and it’s time for customers to reap the benefits, with confidence.

This first year of Open Banking has been really exciting. Not only is it great to see innovative products and services being introduced into the market, but I have been incredibly impressed with seeing how the many players – often with diverse and competing agendas – have proved that they can work collaboratively and with a single focus.

It’s now time to put some extra “rev” into this revolution and I’m confident that’s exactly what will happen in 2019.” ■ The Open Banking Implementation Entity was created by the UK’s Competition and Markets Authority to create software standards and industry guidelines that drive competition and innovation in UK retail banking.

“Our focus for 2019 is firmly fixed on an enhanced user experience. What we have today is a step in the right direction but it does not yet meet the high standards of conformance and performance we expect.”

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

Jan/Feb 2019

Strapline

Let’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

21

Analysis

One year of Open Banking As Open Banking reaches its first anniversary, we take a look back at some of the highlights of the year.

13 January

January

Open Banking Standard launches

Yolt and Lloyds Bank make first successful account information transaction

June

100 00

regulated egulated d provide rs providers of... made up o

67

third p third party p provi vi providers &

33 account

providers p

17 third party providers live with customers

Token makes first endto-end payment through Open Banking APIs

“Open Banking places consumers back in control of their data – unlocking a new world of services and opportunity” Imran Gulamhuseinwala OBE

“Open Banking is playing its part in developing a dynamic and vibrant economy” Information correct as at 8 January 2019.

Produced by the Open Banking Implementation Entity.

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

Imran Gulamhuseinwala OBE

Jan/Feb 2019

Analysis

www.openbanking.org.uk

“80% of the functionality

was delivered in January to approximately 80% of the population”

March

Version 2 of the Open Banking Standards released

Imran Gulamhuseinwala OBE

May

• Open Banking Consumer Manifesto launched

• 1 million API calls

April

CYBG launches new B money management service

August

September

Open Data Service Quality Indicators API published

Version 3 of the Open Banking Standards including Customer Experience Guidelines released

December

November

NESTA Open Up Challenge announces winners

• AIB rolls out Open Banking in Ireland

• Iwoca makes first

business loan using Open Banking data

• 17.5 million API calls 23

Q&A

Jake Ranson Equifax UK

Future vision As we kick off a new year and a new publication, we talk to banking & financial institution expert Jake Ranson. The chief marketing officer for credit reference agency Equifax UK gives us his thoughts on the outlook for Open Banking in 2019.

OBE: What work has Equifax been doing around Open Banking over the past 12 months?

JR: “Our primary focus has been to work with innovative partners to develop Open Banking solutions. Equifax Bank Account Verifier, an alternative to manual identity verification, which launched in Q4 2018 with consents.online, is a good example of this. This solution means identity information such as the consumer’s name, address and date of birth, can be matched with transaction data provided through Open Banking in real time. As an early adopter of the Equifax and consents.online Open Banking service, HSBC is now testing the new verification process to further streamline its digital customer application process.”

OBE: What themes or projects will the company be focussed on in the coming months?

JR: “In Q1 2019, alongside further developing pre-existing Open Banking projects, we will also be exploring working with different types of companies, potentially those as diverse as online estate agents and debt management charities.”

OBE: How will consumer demand for Open Banking solutions shift over the coming year, and will this be industry led?

JR: “The services that will really take off in 2019 and beyond are the ones

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

Jan/Feb 2019

Q&A

that give consumers transparency, control and save them valuable time.

Consumers need a compelling reason to share their data, whether it’s faster lending decisions or the ability to access financial products better suited to their needs, and providers must articulate that value clearly in order to succeed.

“One area where we can already see Open Banking regulation bringing positive change is the development of consumer-facing financial management solutions, better known as budgeting apps. These apps allow customers to access information from multiple banking and credit providers on one screen to keep track and better plan their finances.”

OBE: How is the credit referencing market changing as a result of Open Banking, lending and the use of big data?

JR: “The UK is the first market to implement Open Banking, with both Australia and Canada planning to emulate the UK’s initiative with their own regulations – so all eyes are on us in terms of what can be achieved.

“Open Banking was implemented in January 2018 to create a revolution in consumer finance and while it is taking time to fully embed, it is without doubt having a profound impact on the market. The ability to use Open Banking data to gain a greater level of understanding of an individual’s circumstances and better assess their suitability for lending products is phenomenal. For those individuals with thin credit files, for instance someone relatively new to the country or the self-employed, Open Banking data can be harnessed to get a more accurate view of their capacity to repay credit.

“Going forward, the fusion of Credit Reference Agency (CRA) data and granular transactional data is likely to build the best picture of affordability, with transactional data offering a snapshot of spending over the time period the individual has consented to share and CRA data providing a more detailed view of longer-term commitments, including any defaults.”

OBE: How do you see your customers benefitting?

JR: “Open Banking has been the catalyst for some really interesting innovation in process improvements, credit risk scoring, debt and money management and payment initiation.

For example, Equifax’s Bank Account Verifier helps credit providers to reduce fraud through Open Banking by confirming that account information belongs to the person applying for credit, and not a potential fraudster.

This closes a previous information gap, helping the industry make the most of the new data sharing in a more secure environment.

“Open Banking can also help address critical unmet small and medium-sized enterprise (SME) customer needs through helping SMEs manage their finances via aggregation tools, resolving key payment pain points and filling in data gaps in credit applications.

“Customers will see a far greater impact on their day-to-day financial

experience in 2019 as the PSD2 Open Banking regulation takes effect Europe-wide. We expect to see the volume and sophistication of live Open Banking services to surge.”

OBE: What are the main challenges Open Banking still faces?

JR: “Open Banking is still in its infancy and of course many challenges lie ahead. There remains an educational deficit regarding how Open Banking can improve consumers’ financial lives, as well as understanding the positive predicative capabilities of data. Equally important is reassurance that they maintain control. Data will only be used with their permission and they can revoke access at any time. It’s up to the banks and providers like ourselves to communicate the real life benefits the initiative can bring.

Without doubt, momentum is building, and we can expect 2019 to be a successful year for Open Banking.”■

The UK is the first market to implement Open Banking, with both Australia and Canada planning to emulate the UK’s initiative with their own regulations – so all eyes are on us in terms of what can be achieved.

25

Insight Faith Reynolds Independent Consumer Finance Expert & Financial Services Consumer Panel member

“Open banking, data portability and machine learning could be ‘revolutionary’ but only if they serve the ultimate goals of people and planet as well as profit. Are you ready to step up to the revolution?”

T

he great potential of Open Banking lies in the possibility of genuinely delivering for consumers while still achieving commercial objectives.

It’s now much easier to get suitable, engaging products to consumers quickly and cheaply than it has been in the past. Events such as Forgerock’s Open Banking Hackathon and the Financial Conduct Authority’s (FCA’s) Techsprints on access, vulnerability and mental health show what it’s possible to achieve when a few developers put their heads together.

Innovation brings fresh energy and, more importantly, fresh purpose as fintechs and entrepreneurs see how they can help change the world for the better. Recent interviews with Open Banking leaders as part of the Code Collaboration (an industry initiative assessing the value of a code of conduct for Open Banking), show strong consensus that Open Banking should be a ‘force for good’.

Improving the financial life of the end-user has important ramifications for individuals, but also for small and medium-sized enterprises (SMEs) and the health of the economy. As a society, the savings ratio (the percentage of disposable income that is saved) has fallen to its lowest level for over 30 years, at just 7.1per cent, according to UK statistics. Approximately 27 per cent of the population live on a knife edge with 4.8 million defined as being in financial difficulty in a 2018 FCA report.

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

Consumers – people – want help to live life better and Open Banking products can help them do that, improving financial inclusion, reducing stress and finding products which are a better fit for their needs.

SMEs in the UK employ over 16 million people, with a combined turnover of £2 trillion, but for a variety of reasons they are less productive than their G7 counterparts.

According to BACS, 35 per cent of small businesses say they spend approximately four hours a week on late payments. Four of the largest banks own 83 per cent of business current accounts, innovation has been stifled and trying to get access to credit is long and protracted. Paper and bureaucracy slow down SMEs and make it hard for them to find time to actually understand their business performance so they can plan. The sector and the economy are ripe for revolution.

Revolution means the forcible overthrow of a social order or a dramatic change in conditions and attitudes. Amid Brexit, hate crime, climate change and rising inequality, there is growing appetite for shared action and a renewed sense of purpose. Financial exclusion and the exploitation of consumers’ behavioural biases for profit over people is the status quo. To be a true revolution, Open Banking – open finance – must focus on creating, deploying and facilitating the movement of money to help us achieve our goals as individuals, communities and society

as a whole. It is not enough for Open Banking to make life a bit more convenient. We need to see a decisive shift in the balance of power towards consumers, with a purpose that reflects the needs of our society to address issues such as the ageing population and climate change.

Open Banking, data portability and machine learning could be ‘revolutionary’ but only if they serve the ultimate goals of people and planet as well as profit. That means consciously working not just towards changing the technology, but the culture and ethics of financial services too. What’s your purpose and are you ready to step up to the revolution? ■ The Financial Services Consumer Panel is an independent statutory body set up to represent the interests of consumers in the development of policy for the regulation of financial services.

➽ If you would like to comment on this opinion piece, please email us at: editorial@openbankingexpo.com Jan/Feb 2019

Strapline

REALISE THE VALUE OF OPEN BANKING IN LESS THAN A WEEK

Access to all major banks in the UK

At Equifax, we recognise our clients want to explore the benefits of Open Banking, without significant upfront investment. Our ability to implement a safe, secure and effective end-to-end solution is based on the experience of working on live Open Banking data, having already processed more than half a million transactions.

We can get you up and running with an Open Banking trial in less than seven days and show you how you could transform your customer’s experience in the long term.

No technical integration needed

7 Up and running within seven days

Working with our Open Banking partner Account Score, and their AISP consents.online, our six month pilot provides a quick and easy way for you to make the case for deployment into customer journeys using live Open Banking data.

For more information, email us at openbankinguk@equifax.com Powerful categorisation and actionable insights

Better understanding, better decisions and better products, enabling better customer relationships

Equifax Limited is registered in England with Registered No. 2425920.

Registered Office: Capital House, 25 Chapel Street, London NW1 5DS. Equifax Limited is authorised and regulated by the Financial Conduct Authority.

27

L E A D F E AT U R E / R E TA I L B A N K I N G

Survival of the fittest Some predict that Open Banking will eventually lead to the end of the retail banks as we know them today, but how are the legacy players protecting their businesses?

Joe McGrath reports

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

Jan/Feb 2019

R E TA I L B A N K I N G

I

t has been a transformational decade for Europe’s retail banking sector. Vast regulatory changes introduced in the wake of the global financial crisis and swift advances in technology laid the foundations for a seismic shift in the retail banking landscape.

The scale of change was highlighted in Accenture’s 2019 Future of Banking report, which found that 17 per cent of challengers entering the market in the past 13 years were responsible for one third of the total revenue growth during that time. If nothing else, it shows that challengers offering something new or exciting have the potential to do very nicely in a sector that is notoriously competitive.

The introduction of UK regulations under Open Banking, and the second Payment Services Directive (PSD2), were supposed to be further springboards for fintechs and challenger banks. After all, government officials were keen to stimulate competition in the world of retail banking. However, a Bloomberg report published in January found only four new UK banking licences were issued in 2018, compared to 12 in 2017.

For the incumbents, these statistics make for encouraging reading. Most UK retail banks, including the CMA9 – the banks charged with opening up their APIs by the Competition and Markets Authority – continue to play their cards close to their chest, but market analysts believe that 2019 will be the year when they begin to take more noticeable steps to protect their revenue streams.

“In the coming months, we’ll start to see more multinational banks and other financial services providers recognising the competitive benefits of innovation,” says Nick Caley, vice president of financial services at identity and access management specialist ForgeRock.

Rather than purely protecting their existing market share, Caley explains that some retail banks are exploring new revenue streams by working with digital giants such as Google, harnessing consumer trust in their brands and their own datasets.

“For banks, a major opportunity lies in the delivery of additional services to other companies,” Caley explains. “As the holders of a huge amount of data, banks can position themselves as trusted service providers, helping organisations to understand and anticipate consumers’ needs and preferences. ›

In the coming months, we’ll start to see more multinational banks and other financial services providers recognising the competitive benefits of innovation.

Nick Caley Vice President of Financial Services, ForgeRock 29

R E TA I L B A N K I N G

› “Online platforms such as Facebook or Google are currently dominating this market, but banks have a major advantage in that the data they hold concerns real-world purchasing behaviours. By delivering more actionable insights, and less of the ‘noise’ of likes and clicks, banks can open up significant new revenue streams,” he says.

Spotting the opportunity In January, digital bank Pepper released its Change in Banking report, which surveyed the opinions of 50 C-Suite decision-makers at UK retail banks.

More than half of the decision-makers surveyed (56 per cent) said that Open Banking presents an opportunity, but they also recognised the threat that is lurking from well-known global digital players.

“The concern of the upper hand the regulation has given the GAFAs (Google, Amazon, Facebook, Apple) of this world exceeds the concern they have for the advantage it has given fintech companies,” the report stated.

“There’s no doubt that Open Banking poses a threat to banks as they share their once sought-after prized possession – customer data. But, there’s an even bigger opportunity for those banks willing to adapt in this new digital era and build a business model based on collaboration.”

One area where the legacy players could potentially pick up market share is in the area of banking for small and micro businesses, according to KPMG. Research conducted by the consulting firm among 1,000 small and mediumsized enterprises (SMEs) in August 2018, found that nearly a third (30 per cent) of this group would be willing to adopt or pay for Open Banking services.

Speaking to Open Banking Expo Magazine, John Hallsworth, a partner at KPMG, says the £53 million acquisition of accounting software firm FreeAgent

by Royal Bank of Scotland last year is a prime example.

“RBS’s decision to buy FreeAgent is deliberately in this space. The bank could see that there was an opportunity to broaden its services to businesses.”

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

While the RBS deal was acquisitive, other banks have been partnering to offer their SME customers access to third-party accounting apps as part of current account packages.

Efforts in the business banking market, however, are perhaps more conspicuous that in the consumer retail market, and fewer commentators are willing to place their bets on legacy players holding on to their personal banking customers.

Marc Bertola, a serial entrepreneur in the European loan broking market and founder of national brokerage Loan.co.uk, says the traditional high street banks have been so poor at upgrading their systems that they are now too far behind to win out.

“Most of the lenders in the UK don’t have APIs that are fit for purpose,” he told Open Banking Expo Magazine.

“On a daily basis, we are dealing with the tech teams at the major lenders and we are teaching them how to do it.”

Bertola says that his company has invested in a team of 30 developers and technicians to build its platform, in anticipation of rising consumer demand for loans in the coming two to three years. He questions whether banks are doing the same.

“Some lenders are concentrating on other areas, but they are not concentrating on enhancing their consumer finance offering because they are assuming that they will get all of the business anyway,” he says. “Given this is their thinking, where is the incentive to spend two years on systems?”

Bertola says that the age of the IT systems at some retail banks is so old that he likens new innovations to “putting a Tesla dashboard on a 40 year old Capri”.

Immediate appetite Despite the criticism, some established banking names have been bolder. first direct, a wholly-owned subsidiary of HSBC UK, has conducted extensive groundwork to anticipate what consumers will look for, as levels of understanding of the Open Banking concept become more widespread.

Nick Harrison, commercial director at first direct, says it was important

Most of the lenders in the UK don’t have APIs that are fit for purpose. On a daily basis, we are dealing with the tech teams at the major lenders and we are teaching them how to do it.

Marc Bertola Serial entrepreneur in the European loan broking market and founder of national brokerage Loan.co.uk

for the brand to invest considerably in research because it has spent the past three decades building its brand reputation around customer service.

Harrison says that simpler credit decisioning and more seamless account opening will be two early consequences of Open Banking for retail banks in the coming months and years. For first direct, though, he sees an opportunity to expand the brand’s appeal by offering a digital marketplace.

“What we are doing is offering non-first direct customers the ability to use a marketplace app to help them to save money. This is where we think we are unique,” he says.

“We won’t just offer our own products.

If you are looking to purchase a car, for example, the app will flag the best product, which may not be a first direct product. It is about demonstrating a service offering.”

Harrison says that the app is designed to build brand reputation and doesn’t have customer acquisition as its primary objective. The idea that traditional retail banks will become service providers, rather than product pushers, is one that industry experts believe will become common.

Jan/Feb 2019

R E TA I L B A N K I N G

“While the assumption is that disruption will come from a start-up, banks are in a strong position to innovate as they hold all the cards in terms of data and customers,” he says.

“Banks in the UK are starting to experiment with new services and partners to deliver a truly Open Banking experience for customers,” says Alex Bray, assistant vice president of professional services firm Genpact’s consumer banking division.

“To realise the potential, financial institutions need to improve their

analytics so they and their customers can understand and use the huge amounts of new data available.”

Bray warns outside observers not to write off the legacy players in the future tussle for retail customers, noting that many analysts forget the power that their vast datasets afford them.

Work to do Despite starting from a position of strength, some feel that the UK banks need to accelerate their efforts when it comes to investing in new technology if they are to protect their retail revenues in the coming months.

The first 12 months since the UK’s Open Banking regulations were introduced have not seen the flurry of activity from the legacy players that some had hoped. HSBC launched its Connected Money app, which allows customers to see accounts from multiple providers in one place, while rival Barclays launched its version through its main mobile banking app.

However, while account aggregation may be useful to some clients, observers say that the legacy banks will have to go considerably further if they are to retain their retail customer base.

“The challenger banks see themselves much more as technology companies in that they are a lot more open and transparent than the bigger banks, and that speaks volumes about the culture,” says Dave Tonge, chief technology officer at financial management technology provider Moneyhub.

“The rise of challenger banks and Open Banking at similar times means that traditional retail banks are being attacked from different directions.

A lot of people will be vying to own the consumer experience.”

The challenge for retail customers isn’t purely from fintechs or digital brands such as Google, however. Asset managers and investment banks, such as Goldman Sachs, are also making a play.

“If there is a good product, with a good interest rate, people will always go for it,” says Tonge.

Predicting the ultimate victor in the retail sector, it seems, is far more difficult than it first appears. But given their size and available resources, it is perhaps a little too soon to write off the high street banks just yet. ■ 31

Insight Nick Harrison Commercial Director, first direct

“If we know a customer’s goal in life, such as saving for a house, and we know their typical spending habits, then we should be able to help them manage their money and achieve their goal faster.”

I

n time, 2018 will be seen as a pivotal moment for banking as it took its first steps into the world of Open Banking. first direct has been at the vanguard of this, seeking new ways to provide amazing customer service.

Among the changes we’ve been introducing in this space, our work with third-party provider Bud to create a pilot app, artha, gained the most headlines. We’ve taken our time in developing this offering, working within the Financial Conduct Authority’s Sandbox to pioneer features we believe customers will value, but in a way which still feels unmistakably first direct. For us it has been an incredibly fruitful experience and the feedback from customers has been extremely positive.

Over Christmas I was delighted to receive some direct feedback from a customer, let’s call her Aimee, who had joined first direct in 2018 and had been so motivated by her experience she wanted to get in touch. Not every customer writes in, but her experience to date is not untypical of customers in the current environment.

Aimee was keen to tell us most of her experiences with first direct were digital: making a contactless payment, using the mobile banking app to track her spending or withdrawing cash from an ATM. She went on to explain that she’d been one of the pilot members of artha and that she’d loved the ability to aggregate all her different bank accounts in one app.

She could easily track her spending habits and set up a holiday savings list 32 O P E N B A N K I N G E X P O . C O M

so that she could keep a much closer eye on her holiday fund.

If we’re honest, we know very few people wake up in the morning and think ‘I can’t wait to do some banking’ so it’s a great feeling to hear that you’re making a positive impact.

The timing of this feedback got me thinking about 2019 and how Open Banking and the use of partnerships will begin to change the way financial services support and serve consumers in the future.

In 2019 I expect to see an acceleration in the release of new services for customers by a large number of financial service providers.

As the partnership model between banks, established digital players and fintechs becomes a much better trodden path and consumer awareness of Open Banking increases, there will be an acceleration in the release of new services that help consumers to better track their finances, spending habits and goals.

For most banks, this will start with account information services that allow customers to see all of their bank accounts in one place. However, this is only the start of the journey as the real value-add for consumers comes when that important information is utilised to help them get on with their lives.

What do I mean by that? There are parallels between the automotive industry and financial services. Just as the automotive industry is moving more towards cars that can drive themselves, I expect to see financial services move in a similar direction

and provide products and services that help consumers by making better financial decisions for them based upon their goals. There’s still a long way to go and a lot more customer co-creation required before this becomes a reality but the artha pilot has shown us consumers really value personal and relevant notifications on their spending and savings habits.

If we know a customer’s goal in life, such as saving for a house, and we know their typical spending habits, then we should be able to help them manage their money and achieve their goal faster. Developing customer relationships and supporting consumers in this manner is popular as it enables customers to better manage their finances, frees them up to get on with enjoying their lives and builds a deeper level of trust based on emotion. I hope to see this vision become a reality as we progress through 2019 and beyond. ■ first direct is a mobile, digital and telephone bank and a division of HSBC.

➽ If you would like to comment on this opinion piece, please email us at: editorial@openbankingexpo.com Jan/Feb 2019

Open Banking made easy.

Whether you are a lender, a bank, or a FinTech, we make getting started with Open Banking data easy.

In a few days you could be offsetting credit risk, increasing customer conversion, and reducing consumer fraud through DirectID and our Open Banking suite.

1

2

3

Easy Setup.

Get started in 3 days by using our fully hosted solution, or embed our widget.

Easy Onboarding.

In a few minutes your customers can provide their consent and bank data.

Easy Decisions.

Seconds later you can view bank data, transactions and advanced insights.

Discover how easy it is - visit theidco.com/directid

DirectID is provided by The ID Co., authorised and regulated in the UK as an Account Information Services Provider by the Financial Conduct Authority under registration number 798579.

F E AT U R E / F I N A N C I A L I N C L U S I O N

Banking the unbanked

As banks and fintech start-ups use Open Banking technology to launch tools that help people manage their finances, can they also be used to improve financial inclusion?

Geordie Clarke reports

I

t’s a stark statistic: nearly half the world’s population doesn’t have an active bank account, according to World Bank research.

In the UK, the numbers are less dire, but still equally concerning. In 2015, the Financial Inclusion Commission reported that around 1.5 million adults are defined as ‘unbanked’ – having no current account and no alternative e-money account – while millions of households use high-cost credit, partly because they lack access to other forms of lending.

Of particular concern is the vulnerability of consumers on the fringes of the financial system. In its 2018 report examining the financial lives of consumers in the UK, the Financial Conduct Authority concluded that 4.1 million UK adults were in difficulty due to missed payments on their credit commitments. Worse still, 50 per cent of the adult population were found to be potentially financially vulnerable due to factors such as unemployment, low savings rates, or poor health.

According to the Financial Inclusion Commission, people who are excluded from the mainstream financial system have less market choice than the rest of the population and end up paying a so-called poverty premium for products and services. This can have serious knock-on effects, such as hampering a person’s ability to find a job, maintain secure housing, stay physically and mentally healthy, and be resilient to changes in income and expenditure.

For many observers, Open Banking technology could be a powerful tool for financial inclusion. The only problem is that these solutions are more likely to be a slow burn than a quick fix.

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

“Open Banking will be helpful for improving financial inclusion, but it will take time,” says Matt Cox, head of Open Banking at Nationwide Building Society.

“If Open Banking is not a force of good and doesn’t help financial inclusion, then in my view it has failed.”

Improving financial competence When Open Banking was launched in early 2018, it was on the promise that it would empower consumers to use their personal data for their own

Open Banking will be helpful for improving financial inclusion, but it will take time. If Open Banking is not a force of good and doesn’t help financial inclusion, then in my view it has failed.

Matt Cox Head of Open Banking, Nationwide Building Society

financial benefit. However, public awareness fell short of expectations.

Olly Betts is chief executive of OpenWrks, which builds Open Banking technology. He says one of the reasons Open Banking has seen low adoption rates is because consumers don’t always buy into new technology straight away.

However, he adds that what they will buy are better versions of themselves, and this is where the technology’s ability to enable financial inclusion comes in.

“It’s about real people and about making people feel more competent about their money,” Betts says, adding that Open Banking has the potential for significant social benefit.

One potential area where Open Banking technology can help is in consumer credit, where many unbanked and financially excluded customers either have no access to loans or face higher fees. Betts says the detailed personal data that the technology generates can help lenders make better underwriting decisions for consumers who are more likely to be financially excluded.

“The less information you know about something, the more you have to price in risks of those unknowns.

This disproportionately impacts the risks to those who need it most,” he says.

At charity the Money Advice Trust, the view is that Open Banking, if used properly, can be a force for good.

“As is often the case with new technologies, there are risks associated with Open Banking and it could potentially increase issues such as financial exclusion,” Joanna Elson, chief executive of the Money Advice Trust, told Open Banking Expo Magazine.

“Nevertheless, there is the opportunity for it to be a force for good that could Jan/Feb 2019

FINANCIAL INCLUSION

make a difference to many people, including by widening access to useful and affordable financial services and through the development of products designed with vulnerable customers at the centre of the process.”

Katie Evans, head of research and policy at the Money and Mental Health Charity, says app-based tools can help people who have problems paying bills or managing their money, and as a result are often financially excluded.

“Open Banking allows us to go beyond the one size fits all model and go to a more granular level,” she says.

“What I like is having an app that gives me a spending control. The ability to cap spending online can make a real difference. Open Banking opens up a suite of tools that give people the kind of financial services they want.”

Invest and they will come?

All of this comes at a cost, of course.

At November’s Open Banking Expo in London, Elson said the technology needed to improve financial inclusion requires a level of investment that the non-profit sector can’t provide on its own.

“It’s about people working together: working with banks, fintech, the Money Advice Trust,” she said. “The challenges are, how do we in the voluntary sector who don’t have deep pockets stay up to speed with the pace of change and make sure the services we provide are as effective and cost effective as we can possibly make them?”

To that end, the Money Advice Trust is working with Nationwide Building Society to see how Open Banking can be used to improve the speed and accuracy of completing a budget, which Elson says is a crucial part of the debt advice process.

“Open Banking has the potential to help people manage their finances, through alerts and nudges, and to identify financial stresses early before debt issues spiral,” she says. “We will continue to engage with organisations working in this area and look forward to seeing how Open Banking can help people in or at risk of financial difficulty.”

For Evans at Money and Mental Health Charity, the answer is in making the system work better for everyone, rather than trying to make everyone

work better in the system. She likens it to dropping curbs at street corners to allow wheelchairs onto the pavement.

“The crucial thing is we didn’t try to find every person who had a problem.

We built the system so it works with everyone,” she says.

An international perspective Away from the UK, the technology has proved more successful, particularly when it comes to social inclusion.

At the Open Banking Expo, Carlos Figueredo, chief executive of API strategy specialist Open Vector, said the experience in Mexico has been positive, with encouraging levels of collaboration.

“We didn’t have the pushback seen in the UK and we had immediate collaboration,” he says. “For me, Open Banking is not about products or an IT solution, it’s a movement. Open Banking can bring on new investors, new abilities – most importantly tackle social inclusion. It’s not about the banked, but focus on the unbanked. We never thought that’s what Open Banking would lead us to when we first started doing this.”■ 35

Viewpoint

The Wolf of Fraud Street: Lessons from the 1980s: Mike Haley, chief executive officer of Cifas, the UK’s fraud prevention service, says fraud prevention is evolving in response to Open Banking, with security crucial to gaining consumer trust.

OBE: Open Banking is here and is reshaping the financial services landscape. What are the considerations for fraud prevention?

MH: Open Banking is the most significant change since the 1980s liberation of the financial sector.

Back then, alongside a boom of store cards and credit availability, we also saw a boom in fraud: identity theft, account takeover – frauds that still proliferate today.

After heavy losses, Cifas was created by the industry as a notfor-profit data-sharing system that enabled organisations to join together and fight back against fraudsters. It has continued to do so ever since.

While there are great opportunities and benefits for businesses and their customers in the Open Banking era, it is crucial that these opportunities don’t blind us to the threats. Fraudsters are already looking at how they can adapt their methods to the new landscape. But, unlike the past, this time we have the data and intelligence and, in Cifas, the collaborative system to apply them effectively. It’s vital that we embed this into Open Banking from the start to proactively tackle the threats.

OBE: What do you think the main challenges are for businesses and their customers?

MH: Early adopters aside, the challenge for Open Banking will be to win the trust of consumers so they actually take advantage of

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

the new account and payment services made possible. The aggregation of financial data held in and accessed via one platform or with one provider – rather than in multiple and separate places – means that a data breach or theft could prove devastating for an individual. In addition, the sector will be filled with unfamiliar names that don’t have the same levels of trust as the established banks. Fraudsters will look to capitalise on that with fake apps and phishing emails. There’s a lot to make the majority of consumers decide it’s not worth the risk.

That’s where we all play a role.

Security should be considered a key component along with user experience when organisations are designing their products, and we need to support the FCA in verifying new players in the market. Then we need to communicate these actions clearly to instil consumer confidence in the system and provide clear guidance and support for consumers on choosing providers and using the new products so they are reassured they can ‘transact safely’.

responsiveness and is capable of processing millions of transactions in seconds. Our data can be used in and applied to automation and machine learning, and we’re progressing the integration of biometrics into our system. We’re working in partnership with the Open Banking Implementation Entity to create an industry standard for fraud prevention in Open Banking. And we’re developing our flagship consumer protection product, Protective Registration, to reflect the needs of consumers in the new landscape.

We’re at the centre of fraud prevention and we’ll be staying for the long haul – we count an ever-increasing number of fintech companies, such as Starling Bank and Tandem, among our cross-sector membership. Our commitment to collaboration to stop fraud means if you’re an organisation – big or small, public or private – who wants to talk about how we can work with you, then we want to listen. So get in touch. ■

Mike Haley Chief Executive Officer, Cifas

OBE: As a fraud prevention organisation, how are you responding to Open Banking?

MH: Cifas has been at the forefront of fraud prevention since the term was coined, and our collaborative system of sharing intelligence and data continues to be the industry standard. While our core principle of collaboration without borders still stands firm, this principle is being supported by ever-evolving technology to ensure it can be seamlessly applied as the future unfolds.

We migrated to the cloud to ensure our system provides real-time

JJaann/ F / Feebb 22001199

Viewpoint

Who are you opening the door to?

Why your customers could be the downfall of Open Banking – and how data sharing can save it.

I

n the world of business, it’s rare to find a situation where sharing information between companies results in a competitive advantage. But tackling fraud and financial crime is exactly that situation. And as we move into the brave new world of Open Banking, it will become more vital than ever.

One fraud hides a multitude of crimes.

The key to succeeding or failing in the era of Open Banking is knowing your customer: who are you opening the door to? Get it wrong and the repercussions can stretch far beyond a single fraudulent transaction. Contrary to popular belief,

Lee D’Arcy Director of Engagement, Cifas

transaction fraud is rarely a standalone crime – it’s frequently indicative of the presence of other fraud.

Authorised Push Payment (APP) frauds are a good example of this. APP frauds involve a scammer tricking a victim into transferring their money into the account of a fraudster – frequently, and ironically, by pretending to be their bank and asking them to transfer money to protect it from a fake fraud threat. But that’s not the only crime being committed. ‘Money mule’ accounts – illegal in themselves – are often the recipient accounts of the funds. These form part of wider money laundering schemes that can fund anything from further scams to the drugs trade to human trafficking.

Open banking – changing the game?

As a keen sporting fan, I have watched many sports – tennis, cricket, rugby – introduce technology to enhance the game. In the same way, the world of banking and payments is following suit.

The world of Open Banking reflects the consumer’s new way of engaging with financial services, and organisations’ use of technology to compete for business, from app-based accounts to payments.

But just as the fundamentals of sports remain the same, no matter what technology is introduced, the same is true for the financial sector. This is especially the case when it comes to the risk of fraud. With impersonations, identity theft and synthetic identities posing an increasing threat, data sharing is still the nature of the game when it comes to effective fraud prevention.

It’s now enhanced with increasingly sophisticated technology, such as machine learning and artificial intelligence, that not only wins customers, but protects them.

And with Cifas members increasingly

using machine learning and artificial intelligence to interpret and use our data, it’s no wonder they saved over £1 billion in prevented fraud losses in 2017.

Cifas: essential in the Open Banking era Cifas has over 500 members – including all the major banks, such as HSBC, Lloyds, Barclays and Santander, as well as challenger banks, such as Atom, Starling and Tandem bank. They access the UK’s largest fraud risk database for first and third-party fraud, as well as our database of employees who have committed internal fraud. Fraudsters operate across the sectors, not just finance. Insurers, retailers, regional and national government, law enforcement, charities and many more contribute to an unparalleled source of robust and reliable data that grows in value and utility every single day.

Alongside data, they share intelligence – what fraud patterns they see, what products are being targeted – and use this to inform and develop their fraud and financial crime prevention strategies to protect their business, clients and customers. They receive the latest statistics, trends and alerts from Cifas’ expert analysts who continually monitor the data and intelligence received.

Cifas is continually evolving to adapt to upcoming and recently-implemented regulatory changes. These include Confirmation of Payee and the new option for victims to complain to the receiving payment service provider, meaning that customer due diligence is as vital as ever. For example, new alerts tell members in real time when other organisations have seen activity that involves shared customers and tells them how to act to stop potential fraud.

Open Banking, the new era that both brims with opportunity and is pitted with threats, makes Cifas – the first and the leading UK fraud prevention service – perfect business sense. ■ Cifas is the UK’s leading fraud prevention service with 500 members across sectors, sharing data and intelligence to protect businesses, employees and customers from fraud and financial crime. To find out more, email newmembers@cifas.org.uk or call 020 3004 3600.

37

F E AT U R E / G L O B A L

Brave new world As the UK celebrates a year since the first Open Banking regulations came into force, the world is watching its progress.

But not every country is following its approach.

Jenny Turton reports

R

egulatory initiatives, fintech innovations and rising consumer demand for ease and convenience are fuelling a momentum for change across all industries, especially within financial services.

Whether it’s hunting for the best insurance deal, grocery shopping or researching health concerns, the common starting point for most is online, or via a mobile device.

With one click, a consumer can access the latest music, video tutorials, sector experts and much more. But while companies in other sectors have quickly embraced and responded to vastly increased expectations, financial institutions across the globe have been slow off the mark.

Taking the lead The EY Open Banking Opportunity Index identifies the UK, Germany and mainland China as Open Banking leaders, in spite of sharp contrasts in their approach.

According to the analysis by EY, UK and German regulators have been heavily involved in compiling standards for the APIs that will connect banks and third party providers (TPPs), while China has favoured a market-driven approach with no legal framework or standards in place.

Matt Cox, head of Open Banking at building society Nationwide, agrees

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

Jan/Feb 2019

GLOBAL

that many countries are looking to the UK to learn from its experience and build their own propositions.

“The UK, through the Competition and Markets Authority (CMA) order, has led the way in the model of creating a standardised ecosystem to facilitate Open Banking in a secure, trusted and resilient way,” he says. “When you look across the globe, Brazil is very much looking at the UK model and how that develops.”

It isn’t just regulators in South America watching the UK market, however. The current transformation is being watched by regulators around the world, according to Cox. “Australian regulators are looking closely at the UK model and adopting a similar, but subtly different approach,” he explains. “Rather than just looking at a payment account, the Australian regulator is going to look across all accounts at the same time – pensions, investments etc. This is very interesting and certainly one to watch in terms of how it develops.”

China, Cox argues, is a very different case and, unlike the UK, has found its consumers to be far more willing to share their data.

“They are perhaps too open and there are questions around the security and trust aspect of that,” he warns.

“There is really broad adoption of Open Banking propositions - look at WePay or WeChat for examples of how those are playing out in China.”

Across the pond The United States’ approach to Open Banking has been largely reactive to consumer needs and demands.

According to the Data Sharing and Global Banking report compiled by McKinsey, large banks in the US are agreeing deals with individual partners, as opposed to following the aggregated model used in the UK and across Europe.

The report cites examples including Chase’s partnership with Intuit and Wells Fargo’s deal with Xero and Finicity.

The lack of investment in regulation; guidance for institutions; and standards of practice, however, could see the US financial institutions at a distinct disadvantage when compared with European and UK counterparts.

Darren Upson, VP of small business Europe at Soldo, which offers finance automation tools to businesses, agrees: “The banks in the US are arguably more ‘behind the curve’ than the incumbent banks in the UK. It is going to be interesting when those banks have to open up their closed ecosystems.

Endless opportunities?

Regardless of the approach, financial institutions around the world have taken that first step into an interconnected Open Banking realm. For Jake Ranson, banking and financial institution expert and chief marketing officer at credit reference agency Equifax, the potential next steps are vast.

We are seeing an unprecedented amount of change from traditional financial institutions that need to safely unwind their technical debt, much of which is motivated by the need to compete with new entrants in the market.

Dave Locke Chief Technology Advisor, World Wide Technology

“We could see services that go beyond banking data, encompassing social media information, so that consumers can manage their data in one place to gain easier access to tailored services,” he suggests.

“More and more companies are likely to get involved, potentially including players as varied as online estate agents and debt management companies.”

AI machine learning and voice technology are two areas that could form part of the banking revolution.

Upson says: “Everyone is looking at ways to make people’s lives easier and being able to ask Alexa the balance on your current account without having to log in to your online banking is one thing. ›

39

GLOBAL

It is difficult to know where, or how far, Open Banking will go. If you look back 10-15 years, people were very hesitant when banking facilities first went online. › “[But] will Alexa be able to move £20 from one account to another? It may be that this technology is capable of only doing the basic banking. There is always the possibility that it could be developed to a stage where a voice can be used as authorisation.”

Challenger banks are also expected to become mainstream as younger generations focus on convenience and ease when conducting their day-to-day financial affairs.

Monzo and Starling are two examples that are today being used as secondary accounts. Upson expects that over the next 12-18 months, increasing numbers will move towards these as their primary accounts and this prospective migration is a significant risk for the incumbent banks.

He adds: “The reality is that most banks have an awful lot of data and very large customer bases and if they put that data to work they could learn very interesting things.”

For Dave Locke, chief technology advisor at World Wide Technology (WWT), however, the legacy technology that incumbent banks across the globe have is likely to be detrimental to their progress in creating innovative Open Banking propositions. WWT helps large organisations assess and implement advanced technology.

“We are seeing an unprecedented amount of change from traditional financial institutions that need to safely unwind their technical debt, much of which is motivated by the need to compete with new entrants in the market,” he says.

“However, the complex nature of existing systems built with conflicting metrics over the years acts as a significant barrier to this.”

Locke says that legacy infrastructures are typically built from an interdependent patchwork of applications, which communicate with one another in complicated ways. For this reason, legacy players are at a disadvantage, he claims.

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

David Webber Data Strategy and Content Licensing Director, TransUnion

“Challenger banks, on the other hand, are born on the cloud and don’t have to contend with the legacy IT structures of most traditional banks,” he says. “This enables them to better organise their operations around the customers’ needs and provide incremental improvements to their systems – in a way that legacy banks have difficulty doing.”

Capturing the consumer There is no doubt that the fundamental landscape for financial services is changing, putting the consumer in the driving seat. The biggest challenge for the banking sector in 2019 is to ensure that consumers understand how their data is being used and, ultimately, what value it holds for them.

Jed Murphy, UK head of strategy and innovation at Cardlytics, which helps financial institutions run banking reward programmes, says: “Old habits die hard when it comes to your personal finances, particularly around privacy. If entrenched customer behaviour is going to change, concerns must be tackled head-on, with industry-wide changes and truly compelling propositions.”

This again highlights differences when viewed globally. In the UK, consumers have, for years, been instructed to protect their data and not to share personal information.

Compare this with China, and the message has been completely different. Consumers there have been encouraged to share information and therefore consumer interest in Open Banking has not been tempered with the same level of apprehension and suspicion.

David Webber, data strategy and content licensing director at credit reference agency TransUnion, says: “It is difficult to know where, or how far, Open Banking will go. If you look back 10-15 years, people were very hesitant when banking facilities first went online. Now, online banking is used without question.” The global Open Banking journey has really only just begun and it will take time to reach a point where consumers are no longer asking how their data will be used and by whom. It is then that institutions will be able to introduce real innovation and value to their propositions.

Cardlytics’ Murphy concludes: “There is a famous adage, called Amara’s Law, that states most significant technology changes are over-estimated in the short-term and under-estimated in the long term.

“Open Banking may be one of those trends. The pre-launch hype was always going to be difficult to live up to. But the opportunities that are now available as a result of more portable financial services data are enormous.”■ Jan/Feb 2019

Global Perspectives of Open Banking: Mexico focus

GLOBAL SPOTLIGHT

Claudia Del Pozo Head of Operations, C Minds

S

tarting as an innovative regulatory disposition in the United Kingdom, in just a few years, Open Banking has become a revolutionary global movement.

Considered one of the cures to the ails of the current financial system, rooted in its obsoleteness and loss of touch with today’s realities, Open Banking promises to spark new life into consumer and small business finances.

To date, over 22 jurisdictions across the world have either implemented an Open Banking initiative (in the form of a standard or framework) or are working towards it.

The data and API revolutions have been under way for a while now, and it’s time for banking to enter the next stage. The UK’s leadership on the topic of Open Banking has been a spearhead for other jurisdictions seeking to inject innovation and competition into their financial services sectors, eager to understand the intricacies of the UK standard.

The UK has provided many helpful insights to the world; among them the importance of carrying out a comprehensive Open Banking initiative that includes elements such as communication and innovation promotion, beyond the mere development of a standard or framework.

Mexico has been working closely with organisations such as C Minds, the British Embassy, UK regulators and companies to develop its own standard, placing an emphasis on its potential for accelerating financial inclusion. Over 52 per cent of Mexicans do not have access to a bank account and over 10 per cent do not have access to formal saving mechanisms.

Earlier this year, the country became one of the first to regulate its fintech sector with the FinTech Law, regulating virtual assets, electronic payments and crowdfunding, introducing a regulatory sandbox, and requiring the publication of a regulation

for open APIs within two years.

This regulatory development seeks to accompany the rapid growth of the Mexican fintech industry, one of the most important in Latin America.

In August 2018, fintech accelerator Finnovista estimated that the country had over 300 fintechs with a 40 per cent annual industry growth rate.

Mexican regulators diverged from the scope of the original UK standard, requiring that the Mexican standard apply to all products and services; open, transactional, and also aggregated data; and be adopted by all financial service providers, not only banks.

These institutions will be able to charge for sharing their data, but this should not represent a barrier to entry for new players.

The publication of a report commissioned earlier this year by the British Embassy on the potential for Open Banking in Mexico – co-authored

by C Minds and the Open Data Institute with the support of the National Banking and Values Commission (CNBV) and the FinTech Hub – offered recommendations on the path towards a successful Open Banking initiative, highlighting the importance of an inclusive effort, of reaching out to consumers, of promoting innovation exercises and encouraging the development of new solutions for financial inclusion.

Following the recommendations, the CNBV and C Minds joined the National Digital Strategy Coordination in the implementation of a first pilot, exploring the usability of the UK standard for Mexican banks. The pilot resulted in the opening of 12 APIs,

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

eight ATM and branch endpoints and four product endpoints. It ended with a hackathon to test the potential of these APIs to create new exciting solutions for consumers. The results of both exercises contributed insights for the development of the Mexican Open Banking Standard, to be published in 2019 (pilot report on www.cminds.co).

Now that the Mexican Open Banking initiative has been launched, the more complex part begins: defining a standard for an entire industry.

How will Mexico do it? Regulators are expected to develop the standard step by step, so the financial services ecosystem can gradually adapt to the new reality and possibilities. While some institutions and companies are waiting for the regulation, others are already taking a head start, gearing up to reap the countless benefits this disruption will bring to those who know how to make the most of it.

As the world goes through more and more technological disruptions, it becomes important to create the tools that will guarantee a successful and inclusive future now. As an innovation agency, that’s exactly what C Minds is enabling. We are working to generate more open datasets in all sectors, including the financial industry via Open Banking, to ensure Mexico is ready to harness the AI and data revolution, which marks a turning point in the world’s financial markets and a new opportunity for global competitiveness.

If you want to see what Open Banking taken one step further looks like, keep an eye on Mexico! ■

C Minds is an impact innovation agency that designs and deploys strategies for economic and social development using disruptive technologies, working mainly in emerging economies.

41

Insight Matt Ford Product Director, Tandem

“Tandem is a bank built on this principle: we look at the real-world problems that our customers are facing and see how we can help.”

W

hen most banks decide to make a new financial product, they look at gaps in the market and what’s profitable. It’s easy to see why this is their approach, but in 2019 banking customers are demanding more. Creating products should be about building services that solve your customers’ problems and create value in their lives.

Banks should be looking at the real-world problems that customers are facing to see how they can help.

Every product is an opportunity to help the customer, to ask what they want from a banking product and then deliver it. Not everyone is fascinated by personal finance, but they don’t need to be. That’s where their bank comes in.

Through research we found that something our customers really struggled with was saving and we set out to change that. This was why we built Autosavings, a solution that we’re currently testing with the Tandem community ahead of a UK-wide launch.

We examined the psychological factors that affect savings and designed Autosavings to accommodate these with three stages of saving.

Saving is unique to every individual and is shaped by life experiences, so we conducted weekly user tests to glean a comprehensive view of what customer lives with money really look like.

Savings habits can be the result of ‘learned behaviours’. For example, we found that people who had been brought up in frugal households, where excessive spending is unlikely, 42 O P E N B A N K I N G E X P O . C O M

are more likely to save than those raised in an environment where high levels of spending is common. We also saw that people could become desensitized to debt if they had been exposed to it consistently. In these instances saving had become an afterthought. In addition to this, people told us that they had made a few attempts to start saving but had been thwarted by an unforeseen bill.

It’s circumstances like this that make saving feel unachievable.

Present bias and loss aversion are also clear boundaries to saving.

The tendency for individuals to place greater value on pay offs that are achieved in the present rather than saving for the future is human nature, but it can be detrimental when it comes to building good savings habits. This goes along with inertia, as individuals resist changing habits no matter how hard they want to try.

So, what do we do to change this?

We look to nudge theory. Using analytics and data we built a feature that can ‘nudge’ people into saving, developing new learned behaviours and turning the impossibility of saving in to a reality.

With the findings of our research we’ve built a tool that serves a specific need, with insights from our customers to guide us every step of the way.

This will pay dividends as banks and consumers both start to see the benefits of Open Banking. It’s thanks to this open data network that we can go from understanding a group of individuals in a research session to understanding our entire customer base.

We can see spending habits, understand how individuals approach saving and guide them on how to improve their habits. Knowledge of human nature, combined with the capability of Open Banking to build a feasible solution to a key issue in personal finance, are a powerful combination and this is only the beginning. ■ Tandem is an app-based bank offering current accounts, credit cards and savings accounts.

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

Insight Leon Muis Chief Operating Officer, Yolt

“This explosion in usage has been echoed at Yolt – growing from just three API calls on 16 January 2018 to completing 3.5 million API calls per week by November 2018.”

C

elebrating Open Banking’s first birthday this month provides a great opportunity to look back over the last year and see just how far the UK banking sector has come. The figures are very encouraging: The Open Banking Implementation Entity (OBIE) has reported that 100 regulated providers are now signed up to use Open Banking in the UK, and that the technology was used 17.5 million times in November last year, up from 13.9 million in October and 6.5 million in September.

This explosion in usage has been echoed at Yolt – growing from just three API calls on 16 January 2018 to completing 3.5 million API calls per week by November 2018. The number of financial services firms engaging with API integrations has clearly grown considerably over this period and consumers are already benefiting from more personalised products and services that simply weren’t possible a year ago.

The focus now lies on the innovation still to come. If 2018 was just the beginning, 2019 promises to be the year that Open Banking really takes hold.

What’s in store for 2019?

The success of APIs has been proven in the UK and now we need all UK banks to improve the quality and availability of their APIs to enable more consumers to really benefit from Open Banking.

As the legislation moves into its next phase to include credit cards and savings, this will widen the scale of what Open Banking services can achieve.

Likewise, the increasing availability of PIS (Payment Initiation Service) APIs also looks set to offer new ways for consumers to make use of Open Banking. Once the full range of APIs are available in Europe, in line with PSD2 requirements, these services will become increasingly internationalised.

2019 will also see the introduction of the Customer Experience Guidelines (CEGs) for Open Banking, under the mandate of the CMA, designed to facilitate the widespread use of Open Banking-enabled products and services in a simple and secure manner. User benefit is key here and will pave the way for increased convenience and ease, with more ‘app to app’ coordination smoothing the process.

Digital ecosystems Another key trend that looks set to be increasingly important in the Open Banking world is the proliferation of cross-industry partnerships, which allow new technologies and services to work together. Already, by picking and choosing the services they require, consumers are able to leverage control of their own data to create a singular digital experience that is bespoke to them.

The current collaboration between fintechs and incumbents is already allowing users to start assembling their own personal ‘digital ecosystems’ – built organically around their needs.

These ecosystems are already going beyond the financial world to include utilities, bills, leisure and experiences.

For more and more people, the options available for managing all

aspects of their financial life are better and more easily accessible than ever before. At the same time, these services have become simpler, easier to use and more personalised. As a result, products, services and processes which were formerly impossible are now available, often free of charge, to everyone who owns a mobile phone.

This is certainly worth celebrating.

The world is your oyster – literally Ultimately, customers shouldn’t be reluctant to demand more from the institutions they trust with their money.

With more choice than ever before, competition will be fierce, and consumers needn’t be afraid of expecting high standards and tailored customer service.

While the sector is certainly competitive, the story of Open Banking has too often been written as one of high-stakes competition between ‘incumbents’ and ‘start-ups’. While compelling, this narrative tends to obscure the real winners: Open Banking’s users.

As the industry continues to grow in 2019, consumers will soon be able to create unique ecosystems with all their financial touch points in one place, for themselves, reaping the benefits of this innovative technology to regain control of all aspects of their finances. ■

Yolt is a third-party provider. Its app enables users to view all their current accounts, savings accounts and credit cards in one place.

43

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

The battle for supremacy Regulation has stimulated a wave of new entrants to the payments space and incumbents are spending big to protect their market share.

But who is likely to win out in the battle for supremacy?

Joe McGrath and Jenny Turton report

C

ompetition in the payments sector is intensifying at breakneck speed. The arrival of the second Payment Services Directive (PSD2) in January 2018 acted as a catalyst for product development in an alreadyflourishing fintech scene. The past year has also seen incumbent payment

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

companies move to protect their businesses by spending on marketing, branding and advertising.

Mastercard, for example, kicked off 2019 with the news that it was going to drop the company name from its logo, to ensure the company is fit for the digital age. In the same way as the Apple brand is recognisable in

isolation, Mastercard hopes that its interlocking two-circle identity now has sufficient brand recognition.

Speaking in the press, chief marketing and communications officer Raja Rajamannar has said the decision followed 20 months of research around the world and that simplicity was needed for the digital age.

Jan/Feb 2019

R E G U L AT I O N

What’s at stake?

The reason that companies are splashing out on things as fundamental as branding is simple. Payments are big business, and research from Accenture suggests 35 per cent of the revenue of traditional players could be at risk to fintechs entering the space.

While the future winners from an evolving payments landscape have not yet been decided, analysts predict that the market could look very different in as little as two years.

EY’s Future of Payments research compiled towards the end of 2018 states: “By 2020, the competitive environment will have been redefined; new services, providers and systems will create a very different industry from the one we know today.”

According to the paper, the challenge for current market incumbents is to remain relevant as the sector transforms.

Dave Lock, chief technology adviser at World Wide Technology, says high costs and the implications of existing infrastructure mean banks are struggling to keep pace.

Currently, banks have two major advantages over the latest fintech players: an established customer base and the customer data that comes along with this.

Dave Lock Chief Technology Adviser, World Wide Technology

“Currently, banks have two major advantages over the latest fintech players: an established customer base and the customer data that comes along with this,” he explains.

“To capitalise on this and stay competitive, they must first gain extensive insights into the existing infrastructure to create a real-time

picture of the entire network.

They can then use these insights to create a roadmap to their desired business outcomes. Once this level of visibility has been achieved, banks can confidently rationalise the way that different applications share data within the system, allowing them to achieve the level of agility they need to stay viable.”

Getting real Challengers to the traditional card payment model, like Apple Pay, have enjoyed rapid success in recent years and are considered by some to be a mainstream payment alternative in the digital world. Consumers trust the Apple brand and have responded to the ease of use and functionality.

However, a payments revolution, where consumers prefer to pay by direct inter-account transfer and not credit or debit cards may still be some way off, according to those working at established financial institutions. ›

45

R E G U L AT I O N

Cox says that consumers will still need considerable reassurance to change their behaviours to something new.

“The industry needs to come up with a simpler and clearer liability model to explain when they are better off paying by card and when they should pay by bank,” he says. “Right now, if you decide to buy a washing machine and pay on card, there are certain protections and liabilities that come with that which don’t exist with a bank-to-bank transfer.

“How do you explain what is right for consumers and make it simple for them? I think this is the challenge the industry has got to solve.”

› Matt Cox, head of Open Banking at Nationwide, says the problem is twofold. Firstly, consumers have become comfortable with protections afforded by paying by card. Secondly, the current payments ecosystem has developed over decades, so adapting or replacing that with something entirely new will be tricky.

“Payments is a hard landscape for inflection to be had. Why? Because people pay lots of organisations and they have got lots of banks,” he says.

“Payments is a big area where we will see transformation, but it will be a slow burn because of the headwinds of network effects in getting scale.”

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

Regulation rewards Regulation has acted as a catalyst to encourage new entrants into the many areas of the payments sector. PSD2 came into effect on 13 January 2018 and financial institutions have until 24 March this year to prepare their systems for testing for compatibility with external parties.

PSD2’s arrival presented one of the biggest challenges to the sector as it created a level playing field for all providers, from incumbents to fintechs.

Lu Zurawski, consumer payments practice lead at electronic banking and payment provider ACI Worldwide, says that developments and innovations within the sector must come from collaboration between banks and fintechs, as opposed to the incumbents trying to imitate them.

He cites the partnership between Lloyds and Worapay as an example.

“Worapay is interesting because they are not changing the fundamentals of payments but are instead creating new approaches and with Lloyds they enabled the ‘order ahead’ function in cafés and restaurants.

“This means you could order and pay for your coffee from home, avoid the 20-minute queue in the coffee shop and your phone would alert you when it is ready to collect.”

The transformation of the payments sector isn’t likely to be dramatic or instant but, based on existing

Worapay is interesting because they are not changing the fundamentals of payments but are instead creating new approaches and with Lloyds they enabled the ‘order ahead’ function in cafes and restaurants.

Lu Zurawski Consumer Payments Practice Lead, ACI Worldwide

innovation, we can identify the direction institutions are heading and what the future could look like.

China’s market, according to Zurawski, provides a great insight. “It’s not so much looking at what Google or Amazon have done, but more at what the Chinese fintechs are doing – Tencent and Alipay.

They have ignored traditional payments methods and created their own using QR codes. Now QR codes are clunky, but they have had great success and millions of Chinese consumers can’t be wrong.

He questions: “Could we have a similar sort of thing happening outside of China where Google does their equivalent of a faster payment? It is possible, not with QR codes but perhaps via Bluetooth.

“It is important to remember though that Tencent and Alipay have been working for 10 years on this revolution, so we can’t expect something to happen overnight in terms of replacing traditional card payment methods.“ The last revolution in the payments space was the introduction of Chip and Pin, followed more recently by contactless payments – neither of which moved away from the preferred ‘card’ payment method. The key to real disruption, therefore, lies with the consumer.

“Trying to persuade consumers to do something new, either Open Bankingrelated or instant payments, it is a very slow process. Retail is dominated by cards and it is going to be a hard slog to try and break that traditional payment method,” Zurawski concludes. ■ Jan/Feb 2019

Three reasons why Open Banking can unleash small business lending

SME FOCUS

Christoph Rieche Co-Founder & Chief Executive Officer, iwoca

F

ive years from now, we will look back at Open Banking as a catalyst that unleashed access to finance for small businesses after a decade of bank obstruction. This may seem a bold prediction, but the opportunity exists and with the right support and investment, we can make it happen.

Open Banking helps solve a longstanding and crucial problem for small businesses: access to credit. Since the financial crisis of 2007-08, small businesses are finding it harder than ever to secure finance from their banks.

Today, the stock of loans to this sector has dropped to £36 billion from £40 billion in 2011, while the small and medium-sized enterprise (SME) population has grown significantly.

Little wonder more than half the small business population reports finding it difficult to secure financing.

The Government acknowledges that the majority of SMEs approach the UK’s largest four banks for funding and in the case of first-time borrowers the rejection rate is around 50 per cent. The Competition and Markets Authority (CMA) identified lack of competition as the culprit and freedom of information as the solution.

The banks say small businesses are simply not interested in applying for credit. Our customers disagree.

They say they felt discouraged from applying to banks due to the cumbersome application processes, unfavourably stringent criteria and poor customer service.

In November, a salon in Kent became the first ever small business to apply for a loan using Open Banking. Our connection with Lloyds Bank made this possible. Now we have connections to Barclays and HSBC, covering up to 80 per cent of the UK business current account market (according to the CMA). We’ll hit 90 per cent in the coming weeks.

From iwoca’s experience of using and expanding these bank connections,

I believe there are three key reasons why Open Banking has the potential to open up small business lending.

First, it gives small business owners control over their own financial transaction data. Previously, banks alone had the best view of a business’ financial track record. The advantage was jealously guarded. Armed with the power of Open Banking, small businesses can consent to challenger lenders accessing the right data to make an informed credit decision without inconveniencing the customer.

The cutting-edge risk assessment technology designed by challenger lenders has already improved access to finance for SMEs by making more efficient use of the limited data points they traditionally received. With the comprehensive transactional data provided by Open Banking, these advanced algorithms can go even further in offering better terms to small businesses.

Business owners already see the value of this – two-thirds of iwoca’s eligible customers opted to use Open Banking when completing the application process in December.

Second, it can make shopping around much simpler and easier.

The traditional method of manually providing lenders with bank statements takes time that owners can ill-afford. Sharing up to five years of bank transaction history with a few clicks is welcome to time-pressed small businesses.

We’ve already found that more than twice the number of customers are completing our application process in one hour or less with Open Banking compared to those

manually uploading files. That rises to more than five times the number for completing the process within 24 hours.

Lastly, Open Banking has the potential to shake up the market.

Forget the queues, forget the delays.

Applying for a small business loan can be as easy as booking a flight online – the way it should be. Open Banking signals to all prospective borrowers that it’s worth shopping around and it’s no longer difficult to do so.

To date we have funded 25,000 small businesses and we have an ambition to fund 100,000 more in the next five years. I view Open Banking as a vehicle for getting us there sooner.

But Open Banking is still in its infancy and customers are not familiar with it. Our November survey of 1,000 small business owners found that 73 per cent could not correctly identify what Open Banking actually is. There is still a lot of work to be done by banks, regulators and challengers to raise the awareness and educate small businesses about Open Banking.

Commitment, determination and investment from all sides are required for Open Banking to succeed. Nonetheless, I believe it’s a key piece of the puzzle, a way to level the playing field so that challenger lenders can compete head to head with the big banks. It means that Britain’s 5.7 million SMEs can now be more confident about getting access to the finance they need to realise their potential and, as they thrive, they will unlock economic growth for the country. ■

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

Iwoca is an online lender, offering loans of £1,000 to £200,000 to small businesses.

47

Hub

The Open Banking & PSD2 Hub The first issue brings you the launch of the Open Banking & PSD2 Hub, which will get you closer to those businesses that make up the global ecosystem.

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

Telephone: 020 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.

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

Telephone: 07973 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: keith.hale@gdslink.com Company: GDS Link

Telephone: 03303 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.

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

Fraud prevention

Data sharing

Financial crime

Open Banking as a Service (OBaaS)

Transaction categorisation & analytics

Improved online customer journeys

Credit Risk

Decision Engine

Open Banking

Jan/Feb 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: 07917 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: 07554 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: 07802 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

49

SOAPBOX

Bringing the data daisy to life Dr Louise Beaumont Chair, Advisor & Investor

B

usinesses need to have a clear view of the benefits of Open Banking for those they are trying to reach – consumers and SMEs alike. Being able to communicate those benefits is a crucial ingredient of success.

So, imagine a daisy and I will paint a picture in your mind of what open data really means for an individual or for a small business in our open future. If the person or business is represented by the yellow disc at the centre of the daisy, each petal represents a strand of data in their life or in the life of their business.

At the moment, their data daisy might look a little sparse and not particularly healthy. They’d have maybe one or two petals in the daisy, because all they can plug in right now are bank current accounts: i.e. current account petals of data.

But, in time under the Open Banking regulations, they are going to have more and more petals of data to plug in.

These will include saving petals of data, loans petals, credit card petals, and mortgage petals.

In time, smart companies will open up insurance and pension petals of data. Individuals and business will be able to plug these in as well. If they were in Australia, they would be able to add energy and telco petals of data, because the country is disrupting all three oligopolistic industries (banking, energy and telco) at the same time.

Powering service Over time, individuals and businesses will have access to the different petals of data that the industry creates, and they can – if they choose to – plug in those petals of data to access services which require that data to run.

“At the moment, their data daisy might look a little sparse and not particularly healthy.

They’d have maybe one or two petals in the daisy, because all they can plug in right now are bank current accounts: i.e. current account petals of data.”

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

For example, anybody who has used taxi service Uber has, in effect, plugged in their location petal of data so that Uber knows where they are. Ditto with Uber Eats, the food delivery service. They are plugging in a location petal of data to tell Uber where they are, and then adding to that what it is they want Uber to do for them.

As long as customers are willing to share that petal of data with Uber, the firm can continue to provide its services.

Uber and other providers that operate in this way work hard to ensure they deliver positive experiences for us so that we leave our petals of data plugged in, powering their service. Without our data they cannot provide their service.

The more (relevant) petals of data that individuals and businesses are willing to share, the richer, more personalised – in fact, hyper-personalised, predictive and pre-emptive – the services they use will become.

Big dumb products, mass-marketed without the slightest consideration for the end consumer are dead.

Our future is using our data to access services which are rich, personalised, that wrap around us, that flex and flow, powered by the data petals that we’re willing to share. And we’ll be able to access these services only if we continue to share our petals of data ■

Dr Louise Beaumont works with legislators and regulators to create disruption, with corporates to cope with disruption, and with start-ups to exploit disruption. Her roles include chair of techUK’s Open Banking & Payments Working Group, member of Pay.UK’s End User Advisory Council; and advisor to Yapily, Funding Options and Bottomline.

➽ If you would like to comment on this soapbox piece, please email us at: editorial@openbankingexpo.com Jan/Feb 2019

OPTIMISE your operations IMPROVE your systems and processes INCREASE collections ENHANCE your debt sales GAIN insight and oversight REDUCE costs

Find out how we can help YOU www.qualco.co.uk | +44 1932 213340 | info@qualco.co.uk

CopyrightŠ 2019 Borough Bench Media All rights reserved. Open Banking Expo Magazine is published by Borough Bench Media. No part of this publication can be reproduced without written consent of the publisher. Every effort has been made to ensure the accuracy of information in this publication, however, Borough Bench Media makes no warranties, express or implied in regards to the information, and disclaim all liability for any loss, damages, errors, or omissions.