OPEN BANKING EXPO IDEAS, CONNECTIONS AND DEALS IN OPEN BANKING MAGAZINE LAUNCH PARTNER
Issue 1_Jan/Feb 2019 OPENBANKINGEXPO.COM
Survival of the fittest THE BANKING FUTURE IS HERE PAGE
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OBE News
A L L T H E L AT E S T NEWS FROM THE OPEN BANKING I N D U S T RY
Customer awareness of Open Banking falls short
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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 on 27 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 could have been better and this 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. One reason we can do that is because
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: “There have been a lot of disappointments – adoption and innovation hasn’t been realised. “Customer awareness and comfort, the things we as an industry should drive, haven’t been achieved. There hasn’t been a huge industry drive yet.” Meanwhile, Becky Moffat, head of personal banking at HSBC UK, said while customer uptake has been slow, 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 rather than technology – 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 and we are seeing that with Connected Money.” Panel members also agreed a major hurdle is in making consumers feel comfortable with sharing their personal data through Open Banking technology and 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 Open Banking service 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 them to do more with their personal financial data. The service has been designed to enable greater consumer engagement and more informed lending decisions. 02 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 referencing group formerly known as CallCredit in April 2018. Jan/Feb 2019
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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
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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. 4
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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
VIEW FROM THE TOP
Putting the ‘rev’ in revolution Imran Gulamhuseinwala OBE Trustee of the Open Banking Implementation Entity (OBIE)
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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 timescale. 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, hardworking 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.” 6
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Jan/Feb 2019
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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 Many 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
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January 2019
R E TA I L B A N K I N G
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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 9
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.”
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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 spend 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 so that she 10 O P E N B A N K I N G E X P O . C O M
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 telephone and online retail bank and a division of HSBC.
➽ If you would like to comment on this opinion piece, please email us at: editorial@openbankingexpo.com January 2019
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