A year of open
banking in the UK

Umpteenth BankIn 2016, The Financial Brand took a forward look at open banking, claiming that it …

… would give both customers and businesses the freedom to access all bank data in real-time, ultimately giving them more accurate and up to date information on finances … customers will be able to compare and save on their accounts and have access to more personalized resources … Additionally, customers will have access to better loan terms …

“Of course,” the article continued, “an endeavor on this scale would take years to implement and the Open Banking Standard is expected to be fully implemented by 2019.” 

Spoiler alert: It’s 2019, and open banking actually launched in the UK in January of 2018. Now, a little better than a year in, the consensus seems to be that open banking hasn’t generated much action—yet—but that it’s coming.

If you know what open banking is (I suspect most readers do), I won’t be offended if you skip this paragraph. Open banking has to do with banks making financial data accessible to third-party developers. The idea is to catalyze development of apps to give clients a more accurate view of their financial data across multiple banks, let clients compare apples to apples when shopping financial products, and force legacy banks to become more competitive.

OpenBanking.org promises a … 

… way to new products and services that could help customers and small to medium-sized businesses get a better deal. It could also give you a more detailed understanding of your accounts, and help you find new ways to make the most of your money. 

To date, the response to open banking on the part of developers, banks, and bank clients underwhelms. Were you to read only the first few paragraphs of  “resident thought provocateur” Leda Glyptis’s delightfully written piece for Fintech Futures, you might think that she has all but given up on open banking:

… despite millions spent with consultancies and many a project team working their way through tons of post-it notes, no real strategy for monetising Open Banking and the opportunities it affords has materialised.

The customers have sort of maybe used some aggregator apps, in numbers that suggest that “meh” is an accurate response to “is it working,” “how is it going,” “was it even a useful idea.” Even the startups building their USP on either facilitating Open Banking or leveraging the digital riches it opens access to, have not been as numerous as we expected.

Yet Finextra concedes open banking’s slow start but nonetheless piles on encouragement:

Despite the inevitable teething problems, the initial signs are encouraging, as banks up their game in the face of strong competition from innovative third party products and services.

… The Open Banking Implementation Entity reveals to Finextrathat it currently has 118 regulated organisations in the Open Banking ecosystem and 200 firms waiting to join. Alongside this, in addition to the nine mandated banks – also known as the CMA9 – there are 40 banks using the Open Banking Standard.

And Investopedia continues striking a positive note:

… open banking helps financial services customers to securely share their financial data with other financial institutions. Benefits include more easily transferring funds and comparing product offerings to create a banking experience that best meets each user’s needs in the most cost effective way … It forces large, established banks to be more competitive with smaller and newer banks, ideally resulting in lower costs, better technology, and better customer service.

Coming around to the positive later in her article, Glyptis herself asserts that open banking marks the end of an era …

… defined by fortress mentalities, zero-sum-game commercial models and regulators who looked at what you’ve done and the checklists you employed to ensure you did it properly. Post open banking, the consumer comes first. Plus now we have to contend with sharing economies, transparency in fees and a focus on what is possible, desirable and a bloody good idea rather than “the way we used to do things.”

To her point, in an article posted by The Balance, Justin Pritchard believes that open banking promises an end to data collection viascreen scraping; that it will create pressure on banks to be more open and competitive; and will lead to simplified accounting, business lending, and payments, and to services we may not yet know we need—which seems to be hallmark of technological innovation these days.

Even after a year of “meh,” to use Glyptis’s word, expectations haven’t diminished since Laura Brodsky and Liz Oakes wrote this for McKinsey:

The potential benefits of open banking are substantial: improved customer experience, new revenue streams, and a sustainable service model for traditionally underserved markets.

Glyptis ends on this encouraging note: 

The path is non linear. The players are learning new games. New players are turning up. Old rules are shifting. And the world will change. Without a stampede, perhaps. Without a ta-dah moment. But also without the shadow of a doubt. And that is a good thing.

As the UK gains more experience with open banking, you can bet that traditional financial institutions, fintechs, third party developers, politicians, and regulators on the American side of the pond will be paying close attention.

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