Welcome to the Frictionless Finance Report, our bi-weekly look at everything that’s new in the world of Open Banking, FinTech and consumer experience. If you’d like to receive this in your inbox every other Wednesday, simply fill in the form at the bottom of the page. This week we cover the latest reviews on Open Banking, how Open Banking could help retailers, and the newly implemented FCA affordability regulations.
The ten months since Open Banking was introduced in the UK has flown by. In that time, we’ve had some early adopters, some naysayers, and both banks and banks’ customers calculating what the potential impact could be (has been).
This week we have seen a flurry of “review” articles on Open Banking, looking at its successes or otherwise, future implications, and the reaction of banks and financial institutions.
Most significantly, is FinTech Connects interview with the Programme Director and Head of Open Banking, HSBC, Hetal Popat. Importantly, Popat outlines two of the key strands to HSBC’s Open Banking ideology. First, they look to use other bank’s data to further their own research, and then to use this data to fill in the gaps in their own customer’s customer journey. For banks such as HSBC, he feels it important to think about how customer data is utilised, and can this data be used in conjunction with other data sets to inform and advise, ultimately leading to more value for the customer.
Zopa’s Head of Bank Build, Didier Baclin has written in UK Tech News on the distance travelled by Open Banking over the course of 2018. As well as confronting two of the biggest issues associated with Open Banking - public awareness of the potential benefits and poor customer journey design from a select few of the major banks – he goes on to note that where Zopa have seen real success with Open Banking is when the customer already has a historic relationship with the financial institution requesting the data and the benefits to them of connecting their data are clear.
The progress made by Open Banking is again explored in Finextra. In this article, author, Stuart Jackson considers some of the goals set by the Government and Open Banking Implementation Authority (OBIE) in January. On account aggregation, increasing access to finance, reducing the cost of credit, and the personalisation of wealth management, that good progress has been made.
This is the latest update from the Open Banking Implementation Authority (showing September statistics). While some of the numbers have been called into dispute by some industry commentators, they clearly illustrate a growing volume of API calls and a growth in regulated providers.
In pymnts.com, the security of API’s within Open Banking is explored, with the conclusion that FinTech’s and financial institutions should beef up their security around their use.
Pressure exerted on retail firms from online retailers such as Amazon and Google have been well documented over the last decade, so could Open Banking provide something of a panacea to retailers? That's the question being asked by RetailTechNews. One example given – and one we frequently give at The ID Co. - is the ability of retailers to offer credit at the till when consumers buy big-ticket items. There could be benefits to both consumers as well as retailers, as the customer journey is much smoother, and retailers have more control over the payments process.
Author Hugh Williams writes:
“Open Banking offers retailers the opportunity to benefit from this shift, as it gives them the ability to integrate their propositions with their customers’ financial data. As a result, retailers no longer need to run the risk of having a customer’s card details on file, nor do they have to incur the added cost of low-friction payment mechanisms that reduce the number of steps that users must take to complete a purchase. Instead, they can vertically integrate financial services into their offerings without holding the balances themselves.”
“The pace at which the sector is changing has allowed the status quo to be challenged and has created exciting opportunities leading to better outcomes for consumers” said Amer Bhatti, chief compliance officer of the P2P payday lender.
A survey by Unisys of 450 small business owners has shown that large banks remain the prevalent choice for their banking requirements. Interestingly of the businesses that were aware of developments in FinTech and Open Banking, these business owners were more likely to move their services to a new provider.
It’s not just FinTech’s that banks need to be wary of however. This isn’t the first time on these pages that we’ve written on the emergent possibility of one or more of the giant tech firms entering the banking ecosystem, and Specialist Banker has taken the pulse of several tech leaders to gauge their views on the possibility of it happening.
So what can banks do to ward of the threat of challengers? Finastra’s Martin Haering has written in Finextra on how banks need to incorporate a customer-centric approach using data and AI to produce a seamless customer journey.
Banks and FinTech’s alike have been working to win customer loyalty through the use of Personal Finance Management Apps (PFMs). Now, new analysis from Moneyhub has shown that users of money management technology have double the average value of savings, investments and wealth than those not using tech.
Samantha Seaton, CEO of Moneyhub, commented:
“In the debate on digital money tools and apps, the industry has been almost dismissive of their role in empowering people with their money. The perception has been that apps are almost only the preserve of hipsters to keep track of spending on avocados. Our analysis shows just how incorrect this perception is. The average net worth of a Moneyhub user to manage all of their finances, from investments, pensions, mortgages to current accounts and credit is nearly double the national average, demonstrating the strength of technology in supporting complex decision making.”
And Dharmesh Mistry of Temenos has written a potted history of PFMs, and what the future may bring.
Many congratulations to our friends at Monzo on attaining unicorn status. The news came as Monzo raised £85m in Series E funding at a valuation of £1 billion. Coverage can be found in Techcrunch (nice URL!), Telegraph, The Next Web, Finextra and Reuters.
Open Banking Abroad
Australia, along with some Asian states, continue to lead the way in being the next jurisdiction to implement Open banking, and has the bulk of coverage. Business Insider Australia looks at open Banking and concludes that while banks will have to work harder to keep customer loyalty, Open Banking is unlikely to signal the death knell for major financial institutions. Finextra have examined digital identities from the perspective of the Digital Transformation Agency, and their aim of providing a digital ID for every Australian, known as “Govpass”. And Investor Daily considers the progress made in Australia towards the implementation of Open Banking compared to Japan.
What can the United States learn from Open Banking in the UK, asks isBuzznews? Well, a group of US banks have formed the Financial Data Exchange, that will allow for the secure exchange of customer’s data, as per Business Insider. This could prove to be the forerunner to Open Banking in the United States, a jurisdiction where banks are making a lot of the running in the absence of direction from regulators. This new grouping is a subsidiary of the (catchily titled) Financial Services Information Sharing and Analysis Center (FS-ISAC) and comprises Bank of America, Citi, JP Morgan and Wells Fargo as well as a number of large FinTech’s.
Hong Kong & Singapore
In their Open banking readiness report, Finastra have revealed that Singapore continues to be in the lead for preparedness for Open Banking, beating Australia into second, followed by Hong Kong, New Zealand and China. Coverage can be found across a number of outlets including Entrepreneur, Singapore Business Review, Regulation Asia, and Asian Banking & Finance.
There’s no shortage of news emanating from the UK FinTech scene as financial technology continues to make huge strides.
Where’s the best place to set up shop for a FinTech? Well, TechNation has compiled a report suggesting London, Leeds, Manchester, Oxford, Cambridge and Edinburgh are the places to look. As we’re biased, we’ll nudge you towards the Scotsman’s coverage. And in case you were thinking of going abroad, KPMG’s new report on the FinTech100 show that UK firms increased their share of FinTech’s on the list.
‘Fintech is a combination of the words “financial” with “technology”....’ begins this article in Global Banking and Finance. It gets better though, and goes on to explain the synergy between banks and FInTech’s and why they need each other.
The ID Co. News
Did you notice...
We’re now in November! That means new regulations from the FCA on affordability are now live. Need a solution? Try DirectID. Read more, on our blog.
We’ll be attending the Open Banking Expo on November 27th in London. If you’re in attendance, be sure to watch out for our stand. Our team are really lovely, and would be delighted to speak to you around all aspects of Open Banking – book a meeting with them today. Want to find out more about them? Read their profiles, here.
Our next Open Banking Excellence meetup will take place in Edinburgh on November 19th. Book your place today and join the Open Banking revolution.
As always, if you have a story or article you’d like to contribute to the Frictionless Finance Report you can do so by contacting the team on email@example.com.