Welcome to the Frictionless Finance Report, our bi-weekly look at everything 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 examine coverage from the recent Fintech Connect conference, South Korea’s first tech unicorn and winners from the Open Up Challenge.
As Open Banking continues to effect new sectors, we have witnessed a sharp spike in commentary from the mortgage sector on how Open Banking can impact lenders. This week Mortgage Finance Gazette have explained the case for Open Banking, writing that customer loyalty can be maintained through an enhanced customer experience which builds trust.
Has there been enough focus on the testing of new technology before it goes live ask Finextra? While automating processes is good in itself, testing of new technologies is required to ensure it is not bad processes that are being automated.
Open Banking has once again featured in several articles as the technology to watch in 2019. It has a large role to pay in the payments sector writes Ian Rutland of Optomany. City AM have covered Open Banking as one of their top FinTech predictions for 2019, writing it “will come into its own.”
Nicolas Cailly has written a blog for his employer Societe Generale on the consumer benefits of Open Banking, and their own work with the Berlin Group. In Finance Derivative however, a guest post by CGI has outlined the two key objections to the wholesale adoption of Open Banking – a poor customer journey and consumer confidence in security. Meanwhile, Quantexa have written a guest post in Forbes on how Open Banking has performed thus far, as well as an appeal to banks to see the potential financial benefits that Open Banking can bring.
According to Nationwide’s Head of Transformation and Open Banking, Open Banking as a term has been overused and has yet to demonstrate consumer benefits. What is really required is competition in the market said Matt Perks, speaking on a panel session at FinTech Connect. A panel debated the merits of Open Banking in light of the significant volume of data breaches that have occurred in 2018. Also at the conference, the question of whether banks see FinTech’s as merely “mosquitoes” was raised by Harrie Vollaard of Rabobank.
As we’ve witnessed on these pages in previous weeks, the impact of Open Banking on payments is already being felt. This week, 11:fs has been looking at this in the context of Strong Customer Authentication (SCA). Could a reduction in transaction fees bring down costs for consumers shopping online?
As the second and third implementations of Open Banking are released, many are beginning to look forward to how open finance or open APIs can impact other walks of life. Australia, as an example, is implementing Open Banking to be more far reaching than we have in the UK. One example that could feel the effects in the UK is the energy sector. Could open APIS be a suitable response to the expiration of energy tariff caps in 2023 writes Sam Bowman on Medium?
TrueLayer have shown their frustration at the lack of progress made in Open Banking, and have taken a swipe at the OBIE and the banks;
“You [the banks] have been made to do this because there has been a CMA order, get it done. There is a court regulatory order to say open your APIs, open your data, OBIE was charged with making sure those technical specs were complied with, they haven’t been. What’s the pushback? What are the repercussions of banks not being compliant? I don’t see anything” they said.
Funding Circle have come up as cream of the crop in the recent Open Up Challenge. The competition, run by Nesta, is a prize for FinTech’s who are developing solutions that can utilise Open Banking technology to help funding for small businesses. Funding Circle were joined by other award winners, Funding Options, Coconut, Fluidly, Swoop and OpenWrks. Coverage can be found in Forbes, IBS Intelligence and P2P Finance.
Separately, Funding Circle have announced a strategic partnership with Waterfall Asset Management that will see the investment firm invest £1 billion in loans through Funding Circle’s UK operations. Coverage can be found in Bridging & Commercial, IBS Intelligence, Private Equity Wire and altfi.
The news emanating from the banking world this week is dominated by the challenger banks, and one of the high-street banks replicating some of their recent reforms.
UK neobank Revolut has been granted a banking license – from the Bank of Lithuania. The license will afford it the rights to open up operations on the continent, beginning with smaller European states, before passporting to bigger markets such as the UK and France. The company said it is opening between 8,000 and 10,000 accounts daily and transacting over $4 billion per month.
Monzo’s Head of Marketing has been speaking on the firms distinct marketing approach, through word of mouth and offering transparency in everything they do. As the firm has progressed through 550 employees and adding 100,000 customers a month, they have however begun to adopt some more traditional marketing approaches.
We’ve mentioned above the huge volume of customer’s opening up accounts with challengers such as Monzo and Revolut. Now, new research has revealed 1 in 4 of those under the age of 37 (millennials) are banking with a challenger bank. Unsurprisingly, this figure drops-off for those of an older generation, with only 6% of over-55's banking with a challenger.
The Guardian has written on the lack of clarity and control those sending money abroad through the SWIFT system have; revealing delays in recipients receiving cash, or indeed in monies never arriving, are a common issue. The SWIFT system has been in use for 45 years and incorporates 11,000 banks.
We wrote last week on how Monzo and Starling were enacting new functionality into their apps to block payments to gambling sites. Now Barclays have followed suit, with the aim of offering assistance to those with gambling issues. Customers can also limit their spending in retailers such as bars and pubs. Full coverage can be found in the Guardian, Sky News, the Independent and Metro.
Open Banking Abroad
Christmas may be nearly upon us, but the news on Open Banking continues to pour in. Around the globe this week we cover the latest developments coming out of Asia-Pac, and New Zealand and Australia.
“It is estimated that about 90% of banks in the US plan to invest in developing open APIs and customer-friendly payment tools.” say IBS Intelligence in their recap of FinTech trends in the US.
BBVA has launched a Banking-as-a-Service platform in the United States. While Open Banking has not yet been fully implemented in the US, BBVA is taking a proactive stance with its new BBVA Open Platform. Interested companies can also make use of the Open Platform sandbox testing to work on their proposal before fully signing up.
Australia and New Zealand
Treasurer Josh Frydenberg said:
“It will allow for consumers to more easily compare prices, switch between products and providers, and have products and services customised to their individual needs.”
Bluenotes have looked at what Australia can learn from the UK in the introduction of Open Banking. They note that because it was mandated in the UK, for some big banks, it became little more than a box-ticking exercise. They also question how Open Banking will drive consumer confidence in their own data – something yet to be seen in the UK.
With Open Banking to be introduced in New Zealand by mid-2019, Commerce and Consumer Affairs Minister Kris Faafoi said;
“If we see anything that gives us concern around the detail of the framework, and some of the contractual arrangements that will stymie further competition, then we’d be concerned about this.”
Forbes have been examining what more FinTech in the United States can do to win the confidence of consumers. They point to offering value led benefits, advising ahead of advertising, and providing support to third parties such as financial institutions.
Are millennials moving away from credit cards to smaller, but more frequent loans? And is this being driven by the FinTech industry? That’s some of the questions being asked by Tearsheet.
What are the five biggest trends to watch out for in FinTech through 2019? Fin24 asked a panel of experts, and their answers are revealing.
Articles regarding Alipay and WeChat are beginning to become more and more rife in the western hemisphere, but are Chinese FinTech’s banking on global superiority? With a huge market share in south east Asia, Chinese FinTech’s are now increasingly looking at Africa as their next global destination, before finally branching out further.
In the latest in their explainer series, KAE have written on how FinTech developments are set to impact upon borrowing, wealth management and insurance. The conclude their article:
“With open banking gaining more and more traction, start-ups are increasingly able to interconnect with each other, including on an international level, and co-provide a complex set of personalized services to customers. This way, a wider range of product areas is expected to be disrupted by innovative solutions that work across borders, gradually making the management of finances, including for global citizens, easier.”
Wealthify have revealed there are 11.2m unused banking and personal finance apps on UK tablets and phones.
Michelle Pearce-Burke, chief investment officer and co-founder of Wealthify said;
“Despite the digital revolution and a wealth of free-to-download finance apps available to help people save and invest, it is a real shame so many of these apps sit unused on people’s phones.
“The fact that so many are downloading these apps in the first place shows a clear will amongst people to take control of finances, which raises the question – what can financial app developers do to better engage with users and encourage the move from ‘downloaded’ to regular use?”
South Korea has its first tech unicorn, Toss. The app began as a Venmo-like peer-to-peer money transfer app and evolved into a financial platform, providing an array of services including loans, insurance, investment and credit management. Coverage can be found in the Investor, Tech in Asia, and QZ.
The ID Co. News
The ID Co. Have had a hugely busy couple of weeks at the Open Banking Expo and the FDATA Global Open Banking Summit. You can find our blog coverage of the Summit here.
We’d like to take this opportunity to wish all readers a Happy Christmas and Merry New Year.
The Frictionless Finance Report will return on Wednesday 16th January, 2019.
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 firstname.lastname@example.org.