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 continuing innovation at the heart of Revolut’s growth, we tackle the issue of trust within Open Banking, and examine the new product launch from The ID Co., DirectID Insights.
We kick off this week with a look at new guidelines published by the Open Banking Implementation Entity (OBIE). The ‘Operational Guidelines and accompanying Checklist’ have been, in the words of the OBIE, “produced to provide clarity and recommendations to financial institutions (ASPSPs) on the regulatory requirements for a dedicated interface, as set out in PSD2, RTS, EBA Guidelines and FCA Approach documents.”
The Checklist has been written to help financial institutions ensure they are compliant with requirements. As per coverage in Business Insider, more than half of banks currently feel they do not have enough information to ensure compliance, so the Checklist will likely be well received.
Trustee of the OBIE, Imran Gulamhuseinwala OBE, said:
“The Operational Guidelines and Checklist will ensure that the Open Banking Standard enables a well-functioning, successful ecosystem, where there are no barriers to the provision of products and services by TPPs. Adopted in conjunction with our Customer Experience Guidelines and Technical Standards, these go one step further to ensuring customers will ultimately enjoy enhanced and better experiences when using products and services powered by Open Banking.”
How can Open Banking continue to win support amongst all sections of society, including consumers, banks and corporates?
There has been a number of articles exploring this topic, from different standpoints. A new study from Accenture has highlighted the low adoption rate amongst big corporates.
“Since the UK is a world leader in Open Banking legislation, you might have expected UK corporates to be among its highest adopters globally. But you’d be wrong. In fact, they’re among the lowest. Just 27 percent of UK corporates already participate in Open Banking, well behind Sweden (53 percent), Germany (50 percent) and France (37 percent).”
Ensuring security and privacy are at the heart of Open Banking will help to win trust amongst customers. This feature has been picked up by IT ProPortal and Finextra. Finextra have focused on the use of biometrics as an additional safeguard that could be used within Open Banking, while IT ProPortal direct their attention on building customer trust through safeguarding the ecosystem, including FinTech’s and banks alike.
FinTech Futures look at the issue of trust through the lens of the consumer, and argue consumer education is key. They note:
“… financial institutions need to think and plan from a customer journey perspective. Open Banking will be new to them, so their providers need to ensure that the expected influx in queries and questions can be answered swiftly and confidently by customer service assistants. Training current staff and specialists will be a huge challenge, but one banks need to overcome in order to succeed.”
Money Observer have also looked at Open Banking through a consumer eye, but have concluded that we as customers must make a conscious decision to embrace Open Banking in order that we can reap the benefits from it. After all, if there are savings in time and money to be had, why wouldn’t we want to use it?
Finally, we have spoken before on how powerful Open Banking could yet prove to be in the mortgage industry. In an op-ed in Mortgage Finance Gazette, Melanie Spencer of Twenty7Tec discusses how it could positively impact upon brokers and lenders – ultimately offering up opportunities for better deals for customers.
Open Banking Abroad
It's no surprise to see Canada and Australia dominate the global Open Banking news cycle.
With the Canadian Government having published their consultation into Open Banking, the Canadian press has been quick on the uptake as to whether it will be successful or not. The consensus appears to be that it will come to fruition, but the Canadian Government is already behind the curve – being several years behind the EU and UK, and behind other countries such as Australia and Hong Kong. The Financial Post note:
“The EU gave its financial industry a couple of years to get ready for open banking. If Canada were to do the same, assuming the government even embraces the idea, it could be 2022 before Canadian banking upstarts have regulatory clarity. By then, their international rivals in Europe will have had a five-year head start.”
The Australian Banking Association (ABA) have fed back to the Australian Government on the new Consumer Data Rights, and are concerned about privacy and data breaches. Some of the risks highlighted by the ABA included phishing, fraud, third party misuse of data and hacking. In a statement, the ABA said:
“There are a number of potential privacy risks associated with the system. These risks may have consequences for the rights and wellbeing of individuals and businesses. These risks are broadly categorised into identification risks; transfer risks; collection; use or disclosure authorisation risks; authorisation risks; holding risks; and data quality risks.”
There's no letup in the argument over who will win the battle between legacy banks and the Challengers, and this week we also examine new bank account switching statistics, what more legacy banks can do to offer friction-free banking, and the prevalence of Personal Finance Management apps.
The battle for customer loyalty is beginning to heat up, and this week we saw new statistics from the UK’s Current Account Switch Service (CASS) suggest that Challenger banks are beginning to eat into the advantage enjoyed by legacy banks. The biggest winner in the new round of statistics was Nationwide, which gained over 38,000 new customers, losing 8,883. Monzo gained 5,588, losing just 225, and Starling won 2,362, to a 246 loss. The biggest loser was TSB, perhaps suffering from its IT outage late last year.
This view is echoed in an article from Wired which illustrates the rise of Challenger banks such as Monzo, Starling, N26 and Revolut and outlines how they have broken the dominance of the big six banks from holding 90% of current accounts a decade ago, to just 72% today.
The gulf in culture, as well as technological thinking is highlighted in the Financial Brand. For legacy banks to compete with smaller, more nimble upstarts, they must remove all friction from the banking experience.
And as customers demand a friction-free banking experience, a new survey from Google has shown 72% of consumers willing to sync their finances to mobile apps. In-line with similar surveys, those more predisposed to the use of PFMs and banking apps were young in age.
Finally, 321 arrests were made last year from 4,240 emergency calls made by bank staff. The calls were made as part of The Banking Protocol rapid response scheme which was put in place to catch suspected fraudsters tricking customers into withdrawing their money. When bank staff’s suspicions are aroused - such as an unusually large cash withdrawal being made - bank staff can take individuals aside for further questioning. From there they can alert police. The average age of those helped was 71, with the average withdrawal in excess of £8,000
Revolut has barely been out of the news since the Frictionless Finance Report last graced your inbox. Over the last two weeks, they have announced that they have teamed up with ClauseMatch. The agreement will help to streamline Revolut’s internal policies and controls prior to launch in Australia, Singapore and Japan. The busy Revolut team have also announced plans to launch an app this summer for children. It is the company’s latest development to help kids develop their financial literacy. Finally, Revolut have teamed up with WeWork to offer budding entrepreneurs with a Revolut business account three months of free desk space. The partnership “reaffirms their commitment to helping new businesses get off the ground,” said Revolut in a statement. News comes via Finextra, Crowdfund Insider and Altfi.
FinTech News in Brief
- It has been a bumper year for FinTech investment with new research conducted by CB Insights showing that worldwide in 2018, FinTech companies received almost $40 billion in investment. This was in part due to 52 mega-rounds of investment over $100m.
- Global Banking & Finance have looked at some of the key trends in FinTech and have concluded that disruption in 2019 from FinTech firms will feature within biometrics, AI and crypto.
- Scottish Development International’s FinTech Specialist, Graham Hatton has written on the growth in volume and success of Scottish FinTech firms, citing the size of the financial services industry, the startup ecosystem and the success of FinTech Scotland as key reasons for future optimism.
- We’ve pondered several times on these pages whether the use of Personal Finance Management apps (PFMs) help users better manage their money. Now, the BBC has become the latest to tackle the question.
- Online payments company Stripe has raised $100m from investment firm Tiger Global Management at a valuation of $22.5 billion. Courtesy of CNBC, pymnts.com, Silicon Angle and The Block.
- P2P lender Lending Works has announced it has surpassed £150m in loans. In a press release, the firm said it had experienced growth of 2,832% over the last four years.
The ID Co. News
We’ve been blown away with the positive response we’ve received to the launch of our latest product offering, DirectID Insights. Using Open Banking technology, DirectID Insights offers Underwriters and Credit Risk Officers all of the bank data information they could need to make a lending decision.
And the best bit – with zero integration, financial institutions can be up and running with Open Banking technology in just a few days.
Finally, we acknowledge that understanding on Open Banking is still not as comprehensive as it could be. We’re committed to remedying this and building the trust required to make it a success for everyone in the ecosystem, from banks, to FinTech’s to Challengers and consumers. The first in our new series of explainer articles is now live on the blog – Open Banking: The Comprehensive Guide. Watch out for future posts over the next few weeks!