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 the Financial Stability Board’s new report into FinTech; the release of bank service rates; and the integration into the Yolt website of popular price-comparison site, MoneySupermarket.
Yolt has integrated with MoneySupermarket in its latest move to become a marketplace of apps. Already offering financial products such as Wealthify and PensionBee, the addition of MoneySupermarket will be an added benefit for Yolt’s 500,000 users.
Traditionally focusing on TV ad spots and its own website, MoneySupermarket has begun to diversify since coming under control of new CEO Mark Lewis in 2017. News via FT [paywall] and Yolt website. Separately, Yolt is to begin offering business customers account aggregation services and payment initiation services. News via Finextra.
Dutch payment platform Adyen has launched its new payments platform based on Open Banking. The new service works as an alternative to card payments and has been rolled out to Dutch flag-carrier KLM. During the checkout process, customers will have the option of using Open Banking, where they log-in to their internet banking. Adyen then processes the payment. Open Banking could save customers on debit card payments that are commonplace. Coverage via Verdict, FinTech Finance, Finextra and the Paypers.
Financial Stability Board
Global body the Financial Stability Board has launched a new report on FinTech and its implications for the future of financial services. The global body is instrumental in ensuring the smooth operations of global finance and mitigating against instabilities in the financial markets. The key takeaway from the report is that while FinTech’s are impacting positively on financial markets, the entrance of Big Tech (Amazon, Google etc) “could materially alter the universe of financial services providers.” While characterising the relationship between FinTech’s and financial incumbents as “complementary and cooperative”, the report noted that the entrance of BigTech could lead to a more competitive landscape.
The report also noted the impact of Open Banking. The FSB suggest that the widespread adoption of Open Banking across the globe could give rise to increased levels of competition between the big banks. They write:
“While these services [Open Banking] may complement those offered by a financial institution, they may have some detrimental effects on the financial institution, by replacing or weakening the institution’s traditional customer relationship.”
In this week’s top interviews FreeAgent and Bud have been speaking to pymnts.com and Accountancy Age respectively. Bud have focused on their recent funding round, describing how the cash injection will help them to bolster headcount for entry into foreign markets. They also note how Open Banking has changed mindsets within the financial sector to one of “collaboration”. FreeAgent have spoken on how Open Banking can revolutionise the accountancy space. FreeAgent claim to be the only accounting software currently working with Open Banking.
Kevin McCallum, CCO at FreeAgent, said:
“I think open banking is going to be the gateway for a lot of innovation in the fintech sector over the coming years. With an ever-increasing visibility of information and a more effective flow of data from bank accounts into accounting software, we could see a new wave of apps and services being developed that make the process of financial management – and running a business in general – much easier.”
In other news on Open Banking:
- Anton Zdziebczok, of CREALOGIX has written in FinTech Finance on why it’s not important if consumers understand the intricacies of Open Banking; what is important is that they can see the benefits of what Open Banking provides, such as account aggregation, app integration and more.
- The Financial Brand have focused their attention on why banks should have a clear strategy in place for Open Banking before jumping in with both feet.
Open Banking Abroad
FinTech Australia has welcomed the progress made to date on the Consumer Data Rights Bill, which encompasses Open Banking. Open Banking is set to go live in the country in February 2020. Federal Treasurer Josh Frydenberg, said:
"The consumer data right is a fundamental structural reform that will drive competition and improve the flow of information around the Australian economy. For small and medium businesses, it will allow for more effective budgeting tools that can deal with data in real time and help them manage their cash flow and working capital more effectively than they can do today."
As preparations continue for the introduction of Open Banking in Canada, there has been two interesting articles posted this week, in the Globe and Mail, and the Financial Post. Both relate to submissions to the Canadian Department of Finance’s call for submissions into Open Banking. The Post have looked at how the big banks still hold reservations around Open Banking despite the enthusiasm from smaller FinTech’s. The Globe praises the Canadian Government for moving forward with Open Banking and has outlined some of the key benefits that could be seen through its introduction.
A key trend that we’ve identified and written about on several occasions within this Report is the rise of technology within the financial sector and its impacts upon the banking sector. It is technological advances that have led to the growth of the FinTech sector and Challenger banks. So how are the incumbents responding, and will they ever be overtaken by tech firms, or FinTech’s?
This question has been asked across several articles that we look at this week.
Manish Madhvani in Forbes discusses how a blended balance is required for both tech and questions of finance. He cites Goldman Sachs launch of Marcus as having the same threat to an incumbent playing in the tech field as a Challenger bank playing in the finance field – such as Metro bank, which saw a 40% dip in its share price after making a miscalculation in its loan values. A further Forbes article highlights enhanced customer experience, good use of data, transparent fee structures and integration with other third party apps as some of the reasons for Challenger’s and FinTech’s stealing a march on their bigger rivals when working with SMEs. This rationale has been continued by The Finanser, Chris Skinner. He argues that as long as banks continue to adapt and evolve, they will not be surpassed by tech, because the difference in requirements for those in tech and for those working with people’s money is so significantly different. He writes:
“The approaches are very different, and it is why it is very different dealing with technology through money and dealing with money through technology. They are not the same and the way in which these markets merge are not the same. Don’t get me wrong. They are merging. But the way they merge will be interesting as who is right? Is it better to deal with money with complexity of regulations or deal with technology with simplicity and ease? How do these two extremes come together?”
Bank Service Rates
The most recent bank service rates have been published. The service rates are a six monthly survey of each of the major banks, comprised by surveying 1,000 customers from each. Metro Bank has come top of the list for customer satisfaction, followed by First Direct and Nationwide.
The big winners from the RBS bail-out fund have been announced as Metro Bank, ClearBank and Starling. The body set up to oversee the fund is the Banking Competition Remedies Board, and awards monies to promote competition in British banking. Metro Bank has been awarded £120m, Starling, £100m and ClearBank, which was collaborating with Tide, £60m. Substantial coverage can be found, including Finextra, the Independent, FT [paywall], Guardian, Evening Standard, Reuters, Banking Tech, Daily Business and Insider.co.uk.
The Treasury Select Committee has called for a body to regulate access to cashpoints, as it was revealed that almost 500 per month are being removed. In conjunction with bank branches disappearing, there are fears, particularly in rural areas, that people could struggle to gain access to cash. In a Quartz deep-dive, the issue of what happens when notes and coins become totally irrelevant is discussed.
Last week we devoted several paragraphs to the latest developments coming out of Revolut. This week, we take the opportunity to look at one of their competitors, Starling Bank. Over the last few weeks, the Challenger has raised £75m in Series C funding which it will use to bolster its international presence. Starling boasts 460,000 current account customers and 30,000 business customers. Starling has over 20 partners in its marketplace and has recently launched several more offering B2B payments. The news will be reinforced by Starling being awarded £100m from the RBS bail-out fund (above). Significant coverage can be found in Banking Tech, TechCrunch, FT [paywall], growthbusiness.co.uk and Finextra.
FinTech News in Brief
- Globally, 39 tech Unicorns are valued at $147.37 billion. In 2018, VC backed FinTech companies raised $39.57 billion across 1,707 deals globally.
- KPMG however, has measured the volume of deals to be worth $111 billion globally in 2018.
- Will 2019 be the year that mobile payments begin to dominate? That’s the view from one article in Finance Magnates.
- Could one of the big tech firms enter the mortgage space within the next few years? That’s the question posed in Mortgage Strategy.
The ID Co. News
We continue to be blown away by the levels of engagements and interest that we’ve witnessed for our new product, DirectID Insights. To explain what it is, and why she’s excited about it, we sat down with Insights Product Owner, Helen Stewart. Read our Q&A with her, here.
The first in our series of explainer series offering a comprehensive guide to Open Banking has now been joined by the second – examining what Open Banking can offer SMEs and individual customers. The third part on security in Open Banking will be released over the next few days. Subscribe to updates from the blog to be the first in the know on all things Open Banking!