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 new PSD2 rules that have mandated the creation of a register of Open Banking providers, the impact of Open Banking in the Legal sector, the latest developments from Money20/20 Asia, and whether the latest development in card technology is biometrics.
The European Banking Authority has released its searchable register of Account Information Service Providers (AISPs) and Payment Initiation Service Providers (PISPs), under PSD2 rules. The register allows searches by country and provides details of 150,000 agents working within the EU. PSD2 rules obligated for the register to be created and published, and as well as country of origin, also provides information on passporting rights.
Adam Farkas, executive director, EBA, said:
"The EBA has worked hard to provide a freely accessible and reliable source of key information for market participants across the single market that will facilitate the roll out of PSD2, support the provision of the newly regulated payments services and improve transparency for consumers in the EU".
Screengrab of the EBA Register showing The ID Co.'s entry.
Open Banking and Open Tech
The direction of travel both within financial services and in technology is progressing towards one of “openness”. In the last week, Jason Furman, who served in the Cabinet of former US President, Barack Obama, has written a paper for the UK Government on using Open Banking as a “blueprint” for the technology sphere. He writes that while breaking up the big tech companies is not an option for the UK Government, as has been cited by Elizabet Warren in the US, emphasis should be on changing the behaviour of the tech giants. The central focus of the report is to get the tech giants to release their stranglehold on customers' data. This came at almost the same time as a new report from Accenture found that more than six in 10 banking customers said they would be willing to hand over more personal information in return for better pricing on services and additional benefits.
R2P and Open Brokerages
The impact that Open Banking can have on the payments sector continues to be explored. While these benefits have yet to be felt by the consumer, predictions state that there are multiple new use cases in development. These include Request to Pay (RtP), which in a new paper from ACI Worldwide, is cited as a major new use case for Open Banking. In a similar vein, following the news that M&S Bank is to start utilising Open Banking within mortgage applications, there has been renewed interest in Open Banking within brokerages. Financial Reporter have looked at Open Banking in the context of what technology will impact mortgages and brokerages. They write:
“Open Banking, and its uses, has rather limped into existence rather than being delivered with any sort of fanfare but I think we can all expect it to have a far greater impact on our market in the months and years to come.
“...there’s a lot to be said to using, for example, APIs to deliver data and information across to various systems rather than using a manual system which involves significant re-keying of data. Of course, having that type of all-encompassing information allows lenders to check affordability rather quickly, if you have a technology system to do this, but again how much it might aid the more complex case is yet to be seen.”
It’s Survey O’Clock
With Open Banking still in its infancy, surveys continue to flood the market. This week, Forrester have concluded that Open Banking “is being viewed positively by 99% of financial firms”. They have also stated that 52% of finance firms think Open Banking will help them speed up their onboarding processes, while a further 46% said they expect it to improve customer experience.
Open Banking - Legally
While we tend to discuss Open Banking within the confines of financial services, the legal sector has found an interesting use case by using it to look at a client’s bank details when an application is made for Legal Aid. The Legal Aid Agency is using the technology to simplify and speed up assessments.
A Legal Aid Agency spokesperson said:
“By 2020 we want to simplify the delivery of legal aid by providing a modern digital service that is easy to access and simple to administer, and one area we are piloting at the moment is open banking technology. We want to make it easier for people to prove their eligibility for legal aid.”
Open Banking Abroad
As developments progress unabated across many nations, the United States continues to ask the question of what Open Banking could provide. Westfair has been speaking to some industry experts to gauge their opinions.
Nitin Mhatre, executive vice president, head of community banking at Webster Bank, said:
“What happened in the U.K. and the EU was a little different — they did what they did in part so that smaller banks could compete better in terms of market share and customer acquisition. In the U.S. the focus is more on fostering innovation and developing common standards.”
Discussion on Open Banking has picked up substantially since the Government’s consultation paper was published in January. This week, we have seen Law Times News speak to a number of banking experts on what Open Banking could look like in the country. In their analysis of development, Moneysense conclude that Open Banking will probably have to be mandated in order to succeed, as Canadians – unlike the British – are happy with their banks. Meanwhile the Financial Data & Technology Association (FDATA) have published a new paper on Open Banking in Canada.
FDATA’s North American Executive Director, Steve Boms, said:
“To foster innovation and spur improved financial outcomes, Canada should implement an open banking regime that provides consumers with the legal right to their financial data and builds appropriate safeguards around a well-managed ecosystem. For the sake of consumers’ financial wellbeing and innovation, the time to act is now.”
Money20/20 Asia kicked off this week and Open Banking has featured prominently within. There has been several roundup articles published over the last few days, including from Moneycontrol, Finews Asia and Finextra. One of the biggest announcements came from Henry Ma, CIO and Vice President of WeBank. Speaking on stage, he said that the Bank was looking at ways of serving the underbanked, and for this reason, Open Banking was a very attractive proposition for them.
Moneycontrol also has a discussion on whether India is ready for Open Banking. Speaking to Moneycontrol, R. Venkattesh, President and Head of Operations, Technology and Human Resources, DCB Bank said:
“When it comes to regulation, it is very pragmatic in terms of the open banking concept. As long as the customer confidentiality and data protection is concerned the requirement of various regulations and laws are properly taken care of. I think people need to make sure that they understand the regulations better and comply to it fully. There is a need to have an increased awareness about data protection regulations itself.”
Regulating the Regulators
A new report from the National Audit Office (NAO) has said industry regulators the FCA, Ofwat, Ofgem and Ofcom must do more to illustrate how they are supporting customers. The spending watchdog has said that the biggest issue that consumers face is mounting levels of debt, and regulators must help those most vulnerable to mitigate against it. The BBC report notes:
“The situation for some consumers has not been helped by real-term price increases of 28% in gas, 37% in electricity and 6% in water since 2007. Consumers can find it difficult to get the best deal or service, leading to those who fail to switch paying a collective "loyalty penalty" of an estimated £4.1bn a year, the NAO said. Vulnerable customers are less likely to switch, the spending watchdog noted.”
The FCA’s Chief Executive, Andrew Bailey said:
“Protecting consumers is absolutely central to the FCA and where we have identified potential harm we have taken decisive action. Our recent work in the high-cost credit market, including implementation of the price-cap in the rent-to-own market, is just one example of this.”
In the last edition we spoke on the ramifications of cash being phased out in the UK. This week we can show that the volume of contactless transactions rose 31% in 2018 on 2017 levels, illustrating the confidence UK consumers have with the technology and its prevalence in UK shopping habits. There were 7.4 billion transactions through 2018, UK Finance report. News via Finextra, City AM and Computer Weekly.
Giving the Finger
There has been considerable coverage and excitement at the latest news from NatWest, stating that they are to begin trialling biometrics within their debit cards. When making a purchase of over £30, customers would be asked to give a fingerprint rather than entering the traditional 4 digit PIN number. It is hoped that the technology will increase security, while also speeding up payment at the tills. The first trial will involve just 200 customers. The news can be found in the BBC, the Guardian, The Week, Finextra and Money Saving Expert.
Banking News in Brief
- Starling Bank plans on creating 150 new jobs in Southampton by opening a new office. Source.
- According to industry trade body UK Finance, £1.2 billion was stolen by fraudsters, however, banks were able to stop a further £1.6 billion attempted fraud. Source.
- Chatbots are getting more sophisticated and could lead to the closure of contact centres. Source.
- Do banks need to offer “experiences” to survive? Source.
- A former FCA board member has said that banks are not doing enough to stop discrimination against ethnic minorities and vulnerable individuals. Source.
- Research from Experian suggests a half of UK adults have never checked their credit score. Source.
- And finally, ever wondered what Gringotts Bank from the Harry Potter series would look like were it to be built? Wonder no more. Source.
Barclaycard is teaming up with Chinese giant Alipay to help British retailers benefit from the influx of Chinese tourists. The new agreement will allow Chinese visitors to the UK to make payments in British retail outlets using their phones. Barclays currently has around 11,000 retailers on its network. In their statement, Barclays state that Alipay was the most used app on the planet outwith of social media platforms. VisitBritain recently announced that it was expecting almost half a million tourists to the UK from China, who would spend a cumulative £1 billion. Rob Cameron, CEO, Global Head of Payment Acceptance at Barclaycard, said:
“Thanks to the significant investments we’ve made in our platform, our clients have access to a growing range of payment types, each of which can help them increase market share by meeting the needs of new customers.
“Our new agreement with Alipay gives retailers a vital tool to help them seize the revenue opportunity posed by the growth of Chinese visitors to the UK. At the same time, Alipay users will benefit from a more convenient and familiar in-store payments process – enhancing their overall shopping experience.”
FinTech News in brief
- Management consultancy KPMG has suggested that 2018 could be the best year on record for UK FinTech. The first six months of the year brought amassed £12.3 billion in deals. The UK had four of the top 10 deals in Europe. Source.
- The innovation arm of Standard Chartered is building a “FinTech bridge” to connect startups to relevant business departments within the bank. Source.
- Digital lenders are continuing to steal a march on their traditional banking rivals. Source.
- What will have a bigger impact on the UK economy, Brexit or FinTech? Source.
The ID Co. News
Our new DirectID Insights platform has been live for a month now, and the response it has garnered has been overwhelmingly positive. We were delighted to sit down with Microsoft in the last week to discuss how it can help those with a slim credit file. You can read Microsoft’s full write up on our conversation, here. And don’t forget, if you’ve missed any of the news relating to DirectID Insights, you can read the original press release, an article from our CEO, James Varga on his expectations for Insights, as well as a Q&A with Product Owner, Helen Stewart, all on our blog.
In the last week, James has been in Amsterdam living it up with the great and the good of the Dutch banking sector, on a Department of International Trade FinTech Mission to the Netherlands. You can read his review of the two days, here.
Finally, we continue with our latest series to explain the nuts and bolts of Open Banking. In our latest article we take a whistle-stop tour across the globe, as we look at the rise of Open Banking around the world. As well as the UK and Europe, Open Banking is taking off in the Americas, Australasia, and several Asian states. You can read the full article, here.