Open Banking - Starting to Gain Momentum?

03 April 2019

It was in Q1 2017 that HM Treasury set out its initial thoughts on how open banking should be implemented, and this fitted in well with PSD2’s requirements around open data and access to customer accounts.  The next phase of PSD2 will be completed in September 2019 which tightens up further the access of customer data and stops screen scraping (collecting data from one application and translating it and presenting it in another), and so it is possible that organisations are looking to get these next changes implemented, which wouldn’t be surprising considering the likely penalties that will be made for breaches moving forward.

The nine largest current account providers “CMA9 banks” had to be ‘open banking ready’ in early 2018. Recently I logged into my banking application and after being offered open banking, noted there were still only ten banks I could link current accounts from.

Fundamentally, the bigger banks have the majority of current accounts and therefore have more exposure, both positively and negatively, to the effects of open banking. On the positive side, an area to consider is the automation achieved through API’s in areas such as customer service and how it will achieve operational cost savings. Although a there could be an expectation to pass savings on by way of better lending rates and products to its customers. Conversely, the amount of customer data available in an open banking framework carries risks in areas such as security breaches and it could be that one major breach suddenly brings a temporary halt to open banking advancement.

For other institutions, the day one focus on current accounts means that open banking may not be a priority to many institutions. From a software supplier perspective working with many specialist banks and lenders, we have of course evolved our solutions to be API focussed. All of our implementations now include API’s to enable the secure transfer of data between whatever systems are required within our clients’ technology stack. Moving forward, as more product types are included in open banking, there will undoubtedly be more focus on open banking outside of the CMA 9 banks.

Of course, new entrants in the digital banking world do not have the constraints of having to work with legacy technology and therefore these Fintech’s can really embrace open banking principles from launch and base their business plans around this. These banks also attract younger, more sophisticated customers who embrace the concept, and are far more willing to share their data than a more ageing population.   

Overall, although progression does feel slow, Open Banking is undoubtedly on most institutions’ strategic roadmaps. As more products outside of current accounts become included, we will really start to see some major advantages to many banks and building societies. How long this will take is an unknown, but the mixture of competition, automation and customer requirements will all contribute to its necessity and to its success.

 

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Debbie Staveley
Director and Owner,
bClear Communications

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+44 (0)1275 542 511

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