Open Banking’s First Days at School

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Helen Child, co-founder of Open Banking Excellence, chaired a panel of speakers following on from the January 2019 Open Banking Excellence meetup:

  • David Head, Product Lead Open Banking, Mastercard
  • Carlos Figueredo, founder and Chief Executive, Open Vector
  • Lindsay Whyte, Growth Manager, Yapily

Read the summary of the key areas of discussion below, or listen to the full recording of the First Days at School webinar.


The First Days at School analogy

David reprised his comparison of open banking with growing up. If open banking is on a five year plus path to maturity, 2018 – with the CMA9 opening up – was the birth. 2019 is the year we start school, when things get more serious:

  • The focus now is on being ready – for September’s PSD2 compliance deadline (and other interim dates). Nobody wants to be late for the first day at school.
  • People are at different stages. Some are excited and can’t wait to start; others are reluctant to go at all. However, not everyone will be starting from the same place in September.
  • The world is getting bigger. There’s a whole playground of people getting involved, in the UK and across Europe. There are different rules and standards across different markets.
  • Expectations are changing – from playing in the sandbox to delivering tangible results.
  • How do you prosper? Make friends and collaborate.

What are the wider opportunities?

There are so many opportunities to work with more data and more companies. Open banking will create products and services we’ve never seen before, with unprecedented cross-sector collaboration.

To an extent, it’s not clear where open banking will lead, but standards provide a degree of control. An overarching regulatory framework and data standard across the region will help create seamless interactions.

2019 is still a year for incubating early champions and testing ideas. The sooner we can do this, the sooner we’ll get to mass market products – which might be found in less obvious places. There are opportunities in different industries and for different parties. For incumbents, providing an API that others can build on can help strengthen their offer and so retain customers.

 

What are the challenges?

There are technical challenges – for example, when an API launches, and in terms of making connections when standards have been implemented in different ways. The financial services industry, fintechs and regulators need to ensure that all the components integrate.

Customer readiness and understanding will be another big challenge, particularly while the underlying technology is immature. Recent research's showed that 65% of people are not aware of Open Banking – which is a challenge, but also an opportunity for innovators to position themselves as early innovators. The industry needs to communicate trust and benefits, too, and provide the sort of service, security and so on that will get consumer buy-in. Adverse events – like poor availability or data loss – could be problematic.

 

Which use cases will resonate and really gain traction this year?

Account aggregation is becoming a standard offering. Then you have traditional products being provided in a way that offers better service or financial benefits, and cross-sector products and services that rely on collaboration. We haven’t really got to the one killer product yet.

Services like credit scoring which offer better, faster decisions are exciting. It will be interesting to see whether open banking can gain traction faster in the SME market, where the SMEs can see immediate value. We are all aware of the challenges experienced by some SMEs when trying to gain access to funding; anything that can help to ease this issue will be welcome for sure. Progress with seamless payments is coming, but may be a little further down the line.

What’s really exciting is how open banking can help advance inclusion for the poor and unbanked. For example, apps that combine information to provide warnings on looming financial pressure.

There are interesting cases where ID checks, affordability checks and smart marketing can all be combined with an open banking-triggered subscription plan into one flow – meaning less work, more accuracy.

 

What are you up to in 2019?

Mastercard sees itself as an enabler in three broad areas, starting in the UK and Poland but then building across Europe and beyond:

  • Making it easier for TPPs to connect to bank APIs (6,000-7,000 across Europe), and maintain these connections going forward.
  • Building on existing expertise to protect against fraud in the ecosystem.
  • Developing a rule set and platform that can help banks and TPPs to quickly resolve problems and disputes for their customers.

Open Vector was involved in developing Mexico’s fintech law last year – and is now working on the second phase, which could become a role model across Latin America (and elsewhere). At the same time they are evangelists for open banking, helping governments, banks and fintechs in different countries understand the benefits of common data standards based on the UK’s proven standard. Open Vector’s vision is creating open data across the Americas for new products and services.

For Yapily, it’s APIs, APIs, APIs. Yapily is created by developers, for developers. The prime objective is to automate PSD2 API access for service providers, and reduce all the associated friction for TPPs and banks - for example, with its API monitoring tool.  They are keen to get maximum feedback from the ecosystem across Europe before demand for open banking services really kicks off. A primary focus is to be truly built to scale.

 

What is the one thing you want to get from the open banking community in 2019?

For Carlos, collaboration. Two years ago, small FinTechs couldn’t interact with big financial institutions, which always looked to big tech providers and were unwilling to take risks. Large and small collaborations.

For Lindsay, optimism. UK FinTech in the UK is world-leading, the business climate is great and organisations like OBIE and Open Banking Excellence are making things happen.

For David, engagement. Mastercard wants to be having open conversations around the country, particularly in terms of developing underlying rules for solving disputes and problems – so that we can come up with collective solutions that work for everyone across the open banking ecosystem.


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