Long live Open Banking

It will have no doubt escaped most people’s attention that from this week, we enter a new and unprecedented era of banking, powered by technology and empowering the consumer. It’s called Open Banking and it will soon affect every bank & building society customer in the UK (and beyond into Europe).

It revolves around a new platform developed by the Competition & Markets Authority (CMA) called Open Banking. Based around a Europe-wide regulation catchily called the Payment Services Directive 2 (PSD2), it is designed to enforce banks (and building societies) to ‘open up’ their systems to allow the free interchange of financial data in an open, common platform (amongst other cool payment related things I won’t go into right now).

Empowering the consumer through connected systems

The CMA (and the EU) argue this is all about creating greater competition and innovation in the banking sector whilst empowering the consumer to make better and more informed financial decisions in an easy, uncluttered fashion. It does so by setting a standard for how your banking data (your transactions, accounts, balances and so on) can be shared via APIs with other banks and financially-oriented institutions.

According to the Open Banking website, the advantages of this are:

  • Making it easier to move, manage and make more of your money – so you can find the best deal for you
  • Giving you access to more competitive, tailored products and services – based on your actual account data
  • Putting you in control of your data – you can share your information with other banks and third-party providers

We’ve only just begun

Exciting stuff! But if you’re thinking you’ve missed the boat or somehow this has escaped you, then don’t worry. We’re on page one of a large book that is mostly yet to be written.

Whilst the UK has led most of the discussions on Open Banking and pioneered many of the principles that are enshrined in the PSD2 regulations, we’ve only just begun implementing the standards. The CMA agreed that 8 banks & 1 building society would lead the charge and open their systems up on 13 January. Ok, so only 3 banks were ready to go live and many are weeks or months behind schedule. As for the banks not included in the “CMA9”, we’ve yet to hear when they might join in. However, there is opportunity. Change is coming to financial services and it pays to be thinking about how both businesses and consumers could benefit.

Intelligent banking

We’re already seeing some hints at the promise this new regime can bring. Apps like Emma are claiming to help bring control to your finances by tapping into your bank accounts as Open Banking proposes (albeit this is not quite how it works right now) whilst bank brand B from the challenger bank CYB (Clydesdale & Yorkshire Bank) promises this sort of insight and help from within.

But when you smash together the world of Open Banking with the world of Artificial Intelligence you start to see some real potential in this open future:

  • Smart tools analysing specific transactions on your accounts and then being able to offer personalised services (e.g. a personalised travel insurance add on for someone buying lots of flights)
  • Mimic personalisation; once finance brands have enough information on enough people, they can find “People like you” and begin to predict your spending and savings patterns so they can offer service or products appropriate. Savings chatbot Plum promises a bit of this magic by putting money aside in a savings account it deems appropriate to your spending patterns using their “automatic savings algorithm”

And this is on week one! With enough digital smarts, a keen understanding of the financial services sector and team dedicated to AI and innovative technology, the sky is the limit when it comes to new ideas for an Open Banking world.

Did I mention we’ve got all those skillsets and are already working with several the UK’s leading banks and financial institutions on ground-breaking technology projects involving personalisation, AI, open systems and a lot more. Worth dropping garry.hamilton@eqtr.com a line if you want to chat more about this. Meanwhile, if you’re not quite ready to chat yet but want to know more, may I suggest dropping into the Open Banking website to get a greater idea of where this is all going.