Open banking on the runway

Open banking in the UK rebalances payments in favour of the consumer

By Neil Ainger

The UK open banking initiative is preparing for lift-off, according to a Spotlight presentation on the opening day of Sibos 2019 by Imran Gulamhuseinwala, a trustee with the Open Banking Implementation Entity (OBIE).

He cited a report of the same name by the Open Data Institute (ODI) and Fingleton, published over the summer, that looked at the progress made in the UK implementing and encouraging a secure way for customers to share their financial data with third parties in the search for a better deal on a bank current account, or other finanical product.

An open application programming interface (API) standard is the mandated approach in the UK forcing banks to provide a means for newcomers and rivals to access customer data, so new aggregation services and pricing alternatives can be developed.

The aim is to “rebalance in favour of the consumer”, said Gulamhuseinwala, adding “it’s about customer experience (CX), not just technical standards”, before stressing the need for a “mobile-first, app-to-app policy approach” to improve the user experience (UX). “This has driven 50% more uptake in the UK, than a web-only approach.”

The EU is adopting a voluntary approach to API banking, centred on its revised Payment Services Directive (PSD2), while Asia is relying on the technology itself, which is the key driver. After all, as consumers get used to using open APIs on restaurant booking apps or on Uber – which accesses Google Maps and other apps to deliver its service – they are coming to expect the same immediacy, control, competition and transparency in financial services (FS).

Even in the UK, which Gulamhuseinwala said is journeying towards open banking ahead of other countries, “an awful lot is still broken in FS”. He highlighted “2 million people paying too much for an overdraft and 12 million on the wrong financial product”, such as a mortgage. “We think open banking can fix that.”

Gulamhuseinwala provided Sibos 2019 delegates with an update on the UK initiative, covering: 

  • Implementation: “We’re 90% done,” he said, “but the final 10% is crucial.”
  • Ecosystem growth: “Remember this is an enabling technology that needs third parties on top to serve consumers,” he said, while claiming 300 have applied to come into the OBIE-policed ecosystem. “Only a small proportion are live, but the funnel is big.” More than 80 UK banks have voluntarily implemented OBIE standards, “it’s not just the CMA9 [big] banks”.
  • Consumer adoption: “It’s early days,” admitted Gulamhuseinwala, “but last month we had 180 million API calls in the UK.”

Growth in the use of open APIs in the UK is therefore evident, but by no means universal yet. Indeed, Gulamhuseinwala admitted that the ODI and Fingleton ‘Preparing for Lift-off’ report concluded that “it’s too early to judge” the initiative “as we have haven’t gone through full implementation yet.”

Other countries are watching the UK as a testing ground for the drive towards open APIs and banking. The topic has been much discussed at Sibos 2019. Indeed, the conference themes this year of ‘Thriving in a Hyper-connected World’ and ‘Enhancing Digital Ecosystems’ are dependent on the trend. The other themes of leveraging data, cybersecurity, regulation and the intersection between artificial intelligence identity and the ‘human element’ are also pertinent and overlap in an increasingly technologically-driven banking marketplace.