5 companies selling the Open Banking sizzle (not the sausage)
Open Banking is a new directive in the UK that came into force properly on 13 January 2018. Open Banking forces the UK’s nine biggest banks to open their customers’ data in a secure, standardised form, so that it can be easily shared between authorised organisations offering new services. The public reception to Open Banking has been pretty lousy thus far. The main reason for this? Banks and the media have been so focused on the sausage, nobody has been selling the sizzle.
The complex history and technical details of the initiative are laid out nice and clearly in an excellent Wired article by Rowland Manthorpe. In it he points to the way Open Banking has been “less than energetically marketed” and the finding from a recent Which? survey that 92% of respondents hadn’t even heard of the directive. Where consumers have heard about it, and where it’s being openly discussed online, the sentiment is far from positive.
An initiative born out of a desire to open up innovation, drive competition, put more power in the hands of the consumer to help them save money and wield more control over their financial choices, is looking like a sinister ploy to threaten data security and diminish people’s personal privacy.
As one of the 92% who has not heard of this, I am deeply suspicious of any of my financial data being disclosed in the way this article describes.
TheDudleyOmmer, 8 January 2018
Be very very careful about this. Do not accidentally opt in which is my huge worry. It is so risky. I want as closed banking as possible, no accounts linked ever and loads of unhackable paper records.
Jane Smith, 27 February 2018
The Open Banking conversation is focused on its rails. Think HTTP or mobile wireless cellular networks. People don’t care about the protocols and technology standards behind the scenes — they care about whether they can stream Netflix uninterrupted on their mobiles during their daily commute. With Open Banking, the standards and APIs themselves aren’t sexy (at least not to the average consumer — I know many developers that find APIs extremely sexy), but what real customers can actually do with the APIs is the interesting thing. And this is the conversation that is lacking. All the sausage and none of the sizzle.
5 real and sizzling examples of Open Banking
So now it’s launched, who are the first movers and what real benefits are they offering to consumers. Here are 5 early examples of Open Banking propositions that are available today in the UK, from both new and more established players.
HSBC Beta and First Direct artha
First, an example from the traditional bank arguably (at least visibly) putting the most effort into Open Banking innovation, HSBC and its subsidiary First Direct. Since last year, HSBC has been testing HSBC Beta, an aggregation platform that will allow users to see all of their accounts, from any provider, all on one screen. Beta provides some value-adding services, such as ‘safe balance’, which shows how much disposable money the user has left until payday, and a nudge feature, which will let the user know if they exceed their spending limits.
HSBC’s branchless subsidiary First Direct has also been trailing an app that aggregates account information from other providers, as well as money management tips and third party product suggestions. They app is called artha and has been developed in collaboration with fintech startup Bud. Artha’s marketplace will contain products and services from providers in areas such as investing and credit cards, with American Express, Nutmeg, Wealthify, MoneyFarm, and Flipper among those available during the pilot.
Emma overdraft warnings
New millennial banking app Emma, which was recently granted FCA approval under the new PSD2 scheme, aims to make the most of Open Banking APIs to help its customers avoid overdrafts, find and cancel subscriptions, track debt and save money. Emma’s goal is to improve the financial situations of its users, and it plans to do this by making it much easier to manage multiple financial accounts and contracts. Emma recently integrated with Monzo to become the first startup to join Monzo’s API for customer account data sharing. With these account integrations, Emma (which is still in closed beta) can scan user accounts, check for upcoming payments or anything that’s likely to push their users into their overdraft, notify them, and transfer money from another account to avoid going into the red.
Yolt smart switching
Yolt, the smart money management app owned by ING, became the first third party provider to complete a successful Open Banking connection with a big 9 bank — Lloyds. Currently in open beta, by connecting up users’ accounts and integrating with other third parties, Yolt offers smart personal finance management tools with transactions across all accounts categorised and visualised. Added value will come with Yolt’s planned ability to make easy Open Banking-powered payments to friends and family, find better deals on energy, subscriptions, insurance, travel money and other services.
Starling Bank’s Marketplace
In September 2017, Starling Bank went live with Marketplace, an ecosystem of financial products accessible through Starling’s app. Flux, a rewards and receipt platform, was the first partner to sit within Marketplace, which has since become the UK’s most comprehensive app store-like hub to connect Starling users with relevant financial products. Boosting its API marketplace banking strategy, in February this year Starling added digital pension provider PensionBee, robo-adviser Wealthsimple, mortgage broker Habito and Kasko, which provides travel insurance. Just some of the benefits this approach offers Starling customers include:
- Easily add money to your retirement fund from any of your accounts
- Make a claim on your travel insurance through your banking app
- Seamlessly pre-populate personal and financial information when applying for new financial products and services
- Earn loyalty rewards from transactions automatically without using extra cards or codes
- Find deals and maximum borrowing figures from mortgage lenders based on your personal circumstances
These partners are the first of “at least 25” to be added to Starling’s Marketplace over the coming year. Starling claims to be the first UK challenger bank to offer a developer API, with full documentation and a sandbox environment to test in.
Coconut & Iwoca use Open Banking to benefit small businesses and sole traders
Finally, one to make the lives of the thousands of small business owners and sole traders in the UK much easier. Coconut is a current account for freelancers and the self-employed, which manages tax, tracks expenses and helps them get paid on time. Currently in beta, Coconut has been using Open Banking to experiment with things like maximising tax savings for customers and automatically filing tax returns. Iwoca Europe’s second largest alternative lender, offers small businesses fast, flexible and fair access to finance to meet their needs. Open Banking APIs will be used to gain direct access to SME business accounts to make fast credit decisions — no more uploading or emailing statements when applying for business loans.
With Australia set to implement a similar version of the UK’s Open Banking directive, PSD2 rolling out across the rest of Europe, and governments in Canada, USA, Hong Kong, Japan, India, New Zealand and Singapore looking into Open Banking frameworks, the rest of the world would do well to learn from the UK’s mistakes and communicate the consumer benefits of Open Banking with real examples.
