UK Open Banking six months later
On 13 July the financial services industry hit a significant milestone as it officially marked six months of Open Banking in the UK.
In theory, six months ago on 13 January, all nine of the UK’s major banks (CMA9) should have been ready to roll with a suite of APIs conforming to the Open Banking API Standards set out by the Open Banking Implementation Entity (OBIE).
In practice, only three of the nine were compliant, a few others just missed the deadline, and some asked for sizeable extensions.
Not exactly six months
What actually happened in the period following 13 January was a managed rollout of Open Banking, which only completed officially on 17 April. During this time, functional testing of API connections and performance was carried out amongst closed groups of account provider staff and OBIE members, followed by a very controlled phased rollout of live user connections.
A handful of third party providers including Yolt and Consents Online were up and running with live, in-market Open Banking connections during this time, but it wasn’t until May that we saw the first in-market use case from one of the big banks. Despite completing the managed rollout in April, deadline extensions and quality issues meant that this only applied to the account information APIs; payments APIs are still in their controlled testing period, with the first live Open Banking API payment only taking place on 1 June.
So whilst technically Open Banking has been up and running in the UK for six months, the reality is it’s only been operational for half that time (and only for account information).
A shaky start
As expected the Open Banking rollout has seen a slow start. In June, there were only 1.2 million uses of Open Banking APIs — that’s uses, not users — averaging just 40,000 API uses per day. But according to industry critics and a recent open letter from the Emerging Payments Association, Open Banking is experiencing not just a slow, but also a shaky start. The open letter cites numerous concerns, including performance and consistency issues; banks’ compliance with Open Banking, public perception and consumer protection, API standards, data standards, customer journeys, scope of Open Banking.
The Emerging Payments Association was not alone in its criticism.
“By 13 January, six of the nine largest UK banks had missed the deadline for the initial roll-out. Not a good start. Since then, most have caught up, but the onboarding processes are clunky.”
Marie Steinthaler, Head of New Products, Zopa
HSBC, Open Banking* pioneer of the CMA9
The one and only major bank emerging as Open Banking pioneer is HSBC, which has a clear early mover, test and learn strategy. Through partnerships with Open Banking as a Service (OBaaS) providers, it has launched the UK’s most significant consumer-facing propositions.
Following a six month beta testing period, HSBC’s account aggregation and money management service, Connected Money, launched in May. Currently the star of an advertising campaign fronted by Richard Ayoade, the Connected Money app is the first from a major bank to allow all accounts (even from competitor banks) to be brought together in one place.
Taking it a step further with its sister brand, First Direct is testing the concept of marketplace banking with its artha app. Built by Bud, this app allows customers to access and integrate new financial products from other providers such as Wealthify, from within the app. It is open to both First Direct customers and non-First Direct customers on an invite-only basis, and is being developed within the FCA’s innovation sandbox.
HSBC has also been using Open Banking to power fast credit decisioning for personal loans, accessing customer account history to quickly run affordability checks.
The other major banks have been relatively quiet on the Open Banking front, with the slight exception of Barclays and its SmartBusiness dashboard for SME customers. However, this launched back in August 2017 and although it uses smart integrations between banking and business tools such as Xero, Shopify, MailChimp, it’s unclear as to whether Open Banking APIs have been utilised for this service.
In June, Citi Bank became the first corporate bank to enroll on the Open Banking directory as a Payment Initiation Service Provider, and in July Metro Bank launched its own API developer portal, “closely aligned” to the OBIE standards.
Third party providers are gathering momentum
After waiting patiently for the managed rollout to complete, Open Banking-enabled services from fintechs and other third party providers are starting to go live. In the past month, more and more activity is taking place as the smaller players are starting to take advantage.
As of 27 July, there are 36 third party providers officially enrolled and FCA-approved on the Open Banking Directory, and many more taking advantage of Open Banking through partnerships with intermediaries. 42% of these third parties have propositions directly targeting consumers. The rest are B2B propositions, and seven of the 36 are companies offering Open Banking as a Service to other third parties.
One such consumer proposition gathering steam is Yolt*, the money management app by ING. Yolt became the first authorised third party provider to successfully integrate account information in the live Open Banking ecosystem. The app allows customers to sync their accounts in one view, see their spending clearly and do more with easy budgeting, international money transfers and energy comparison. Yolt now has over 300,000 UK customers and is launching in Italy and France soon.
Enabled by OBaaS intermediaries
Some of the strongest players to come out of Open Banking so far are industry utilities building the infrastructure and microservices enabling other companies to connect to the big banks’ APIs.
TrueLayer is one of the most interesting intermediaries, building the rails to enable access to Open Banking, and plugging the CMA9 API performance and consistency gaps identified above. TrueLayer’s OBaaS products allow turnkey access to the Open Banking APIs to fintechs and other third parties, even those not officially authorised on the OBIE’s directory. TrueLayer is the middleware between the banks and the developers building new services for customers.
“Based on the view of the market that we have…I can assure you that you will see a wealth of high street banks and retailers, financial institutions, global platforms, marketplaces, loyalty and rewards propositions, crypto exchanges, wallets and fintech applications experimenting and launching Open Banking-based propositions in the next 12 months”.
Francesco Simoneschi, Co-Founder and CEO, TrueLayer.
Peer to peer lender Zopa is one of TrueLayer’s customers, and uses Open Banking connectivity to verify personal loan applicants’ income. Over 50% of Zopa customers who need to verify their income chose to do so via Open Banking.
Similarly, proptech company Goodlord uses TrueLayer to speed up tenant affordability assessments. TrueLayer just announced a new round of $7.5m in funding that will drive expansion into Europe, starting with Germany and France.
Real innovation is yet to come
When Google Maps launched in 2005, few foresaw how it would pave the way for a revolution in the sharing economy, giving birth to Uber and a host of imitation ride hailing apps.
Now the Open Banking pipes have opened, we are sure to see innovation across multiple sectors as APIs collide.
But it’s still early, experimental days yet.
*Edit: It’s been pointed out (thank you John Heaton-Armstrong) that although a lot of the live propositions I’ve referenced are designed for Open Banking, apps like Connected Money and Yolt are still using screen scraping for many of their customer connections. I’m sure the intention is to migrate to Open Banking APIs when performance issues are ironed out, but this seems to be a long way off right now. So I’ve downgraded HSBC and Yolt to open banking (with little ‘o’ and ‘b’) pioneers.
