Home / Digital Bank / The disappointing arrival of Open Banking … and the optimistic future

The disappointing arrival of Open Banking … and the optimistic future

Finally, just over a week ago, Open Banking came into the UK and Open APIs into the European Union. I am sure you all know what this is all about by now but, just in case, it is the regulations that force banks to share data through APIs – plug and play software – with trusted third parties, if the customer gives permission. This means that other firms you like, such as Amazon and Facebook, can leverage this data and allow you to send money and gifts to friends and family with a simple click or swipe in an app. You no longer have to login to a bank system and enter new payee details with account numbers and sort codes; just say send that £1:50 to Joe and £900 to Anne. And when I say ‘just say’, I mean it as banking can now be incorporated into Siri, Alexa or Cortina.

All well and good but, in a move that I am fairly sure was carefully orchestrated by the banking community, nearly all of the mainstream media greeted the launch of Open Banking with fear and scaremongering. These three headlines illustrate it well:

Even The Financial Times jumped on the bandwagon:

Will you let a stranger look deep into your bank account?

Be afraid … be moderately afraid. Open Banking arrives on January 13, allowing “third-party service providers” to access data from your bank accounts online, if you give permission. It sounds terrifying, doesn’t it?

Although after that opening line, the article does a good job of explaining that it is safe and secure and a good thing potentially. However, it started with such a negative tone and, with the ADD world we live in, that is likely to be all the reader remembers. In fact, the problem is that nearly every article I’ve read has greeted the development with a negative headline, even if the mainstream content is more balanced. As a result, no consumer is going to think Open Banking is a good thing and, with two-thirds of UK bank customers avoiding mobile banking and a third even running scared of internet banking, as they think it is insecure, I really cannot see how consumers are going to adapt to and accept the benefits of Open Banking.

Nevertheless, the FinTech community are far more advocates of the new regime:

Note that to find the positive spin on Open Banking, I’ve had to seek out more business or niche news channels than the doomsayers of the mainstream consumer media.

My take on this is that you have two camps battling with each other. The mainstream banks with the mainstream media and the FinTech community with the tech and niche media. Unfortunately, the latter camp will never win out if they are not safe and secure in the consumer’s head and, more than this, offering something that is a compelling reason to change.

In fact, the most likely outcome of Open Banking and Open APIs is that the big players will try to leverage more against their competition through data and the internet giants will gradually step in , with possible partnerships with the niche FinTech community, to create that compelling switch reason.

For example, if Facebook is savvy enough, they would pickup with Stripe, TransferWise, Zopa and others to look for ways to make it easy for you to respond to their in-app advertisers, games and purchases and make it easy to get anything you want with a swipe. Add on to this that it’s social and sharing, then I should be able to donate to friends’ causes or pay my mates with messenger.

Amazon and Alibaba are the two most likely global players who will get this first, not forgetting the other guys: PayPal, Tencent and more. It is these heavyweights working with niche lightweights that will change the game through Open Banking and, in the meantime, the ill-informed carping journalists can continue to kiss the banks’ backsides.



About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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  • sketharaman

    TBH most of the use cases in this blog post are available without Open Banking e.g. PayM, Play Store, Amazon 1-Click. Why risk giving online banking creds to 3rd parties? Media does have a point. IMHO, accusing it of kissing “banks’ backsides” is a bit harsh.

    • Chris Skinner

      Well, we agree to disagree.

  • Giles Sergant

    TPPs as overlay service providers is a nice idea if it works out but young Fintechs face a significant hurdle to win customer engagement the way Open Banking is shaping up …

    Letting in a high street bank that’s been around a hundred+ years or Amazon who’s had your card-on-file for longer than you care to remember is of course a VERY different trust decision than gifting consent to an essentially unknown Fintech who might well have coded up a compelling new feature but hasn’t accrued anything like the appropriate trust pedigree to be given unfettered access to your holiest of holies!

    Even then the TPP won’t be able to fully own their new-customer-experience as the ASP lurking within still holds sufficient cards to make it clunky and off-putting should they so desire.

    “Forcing banks to open up” isn’t really going to play out, it will be defended. Most young Fintechs will struggle to survive partnering only with new challenger bank breed as they lack volume and ‘partnering’ with CMA9 inevitable means loss of control.

    Like you say GAFA & Co won’t much care … they know more about you than can be gleaned by 90 days activity analysis, their main intent is to avoid card fees.

  • Giles Sergant

    It’s a pity the FT didn’t pick up on the impact on consumer trust and Open Banking that the CMA has placed fast and loose with by forcing our largest UK banks into Open Banking before it’s fully baked and tested (and way ahead of the mandatory timetable).

    In their haste to proceed beyond the first phase of remedies the CMA imposed a hugely unrealistic timetable on banks to come together to: inter alia, devise and agree a common interim API standard for the dedicated access interface; avoid security flaws in the communication session and customer redirection piece; authenticate authorized TPPs via certificate exchange; decide how permission revocation might work; dynamic linking; dispute handling; liability … etc

    …… oh, and design it all in such a way that neither collides nor breaches incoming GDPR legislation which comes into force far sooner and with far heavier consequences on outage.

    In an age of ‘data minimization’ and ‘data protection by design’ UK banks are having to not only park any initiatives which would prevent anyone other than the account holder(s) from logging into their account but, bizarrely are now having to promote the sharing of sensitive login credentials to third parties as a means of accessing ‘Open Banking’.

    Barclays OB informer: “Another way is to share your bank account login details directly so that the company will be able to login as if they were you in order to use your data”.

    Cynics might say our own CMA has pushed UK banks under the bus.

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