Around the world regulation is being introduced that recognises the value of data, the need to keep it secure and the largely untapped potential for it to be used to the benefit of its ultimate owners, the consumers.
For example, the European Union’s (EU) General Data Protection Regulation (GDPR) came into force on 25 May 2018. It protects its citizens from organisations using their data irresponsibly and gives citizens control of what, where and how information is shared. Australia’s Consumer Data Right is being phased in, starting with the banking industry in July 2019.
UK leads the way
Regulation covering the UK’s Open Banking regime became effective on 13 January 2018. It requires the UK’s nine largest banks and building societies to share retail and small business customers’ current account transaction data with third parties at customers’ request. Over the next year or two data on loans, credit cards and other products will also come under the regulation. To date the Financial Conduct Authority has approved 18 service providers to offer services directly to consumers and small businesses using Open Banking.
Unlike the EU’s revised Payment Services Directive (PSD2) that also requires banks to share customer data, the UK regulation stipulates data is shared in a standardised way through Application Programming Interfaces (APIs). These are smartphone applications and service-driven websites that pull in data from multiple sources and manipulate it in different ways.
Big banks moving quickly…
HSBC launched its Connected Money app in May. It shows customers their UK current accounts, some savings accounts, credit cards, loans and mortgages with around 20 banks together in one place. Its “balance after bills” feature tells customers how much money will be left in their current account until the next payday after taking regular bills into account.
Barclays’ SmartBusiness Dashboard offers its small business customers a directory of connected apps to better link bank accounts with tools for bookkeeping, marketing and analytics, sales and inventory and workforce management.
Already six of the UK's nine big banks can connect their customers to ING’s money management app, Yolt.
… so are challenger banks and start-ups
Some of the fintechs preparing for Open Banking paint a picture of what the future might look like. Coconut, which specialises in current accounts for freelancers and self-employed workers, believes Open Banking will help the self-employed and small businesses to “ditch the manual work needed to file tax returns, freeing them up to earn more money.”
Licensed challenger bank Starling Bank has a vision to create a Marketplace platform that makes it easy for third parties to integrate Starling’s public APIs and plug in their own APIs into the marketplace within the Starling app. That would see those third parties offering their services to Starling’s customers. Essentially Starling seeks to create a platform where customers can easily access a range of personalised services in one place without having to offer all those services itself.
Services consumers couldn’t imagine living without
At a recent webinar in London, we heard that open APIs will enable hyper-personalised, predictive and pre-emptive services dynamically flowing based on data that consumers share on the understanding they will receive value for the data.
It is estimated that Expedia.com generates 90% of its revenue through APIs and 60% in the case of eBay. Open Banking, through APIs, creates a new revenue channel for banks.