11 December 2017
Open Banking Reform: Christmas is coming!
James Walker and Luke Lishman
So you’ve been dizzied and distracted by drumbeat of GDPR, but hidden by noise lies a massive opportunity: Open Banking Reform.
GDPR is just something your business needs to be addressing, and perhaps harnessing to your advantage. But Open Banking is a massive strategic opportunity. For us folks in the world of data and analytics, Christmas is coming!
Retail banking has been a cosy sector for a long time, with a small clique of 'too big to fail' institutions and limited competition. New regulations from the European Union and the UK’s Competition and Markets Authority are aiming to shake this up – with PSD2 and Open Banking. There’s lots of admirable initiatives in their reforms but reducing hidden fees and making it easier to switch your current account, aren’t subjects for an analytics blog. What’s got our attention is access to bank account data.
In the current world, banks have a monopoly over their customers’ data, and aside from some rudimentary planning tools, they don’t do very much with it. But from January 2018, customers will have the right to give third parties to see the same data as their bank for any current account, credit card, or easy access savings account. Not only can they give permissions to see the data, they can also allow third parties to initiate payments from accounts on their behalf.
Moreover, to make sure the rights don’t just exist on paper, the CMA has obligated the 9 largest UK banks to put in place an accessible, standardised data infrastructure and programming interface that challenger companies can use to access the data. What this means is that the banks’ stranglehold on customer data falls away. A world of opportunity for personalisation and targeting opens up, provided you can get the account holder to open their kimono and see their data.
The reforms have set off a race to become the 'hub' for you accounts. The retail banks are scared they’ll become interchangeable 'plumbing' whilst someone else owns the relationship with their customers. HSBC announced its open banking app at the end of September, unsurprisingly the main feature is seeing all your accounts on one screen, whether they’re held with HSBC or not.
We’d also expect the price comparison websites to be in the running - MoneySupermarket Group snapped up OnTrees (an account aggregator doing much the same thing as HSBC’s app) in 2014 but so far hasn’t done much with it. Will 2018 be the year it moves from when it turns from a sapling to a sturdy plank of the portfolio? The UK’s busy Fintech scene will also be active – Challenger bank Monzo, has said it’s ultimately aiming to be the 'control hub' for all your financial arrangements, and so they’ll be looking to pile in too.
Winning the race will require speedy product development, stellar marketing, and ultimately, the ability to do something smart with all that data. We’re watching keenly to see what happens!
James Walker, Partner and Global Head of Analytics
Luke Lishman, Consultant