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Nationwide’s OB4G Challenges Fintechs for Prosperity

Interview by Zoya Malik (Managing Editor)

Nationwide has set a challenge for the fintech community to develop open banking technology that helps improve the lives of one in four UK households who are financially squeezed – equivalent to 12.7 million people. Zoya Malik, managing editor TFT spoke to Phil Gosset about Nationwide’s objectives and investment into the Open Banking for Good Challenge (OB4G) and how he views the programme’s winning technologies and partnerships will help stretch household incomes to benefit the community and industry at large.

Nationwide
(Phil Gosset, Senior Innovation Manager, Nationwide)

ZM: What is Nationwide’s objective in partnering and funding the Inclusive Economy Partnership (IEP) or Open Banking for Good Challenge?

PG: We want to support and encourage firms to deliver digital services aimed at helping those who are financially squeezed. According to the Money Advice Trust, as many as 12.7 million people are one financial shock away from real difficulty, and an increasingly more fluid job market leading to ever more fluctuating incomes only compounds this.

The aim of the Open Banking for Good challenge is to bring together fintechs and charities to make a real difference to people’s lives through the development of apps and services that utilise Open Banking, to create scalable solutions to the widespread financial capability issues, experienced by the most financially vulnerable.

ZM: What is the criteria for selecting fintechs and for funding their R&D for apps to support Open Banking and financial inclusion?

PG: As a member-owned organisation we have a social purpose, and Open Banking for Good places a premium on innovators who use Open Banking to achieve social good as well as financial good. We have worked closely with charities and partners to define real problems that people face and that are addressable through Open Banking. In detail, we focussed on three main areas that are the most tractable using Open Banking and which are outlined in the Open Banking for Good challenge document, namely: supporting debt advice charities in creating income and expenditure statements, helping people with irregular income manage these fluctuations, and empowering people to manage their money more effectively.

There are four distinct application paths which are suitable for applicants whose concepts are at different stages of maturity, and that provide the lowest barriers of entry depending on that maturity. These range from Explore, where Nationwide will work with applicants to explore if a kernel of an idea can be developed into a testable concept, to Invest, for applicants that have built and tested their product and are seeking investment and a ready user-base.

ZM: What are financial literacy issues in the UK and how can fintechs support banks in assisting customers’ money and debt management?

PG: Both the OB4G Challenge document and the report published jointly by Nationwide and the Money Advice Trust found three key areas where fintechs could use open banking to help solve financial literacy issues:

  • Income smoothing – an increasing number of people rely on irregular income streams, and open banking has the opportunity to ease the administrative load on people and support flexible forward planning.
  • Income and expenditure – Open Banking provides an opportunity to support debt charities in gathering income and expenditure from users that are experiencing financial difficulty.
  • Money management and help – there’s a huge opportunity to use Open Banking to create solutions that help people practise and embed better budgeting, spending and savings habits.

ZM: How will Nationwide encourage positive change in their customers’ finance management and still remain profitable? What are the priorities?

PG: We don’t look to profit from any poor financial management of our members. We are a member owned organisation and we believe in supporting members to improve their financial management. We believe members want to manage their money better, and that they value our efforts to support them in doing so.

ZM: What will be critical financial concerns of UK households in 2019?

nationwide

PG: The economic outlook is unusually uncertain, and we expect a squeeze on household budgets. The public is on balance more pessimistic than optimistic about the economy and their own finances, with a particular concern around the rising costs of goods and services. Our own Spending Report found that 80% of people have seen bills increase in the past 12 months, particularly around utilities, council tax and food costs. Some UK households may see these changes as challenges.

ZM: What are types of innovative solutions and apps that banking and finance customers can look forward to in 2019 in assisting them in their decision-making with regards to their savings and investments, borrowing and debt repayments?

PG: In 2019, we’ll see more and more use of data and analytics to provide personalised information to customers. For example, at Nationwide in 2018 we launched MoneyWatch, a function on our app that provides our members with insight into their spending habits. We believe this type of function will become increasingly common over the next year.

ZM: How much investment and funding is Nationwide committing to the programme and what’s in it for Nationwide and the industry at large?

PG: Nationwide is putting forward £3 million to encourage fintechs to take part in this programme. We’re doing this because we believe that society at large should have the opportunity to benefit from Open Banking. More generally we believe that the more people understand about how to manage their money effectively, the better for the financial services industry as a whole, including us.

ZM: Once launched, what’s the road map to help these apps scale up and reach Nationwide’s audience and on-boarding and capturing new segments?

PG: There are four distinct application paths, suitable for applicants whose concepts are at various stages of maturity. Whether they have a great idea that needs exploration and development, or they have a tried and tested product that needs investment to help scale it up, there’s an application path to suit.

  1. Explore: For concepts that are not clearly defined but contain the kernel of a great idea. Nationwide will work with applicants to explore if it can be developed into a testable concept and enter the Develop path.
  2. Develop: For well-understood concepts with a clear development and testing approach. The duration of this scheme is three months and the funding available will provide half of the person-hour cost for the duration of the scheme.
  3. Accelerate: For ideas that are fully formed but are neither fully developed nor tested. This pathway lasts for six months and support will include providing access to a team space and incubation team, access to additional skills such as design or technical capabilities as required, access to users for exploration and evaluation, along with full funding of the person-hour cost.
  4. Invest: For applicants that have built and tested their product and are at the stage of seeking investment and a ready user base. This will be handled on a case-by-case basis.
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