One of the first events to take place during the annual Innovate Finance UK FinTech Week focused on discussing the future of Open Banking and Open Finance. As with most events right now, this panel discussion had to go virtual – in the form of a webinar – hosted by Tram Anh Nguyen, Co-Founder of the Safety Centre for Finance Technology and Entrepreneurship.
Despite the slightly unusual setting, it was a fascinating discussion, with a highly experienced line-up of speakers, all highlighting just how far Open Banking has come, and probing the next steps required to take it to the next level, and to usher in the world of Open Finance.
What does Open Banking currently offer right now?
Ross Laurie, CEO at Visible Capital
Ross was originally involved in setting up the Open Banking Excellence Meetups, before moving to Visible Capital. Launched earlier this year, Edinburgh-based Visible Capital aims to help customers in the wealth sector, by improving the process of data access & management.
Open Banking is crucial for their service, opening up this data, and allowing them to provide an offering that frees up a lot of time for wealth advisors. They can then use this time to both make administrative savings, and to spend more of their time working on managing their client’s money – the benefits to both parties are clear.
As for the current situation, Ross points towards a small, but successful number of positive Open Banking use cases that have given him cause for optimism and will “pave the way” for further developments. In particular, he points to the credit-side of the Open Banking market, with people using tools such as ‘affordability scores’ and ones that allow them to understand where exactly they spend their money.
However, these Open Banking successes to date have been achieved despite the fact that “any of us that worked in financial services or use financial services tend to use the things that are driven by customer-demand,” and the customer demand & awareness is just not quite there yet.
This means that the next logical step is quite clear: pivoting this small but burgeoning industry to focus on where the demand is at. Making this move could lead to immediate results, and an acceleration of this entire process. Ross concurs with this position arguing that, whilst alongside working with the regulators, “we need to start thinking about how we put the customer at the centre of all of this”.
Emily Reid, Partner & Head of Financial Services at Hogan Lovells
Many firms in the wider legal community have started to wake up to the myriad of possibilities and issues that the wave of Fintechs bring. The American-British law firm Hogan Lovells is no different, having taken many such companies on as clients. Emily’s team helps to advise on the regulatory framework for Open Banking, and Hogan Lovell’s banking clients, who are affected by it.
She agrees overall with Ross as to the current progress of Open Banking, and also touched upon her own experiences of having to frequently field questions about ‘what has Open Banking actually done for us?’. How does she deal with such claims? “I think we’re still seeing that this is the tip of the iceberg,” Emily responds, suggesting that much of the important work being done, is under the surface and out of sight from people “who aren’t really in touch with the sector.”
Emily expects much more to come from Open Banking. Her optimism stems from witnessing first-hand the evolution of Open Banking, particularly with “these new use cases, which I can honestly say, I don’t think were ever imagined by the regulators when they designed the framework” and that one of the most exciting and challenging aspects of her role now involves “working out how they fit and if they don’t fit, then working out how they could be made to fit, in order to launch a very innovative Open Banking product.”
The next step on from Open Banking: Open Finance
Felicia Meyerowitz Singh, CEO & Founder at Akoni
Akoni provide a cash marketplace and management system for SMEs, charities, financial advisors, accountants, and learning platforms. Their aim is to allow smaller organisations to make their cash work for them in the best way possible, without needing to have access to the highly complex management tools that are usually only available to much larger companies.
As she points out, Akoni can only provide this service because they can “use Open Banking for a range of [our own] cash-planning tools. For instance, we pull in the data and we do an analysis, and we provide an automated cash portfolio recommendation based on your historical balances.” This enables their clients to select the banking solution which is both the best fit them, whilst being one that is able to maximise interest and minimise risk, on their cash.
She also sees the current Open Banking situation as being reasonably early-stage, “Looking more at qualitative data. I think we were really right at the beginning of the journey […] what’s been achieved to date has been, substantially, changes in terms of the technology, the innovation of the use of data.” The next stage on this journey? Open Finance.
According to the FCA, Open Finance is an “opportunity to build on the conceptual framework of Open Banking and allow consumers and SMEs to access and share their data with third party providers who can then use that data to develop innovative products and services which meet their needs today and in the future.” It’s easy to see why many in this industry are excited about this, as a natural development to the existing Open Banking regulation & infrastructure.
Sam Seaton, CEO of MoneyHub
MoneyHub is behind the MoneyHub app, which is an app providing a financial management solution to individuals, financial professionals and enterprises.
This means that, for Sam and her team, the real usefulness of Open Banking comes from its progression into Open Finance. Her and her team’s ambition, she explains, is to “make people’s money go further and work harder for them.” They hope to achieve this by leveraging the full power of Open Finance, in a way that can empower their users. This empowerment, Sam hopes, will lead to positive developments in the banking sector, with institutions having to undertake a “step change in the way that they interact with their customers.”
This empowerment is definitely needed, as the majority of people struggle to navigate their way through financial services. Sam felt that this is because the sector was “just too muddy, there’s no transparency from beginning to end, it’s layered with intermediaries.” Products such as MoneyHub see Open Finance (underpinned by Open Banking) as a way of moving towards some transparency, openness, and clarity within the Financial Services sector.
Sam also thinks that people have potentially missed out on another promising development in the Open Finance revolution. Referencing a popular talk by Angela Strange she notes that, due to the new infrastructure, nearly every company will soon regard themselves as a Fintech.
Thanks to Open Banking, you can now envisage the possibility of non-banking companies being able to work directly with the customers, and to offer them tailor-made financial products. Sam uses the example of Nike: “Nike is really good at dealing with customers. I would argue much better than any company in financial services whatsoever […] they are just one of thousands of companies that live and die at the coal face with the consumer.” That, in actual fact, is where she sees Open Banking really heading, with less emphasis on the neo-banks and startups that usually take most of the spotlight.