Most people know where Open Banking started, but the more intriguing question is where is it heading? Marie Walker from Open Future World has the answer to that
Trying to establish where and when Open Banking started, risks causing an argument, particularly if the conversation involves people from more than one country. But what is clear is that Open Banking has now developed into an unstoppable global movement. More than that, there’s a growing understanding that Open Banking is just a starting point in a wider transition towards a world of Open Finance and Open Data more generally.
Different countries vary in their approach, reflecting local preferences, market structures, regulatory environments, and so on. The UK and European Union were perhaps pioneers of the regulatory-led approach, while the development of Open Banking in the US has (until now) been essentially industry-led. While Open Banking regulation in the UK/EU focused on payment accounts, more recently, countries like Brazil and Australia have leapfrogged ahead to a wider Open Finance or consumer data right approach.
Despite these differences, Open Banking and Open Finance around the world throw up the same questions again and again – if not entirely the same answers. Issues around security, standardisation, consent, trust, and so on are tackled. Financial services providers feel their way towards a business model that can deliver value to the customer – and profits for the organisation. Astute institutions (and regulators) learn from others’ experiences.
More data, please
Among the many solutions that are being brought to market, a clear trend is beginning to emerge. More data can deliver more powerful solutions.
For example, bank account transaction data is being used for faster, lower-cost credit-decisioning which can both increase acceptances and reduce defaults. New services are helping ensure that a broader range of payments is taken into account in credit assessment.
But add in alternative sources of data – for example, data from mobile phones – and this sort of solution is able not just to improve lending, but to bring the unbanked and underbanked into the financial system. That can be a life-changing transformation for the individual.
Go a step further and start combining other types of data – for example, on the carbon emissions associated with different products. Then you’re looking at solutions that don’t just empower the consumer but could make a meaningful contribution to global sustainability.
At the same time, we’re beginning to see forward-looking banks building ecosystems around verticals such as real estate. They are starting to create whole families of services – and data exchanges – around the customer. This is a critical step for banks, according to Liz Brandt, CEO of Ctrl-Shift: ‘Customers don’t live their lives in product silos, they want banks to understand and support them on their own unique life journeys’.
Innovative Chinese super apps have built ecosystems so rich that regulators are now reasserting their control. Meanwhile, regulators elsewhere can see the potential, for example with the European data strategy and the UK’s Smart Data Initiative. The US is opening up healthcare data and open energy is on the cards in Australia.
Towards personal data mobility
We’re moving away from the traditional product-led mindset of the financial services industry to being truly customer-focused. As ecosystems built around the consumer grow, so can personal data mobility.
In October 2021 we’re collaborating with Ctrl-Shift on the world’s first OpenX event. As they put it, ‘at the moment, many enterprises acquire personal data through the ‘narrow letterbox’ of their own interactions with the customer. The future is one where personal data mobility across extended, cross-sector ecosystems allows far deeper insight and more valuable customer services’.
Of course, there are huge challenges to overcome on the way. Just as with Open Banking, we’ll no doubt face resistance from incumbents looking to keep control of ‘their’ data for as long as possible. Defensive organisations will focus on compliance rather than looking ahead to the opportunities. Tentative partnerships will under-deliver as cultural differences prove difficult to overcome.
But we will get there. And the more different organisations, countries, and industries can learn from each other, the faster that can happen.
This article was originally published in The Paypers` Open Banking Report 2021.
Open Future World
Marie Walker is co-founder of open banking and open finance community Open Future World. Marie creates the agenda for the company’s Open Banking World Congress and OpenX events, and curates the acclaimed Daily Edit of open finance news and views.
Open Future World brings together the best people and ideas from the world of Open Banking and Open Finance. Free resources include the Open Banking World Congress, OpenX Congress, the Open Future World Directory, and the Daily Edit, helping the community keep informed and connect with peers and prospects.
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