January 13th 2018 is a significant date for the financial services industry, as Open Banking was officially launched in the UK and the revised Payment Services Directive (PSD2) came into force in Europe. However, transformative events don’t always happen in a day. Since January, we have not seen many different applications hit the market or changes in customer or bank behaviour.
Slowly but surely
As said, Open Banking rollout has seen a slow start. In June, there were only 1.2 million uses of Open Banking APIs, averaging just 40,000 API uses per day. According to stats from the Open Banking Implementation Entity (OBIE), there were 57 providers offering Open Banking in July 2018, including 36 third party providers and 21 account providers, such as banks, building societies and payment providers. But, according to industry critics and an open letter from the Emerging Payments Association, Open Banking is experiencing not just a slow, but also a shaky start. The open letter cites numerous concerns, including performance and consistency issues; banks’ compliance with Open Banking, public perception and consumer protection, API standards, data standards, customer journeys, and the scope of Open Banking.
While commenting on the first six months of Open Banking, Imran Gulamhuseinwala, Trustee of the OBIE, said: “It’s been a slow but sure start to Open Banking, as expected. We are pleased with the steady pipeline of new entrants to the Open Banking ecosystem and are beginning to see some compelling and innovative propositions develop which will ultimately help customers move, manage and make more of their money. Some heavyweight non-mandated players have already seen and seized the opportunities Open Banking will bring and we are confident this will continue. Looking ahead, we have an intense programme of enhancements planned and we are working closely with the banks to ensure that customer experience and capability are expanded dramatically in the near future.”
Most recently, he told the LendIt Fintech Europe conference that the 2018 launch was only the first chapter in the revolution. He reminded those present at the event that the process, which was deliberately mapped out within 18 months, is something unprecedented, yet successfully attempted by the UK. The “starting gun” as Gulamhuseinwala refers to, is just the kick-start of a collaborative approach in the banking industry.
So far so good. One thing is for sure, though: Open Banking was meant to be transformational. And international.
Gaining momentum
Progress may be slow in some product categories but momentum is building. In April 2018, the UK`s Open Banking initiative has completed its three-month managed rollout programme. Open Banking services could thus be offered directly to customers by fully authorised companies.
The body charged with implementing Open Banking has been operating the managed rollout phase since 13 January to prove the new piece of UK financial infrastructure was ready for customers. Now it confirms that the programme has proven the account data access functionality of the Open Banking system. This means that Financial Conduct Authority (FCA) authorised and registered third parties are now able to offer products based on it to customers.
Who`s already on board
Most countries are starting to implement versions of these rules as regulations. The Dutch bank ING`s Yolt has been one of the first to fully implement third party access integration. The service links to all Lloyds Banking Group, RBS and HSBC brands, as well as challenger banks Monzo and Starling.
Barclays launched an account aggregation feature powered by Open Banking, while HSBC launched the Connected Money app in May 2018, allowing customers to see all of their current account, savings and mortgage accounts across 21 banks, including Santander, Lloyds and Barclays, in one app.
Danske Bank has become the first of the Northern Ireland banks to introduce an open banking feature within its mobile banking app. Danske customers who have a personal current account with Santander can choose to view their Santander balances and transactions when they log on to Danske’s New Mobile Bank, giving them a clear view of their money without switching between apps.
Additionally, challenger banks like Metro Bank, Starling Bank, Tandem and Monzo are also developing around API marketplaces and information services, in order to differentiate their offers.
Furthermore, in June, Citi became the first corporate bank to enrol on the Open Banking directory as a Payment Initiation Service Provider, and in July, Metro Bank launched its own API developer portal, aligned to the OBIE standards.
In September, Nordea has extended Open Banking to Sweden, giving developers the possibility to begin building applications designed for both Finnish and Swedish customers.
Nordea’s Open Banking platform was launched at the end of 2017 when Finnish customer data was made available to third party developers. Nordea was one of the first banks in Europe to see the potential opportunities offered by PSD2 regulations which require banks to open up to third parties to offer services to account holders. Since the launch of Open Banking, more than 2500 developers have registered to test Nordea’s APIs.
In September, the Open Banking Implementation Entity (OBIE) has created an infographic to show the progress in Open Banking. Imran Gulamhuseinwala mentioned the steady progress within the Open Banking ecosystem, in particular with the growing use of their APIs: “We expect to see this momentum continue, added the Trustee of the OBIE.
The OBIE shared figures that show 3 million uses of open banking APIs in July 2018, up from 2 million in June. There are now 67 regulated providers of APIs, made up of 44 third party providers and 23 account providers. If this is not progress, I don`t know what that is.
What is more, in September 2018, the Open Banking Implementation Entity has announced the publication of the Open Banking Standards, version 3. This update built on the version of the Standards that launched in March 2018, giving account providers who implement them in full, a solution that complies with the EU’s PSD2.
Whilst previous versions of the Standards covered business and personal current accounts, Version 3 covers all products with payment capabilities (for example, credit cards, pre-paid and e-wallets) in any currency.
Developed in conjunction with a broad base of stakeholders, from large banks to challenger institutions, fintech companies and consumer bodies, The Open Banking Standards v 3.0 include the following core components:
Detailed Technical Specifications for all AISP, PISP and CBPII use cases
Security Profiles for Redirect and Decoupled Flows
Customer Experience Guidelines and Checklist
Conformance and Certification.
No longer just a UK thing
Open Banking is gone global. Other geographies, such as Singapore, Hong Kong and Australia are also moving towards creating open banking standards. Australia has introduced Open Banking rules that will force the banks to share data with trusted third party providers by July 2019; Mexico has introduced a Fintech Law; South Korea and Singapore have enforced rules around financial data sharing between banks and third parties; and the US has seen several banks innovating around open financial structures, although there is no law enforcing them to do this, yet.
What next
Embracing Open Banking and APIs means that banks around the world can innovate quickly, keep pace with customer demands, and advance their customer experience in an efficient way.
To stay ahead of the curve, banks will have to actively promote Open Banking innovation and forge fintech partnerships with companies using their data sets, in order to enhance their existing products and leverage innovative fintech products being created with their data.
September 2019 is a particularly notable point in the evolution of Open Banking, as the Regulatory Technical Standards (RTS) comes into force under PSD2. All banks across Europe must comply with these technical standards, by either must put in place a dedicated interface (API interface) which meets those requirements or must provide an updated version of their existing customer interface. Long story short, banks must make sure that it is only the regulated authorized third parties who are accessing an account. Watch this space!
To learn more about topics such as building trust, gaining consent and improving customer experience in Open Banking, check out The Paypers` Open Banking Report 2018 - Building Trust, Gaining Consent and Improving Customer Experience, launched in September 2018.
About Oana Ifrim
Oana Ifrim is Senior Editor at The Paypers. She is a passionate observer of banking innovation, with a penchant for fintech - always keen to identify and understand how new technologies and digital strategies and solutions are shaping the future of banking. Oana holds a Master’s degree in American Studies.
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