Abstract Banking Promises a New Era of Customer Choice

Open APIs could revolutionise the banking sector providing customers with more choice and flexibility while increasing competition between banks and lenders. Just as comparison websites enabled customers to find the best products and thus disrupted the high street banks, APIs could empower customers to compare and switch products in a much more seamless manner, further weakening the hold of the established banks. If this happens, it is vital that customers remain in control of their data and have a clear understanding of how to use it. They need to understand who they are sharing their data with and for what purpose it will be used.

Efforts are underway to develop standards, led by the Open Banking Working Group (OBWG), an industry-led body tasked with developing a framework for access to bank data. For now, the OBWG is hopeful that its proposals will be embraced by the industry, but it may push for legislation if necessary. That makes it highly likely that these APIs will become reality and they could lead to an explosion of apps and services utilising them.

It is early days yet, but already we’ve seen interesting things like https://teller.io/ spring up. Teller look to be offering a single API interface to a number of high street banks, making it easy to do things like transfer money between accounts.

The concept of a trusted third-party (TTP) has been proposed by the European Union’s second Payment Services Directive (PSD2).  TTPs would be the third point in the triangle linking account holders and banks. The TTPs would be those offering disruptive services that could be of great benefit to consumers.

We’ve seen something similar happen in the home energy market where QR codes containing all the customer’s account information are now included on every printed energy bill. Energy comparison services have been able to develop apps to read these codes and offer instant comparison and one-click switching to the best offer in the market. The customer has to do very little other than allow the comparison service to read their QR code. In a similar way, a customer could allow a banking comparison service to read their account details via an API, the comparison service could then show them alternatives and switch them seamlessly if they like another provider.

The decentralisation of control offered by banking APIs has the potential to wrest even more of the power away from the banks and put it in the hands of consumers. It’s hard to predict the outcome of that, but few would argue that improved choice and freedom of movement for customers is a bad thing. That, in turn, should create a more competitive marketplace with better products.

At the more fanciful end of the spectrum it’s possible to imagine a completely fluid banking and lending market with customers moving to the best deal on a monthly, weekly or even daily basis.  We could even see customer doing things like distributing their borrowing across a number of providers according to their needs and the current state of the market. Whatever happens, TotallyMoney.com wants to be at the centre of it, helping customers to get the best deal and helping to create a fairer credit market through technology.