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Open Banking - Comments on CMA Year 2 Report

Last week, the CMA released a report on the status of open banking after 2 years in place in the UK. This blog will reflect and challenge the comments from the blog “Open Banking year two: Insights from the CMA9” and what the various banks perceive as progress.

To set the tone, none of us who were part of the original team under the first trustee and the first director, had any idea that this movement would become as relevant as it is today, but even then, it was NOT considered to be simply a regulatory requirement and check box. We knew even back then that open banking was much more than that. To state the obvious, open banking is by far the biggest impact to the financial sector, period. Why? Because open banking has opened the door to open finance and eventually to open data that will see cross sector integration and an impact to true social and financial inclusion to not only the banked but more importantly to the unbanked. 

But this opportunity of social and financial inclusion can only happen through culture changes to traditional banking, true collaboration and allowing innovators to innovate providing consumers with true “open” products and services that allow them to take control and make sound decisions using their own data. Yes, consumers owning and making decisions on their own data by deciding how and when their data is to be used. 

In reading the comments of the banks in the article mentioned above, you have to seriously question what some of those banks deem as success through the offering of aggregation services. Now, most of these banks have incubators where so many fintech firms participate and fight for the spotlight of their solutions and with London declaring itself the fintech hub of the world, it is very difficult to understand why all that we can show after 2 years are aggregation API’s(?). We can and should do better than that! 

Supporting what the article states, banks in the UK continued to miss deadlines and failed to truly bring forward relevant solutions even though the OBIE presented a set of guidelines to further support the banks. To further highlight where banks stand, they have held consumer data for as long as they have existed so to say that, in the case of one of the banks, that they “have entered open banking in a position of strength” by aggregating credit card and savings accounts is very much missing the mark of the potential this movement has.

Not surprisingly, one of the Nordic banks did present a slightly more innovative approach but this comes from a region that has been innovative in the banking sector for many years. Another UK bank states how they have focused all this time on complying with PSD2 and open banking requirements which again shows that they are only seeing this as a regulatory checkbox.  

Culture changes in traditional banking, true collaboration and allowing innovators to innovate

So why are we not advancing in the UK?

  • Because banks in the UK have maintained a strong traditional view and are reluctant to change the culture needed from top to bottom to truly embrace “open”.
  • Because banks are not allowing innovators to innovate. Most banks have incubators and innovation departments full of extremely talented people but are not allowing them to unleash what they are developing. Why? Because it goes back to the first bullet point. A lack of willingness to change.
  • Because banks continue to have unreasonable procurement processes that are not in line with today’s need to quickly on board a new fintech. A 9-month procurement process is no longer valid in today’s fast changing world.

The result of the above will be once again that banks may become a background process ruled by the products and services that the big fintech’s will bring forward. Maybe that is what the banks actually want, to take a step back and not be innovative and instead just be a processor. 

It is not news that Generation X will most likely never step foot in a bank but what may be news is that banks will disappear as we know them if this way of thinking continues.  

 

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Comments: (9)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 27 January, 2020, 10:28Be the first to give this comment the thumbs up 0 likes

As I highlighted in Open Banking Needs A Blockchain Boost, the founding premise of Open Banking is questionable. I'm tempted to believe that's the reason for the lukewarm reception received by Open Banking.

But I'll stand corrected if there's any evidence to show that customers wanted truly “open” products and services that allow them to take control and make sound decisions using their own data. 

Carlos Figueredo
Carlos Figueredo - Open Vector Limited - London 27 January, 2020, 11:08Be the first to give this comment the thumbs up 0 likes

Mr Swaminathan, I do not agree at all with your comment. This would be like you saying we never asked for cars. We were happy with horses. We didnt need credit cards, we were happy with carrying cash. We didnt need SWIFT, we were happy with sending cheques. We didnt need the internet, we were happy reading the papers, etc, on and on.

Our role is to make consumers lives better, more efficient and safer. We see that in today's world, consumers want now and at their fingertips though they may not know exactly how that should occur. So open banking (into open data) will give consumers the options that they should be entitled to. Lets get this straight, banks have held consumer data for the history of banks and have done nothing with it but use it for their own financial benefit, not the consumers. That is your proof.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 27 January, 2020, 12:04Be the first to give this comment the thumbs up 0 likes

People have always wanted transportation, to send money, etc. They were doing it thru' horse buggy, checks, etc. When a new product came up that achieved the same objective but 10X better than the incumbent product, it has managed to gather traction, ergo mainstream adoption of automobiles, SWIFT, etc., happened. Likewise, when the new product doing the old thing was not 10X better than the incumbent product, it has failed to gain traction e.g. mobile wallet has not killed plastic credit card; ebook has not killed printed book.

Not let's take Open Banking. New products to do same old thing are not 10X better. Re. new products to do new things using data, it's only your hypothesis that people want them. I still see no proof.

OTOH, I've seen some evidence that customers DON'T want FIs to use their data. More at Banks Will Know Chipotle Is Going Bankrupt Before Chipotle

Carlos Figueredo
Carlos Figueredo - Open Vector Limited - London 27 January, 2020, 12:14Be the first to give this comment the thumbs up 0 likes

Mr. Swaminathan, then lets remove screenscraping, comparison websites, lets remove any aggregation website like Skyscanner, or Hotels.com because people simply dont need this. Products you (dont) mention, did not provide 10x benefits for quite a while. I have many examples where they were not instant successes. The evolved. 

The fact that you think that open banking is a product tells me everything I need to know that you do not understand whot open banking (finance/data) is. Consumers should not care about or know or want open banking. Consumers want services and products right away in a safe manner. It is time to break the monopoly of data from banks. 

It is also clear to me that you defend banks which I do too, but not as blindly as you do. With all respect, I have travelled heavily speaking and debating with banks, regulators and fintechs in the hottest markets and I know why banks are not moving to push open banking and why some regulators and mostly fintechs do understand its potential. Please feel free to contact me privately so I can share true facts, not supposives. 

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 27 January, 2020, 14:57Be the first to give this comment the thumbs up 0 likes

MINT, Perfios et al have been providing PFM / MoMMA functionality for nearly a decade without Open Banking. 

myBank, PayM, Zelle, Venmo, PayTM, AliPay et al have provided or are still providing bank-account linked payments in all the hot markets for over 5 years without Open Banking. 

Customers don't seem to care about whether it's safe to handover their online banking creds to these companies or whether these apps use screen-scraping or whatever technology to access their banking information. One in four Americans has shared their banking creds with master screen scraper Plaid.

Banks also don't seem to care about this, going by the fact that they could have but haven't shut down these apps which takeover online banking creds or carry out  screen scraping since the times of MINT. If banks only blockade progress as you claim, they would have easily been able to justify their decision to block access to these apps long ago.

Consumers seem to already have what they want. Banks also seem to support the apps that give consumers what they want.

This only leaves Open Banking proponents and Open Banking-based fintechs out in the cold. IMO, drunk on the Kool-Aid of API-based access to banking information, they completely misread the behavior of consumers and banks, who are the two primary actors in this realm. They're now trying lamely to blame banks for the lackluster response to Open Banking-based apps, when the truth is that these apps are not 10X better than the incumbent PFM and A2A payment apps that work without Open Banking, and will not be able to unseat them. Lack of support from banks is just a smokescreen for their complete misreading of the market. 

Carlos Figueredo
Carlos Figueredo - Open Vector Limited - London 27 January, 2020, 15:09Be the first to give this comment the thumbs up 0 likes Let’s come back to this exchange in a year or so and see where we are.
Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 27 January, 2020, 18:16Be the first to give this comment the thumbs up 0 likes

Yeah sure, I've seen several cans being kicked down the road e.g. cash will be dead, fintechs will kill banks, mobile wallets will kill plastic, branches will be dead, and so on. What's one more?   

Meanwhile, these just out:

1.

"One million customers are using Open Banking, ...." ~ https://www.telegraph.co.uk/technology/2020/01/25/britains-financial-giants-scuppered-digital-banking-revolution/ .

Even the Telegraph is talking about Open Banking as a product. Can we conclude that even a reputed media outlet doesn't know what Open Banking is, eh?  

2.

"“They’re idiots, they’re really naive,” is how Stevie Graham, the co-founder of fintech Teller, once described Open Banking Limited, the body charged with delivering open banking in the U.K." ~ https://techcrunch.com/2020/01/27/teller/ .

A bit harsh but jells with what I said about Open Banking proponents misreading consumer and bank behavior.

Chetan Ghadge
Chetan Ghadge - Wipro - Pune 07 February, 2020, 15:54Be the first to give this comment the thumbs up 0 likes

Open banking seems to be a one way street right now.

I would love to see fintechs open access to their data too. I would love to see Amazon opening up a merchants transaction history to bank so that they can offer better working capital terms. I would love to see  apple sharing my fitness routine to my health insurer so that I get a better deal on my premiums. 

That will be a perfect world ; for the consumer offcourse.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 07 February, 2020, 16:14Be the first to give this comment the thumbs up 0 likes

@Chetan Ghadge + 1. 

That's exactly what I'd written at the end of my post entitled Innovative Fintechs Don’t Need No PSD2 Regulation:

"Fintechs who're still not convinced that they should shed their reliance on 'open banking' should just pause to contemplate their future if said regulation becomes two-sided and requires fintechs to share their customer info with banks."

Sadly, things are going in the opposite direction in other industries.

As soon as PayPal bought honey for $4B, Amazon suddenly started flashing a warning on its checkout screen, highlighting the security risks of using the popular Coupon Browser Extension and urging customers to remove it.

LinkedIn recently blocked hiQ from accessing profile info despite the fact that 100% of the said info is entered by and belongs to Users.

Apple of course spins its policy as "protecting consumer privacy" but less said the better about its chances of sharing fitness data with third parties. 

Carlos Figueredo

Carlos Figueredo

CEO/Founder

Open Vector Limited

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This post is from a series of posts in the group:

Open Banking

Open Banking regulation, innovation and technology and it's potential to revolutionise the Financial Services Industry.


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