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Startups call for Open Finance to break the dominance of banks

Startups call for Open Finance to break the dominance of banks

The UK needs to avoid an overly-standardised approach to Open Finance if it wants to break the dominance of banks and empower consumers, says a report from the Coalition for a Digital Economy (Coadec).

Despite widespread distrust of high-street lenders, Open Banking has so failed to take off, with just over two million registered customers to date.

The report - commissioned by bank data specialist Plaid - claims that this is in part because of overly-prescriptive technical standards and anti-competitive security measures.

It calls for a more Australian-style, market-led, approach to Open Finance, warning that with the EU committed to having an Open Finance framework in place by 2024, the UK must act quickly to defend its fintech crown.

Specifically, the report calls for the government to grant Brits a new data sharing right that empowers them to own and share financial data. This would see off efforts by banks to entrench their dominance by levelling charges on third party startups for accessing financial data - via so-called 'Premium APIs'.

In addition, Coadec says the government must remove the 90-day re-authentication rule, which has seen startups face massive customer attrition rates.

Meanwhile, the report predicts that the quick-wins for Open Finance will be in the savings, credit, mortgages and pensions markets, and says the FCA must make these the first sectors to open up their data first to consumers via open source APIs.

Joel Gladwin, head of policy, Coadec, says: "What Open Banking has shown that when the consumer is in control of their data and who they share it with, this can build trust, drive engagement and empower activity.

"But the banks were able to send armies of slick lobbyists and magic circle lawyers to Brussels to build extra barriers to fintechs and maintain their gatekeeper roles. By granting consumers a new data sharing right, and encouraging a market of API specialists to compete in building the plumbing for Open Finance, banks will have very little room for manoeuver this time.

"Ultimately, this will allow consumers to access better, and more tailored, financial services than they do currently."

Read the full report:Download the document now 485.8 kb (PDF File)

Comments: (2)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 25 November, 2020, 15:04Be the first to give this comment the thumbs up 0 likes

LOL maybe banks read my last year's message on Twitter and decided to send "slick lobbyists" to Brussels! I won't claim any credit for "magic circle lawyers", though!!

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Open Banking is an epic failure of Big Bank lobbying. I'm looking forward to similar regs in other industries that will force Amazon to share customer data with Walmart, Verizon with AT&T, Google Search & LinkedIn with 3rd party apps.

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Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 25 November, 2020, 15:17Be the first to give this comment the thumbs up 0 likes

"Despite widespread distrust of high-street lenders". I don't know on what basis the article / cited report makes such a confident assertion. Even taking it at face value, how does distrust have anything to do with Open Banking adoption? It's not that Open Banking is creating alternatives to traditional banks.

I earlier highlighted that EU style Open Banking is premised on a flawed assumption viz. bank customers want to unlock value from their banking data when US-style Open Banking clears shows it's about compelling features / functionality / apps that happen to need banking data access.

That was another axiomatic flawed premise. This one about distrust is another. Looks like EU OB proponents never learn from their series of misconceptions. 

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