Welcome to the Frictionless Finance Report, our monthly look at everything new in the world of Open Banking, FinTech, and consumer experience. If you’d like to receive this in your inbox, fill in the form at the bottom of the page. This month we examine the future of the Open Banking Implementation Entity (OBIE), the latest Open Banking news from across the globe and the continued impact of Coronavirus on the finance sector.

Open Banking 

While we often talk at length on the technicalities of Open Banking, the volume of Data API calls that are being made, and new use-cases that are being found, it is not often that we give reference to the OBIE. This month in the Frictionless Finance Report, they feature prominently, due principally to UK Finance proposing the creation of a new body to oversee Open Banking in the UK, and because their media friendly chief, Imran Gulamhuseinwala, has leant his own thoughts on the future of Open Banking in the UK.  

Both Finextra and IBS Intelligence cover the story suggesting that UK Finance have proposed a new body to take forward Open Banking in the UK when the OBIE’s roadmap expires in 2021. The OBIE were created under the auspices of the Competition & Markets Authority in 2016, and over the last four years have been the driving force behind the implementation of Open Banking in the UK on behalf of the UK Government and regulators.  

The news was broken in a new report from UK Finance, published in conjuncture with Accenture, titled Open Banking – Future State. 

The report states that on completion of the OBIE’s roadmap in 2021, a new body should be formed with the remit of carrying forward Open Banking in the UK. The FCA is also likely to input as it prepares to publish a new report on moving from Open Banking to Open Finance.  

Tom Graham, managing director in Accenture’s UK banking practice, said:  

As the power of Open Banking continues to gain momentum and drive welcome innovation in the UK for the benefit of consumers, community collaboration is vital to ensuring this continues. This report lays out the next steps for building on the highly successful foundations the UK has built – maintaining the country’s technical lead, supporting business models built on this infrastructure, whilst considering what might come next.

In a wide-ranging interview, the OBIE’s trustee, Imran Gulanhuseinwala spoke at length to Lexis Nexis on the future for Open Banking in the UK. Encouragingly, he spoke of the robustness of the system in the face of the global Coronavirus pandemic, and calls for banks to respond at a time when the pace of change has greatly accelerated. He further states that the OBIE has moved on from the creation of a regulatory environment to the creation and build of premium APIs from which banks can directly benefit. 

Separately, Open Banking has launched an app store to help consumers and business who require more clarity on the regulated entities using Open Banking. Through the store, individuals and business owners can compare products and services across a range of categories, including budgeting, accountancy & tax, payments, borrowing, debt advice, financial safeguarding and more. 

David Beardmore, OBIE ecosystem development director, said:  

Consumers and SMEs need more clarity than ever on how to manage their finances through this difficult time. With the number of banks and fintechs offering Open Banking-enabled products growing so rapidly, deciphering the advantages of each product can seem daunting. With the launch of the Open Banking App Store, we are enabling individuals and businesses to find the financial products that are best suited to their situation by helping them narrow down their options and see what’s out there.

The open banking app store can be found on the open banking website, here. 

Best of the rest in Open Banking: 

• Data aggregation is the way for Open Banking to flourish argues Fiserv in pymnts.com 
• Scandi startup Tink suggest in a new survey that investment by banks in Open Banking is higher in the UK than anywhere ese. 
• PSD2 may be here, but the APIs required to support it are not yet ready say FinTech Futures. 

Open Banking Abroad 

We open this week on news of a positive survey conducted by Finastra on the state of Open Banking globally. Though conducted prior to the Coronavirus outbreak, it reveals that 30% of those surveyed believe that Open Banking is having a positive impact on the banking and finance sector, with a whopping 86% committed to using Open Banking and APIs within the next 12 months. 

We bring you further news this week from Mexico, the Nordics, Australia, South Africa and Canada. 

Australia 

Learning from what has happened in the UK, FinTech Australia has called for more and better training for both individuals and business prior to its launch. Should there not be underlying trust in Open Banking, the industry body fears that Open Banking will not be in a position to deliver on its “radical expectations” 

South Africa 

The Head of Bank and Payment Providers at South Africa’s Financial Sector Conduct Authority, Sindiswa Makhubalo, has laid the groundwork for Open Banking with an article exploring its benefits. The rise of Coronavirus, he says, has brought about many new problems which require radical solutions. Open Banking could further support the South African banking scene by fostering competition and improving access to financial services.  

He writes: 

Open banking is already gaining traction because of the possibilities it unlocks. More than 22 countries around the world have developed and implemented frameworks around it and are already seeing its value, because of the opportunity to make the financial infrastructures more efficient, and its ability to serve more people - a goal that has not yet been achieved by the commercial sector alone.

Canada 

The Canadians also, have examined how Open Banking may have been able to support the financial system through the current pandemic. Open Banking is still currently under review in Canada, and will likely be made live next year. The Financial Post article cites access to funding as a particular problem for small businesses in Canada. 

Mexico

The Mexican Government has approved the release of unclassified bank data. Unstructured data covers publicly available information such as the location of ATMs. Due to the Coronavirus pandemic, it is unlikely that Mexican FinTech’s will receive structured data (bank transaction information) for some time.  

The Nordics 

Could the Nordics become the new frontrunner in Open Banking, potentially overtaking the UK and other forward-thinking jurisdictions? That’s the question posed by a new report from Nordic API Gateway, who cite the regions fast adoption of new technologies, high levels of digital literacy, and the respective openness of banks. 

Rune Mai, CEO of Nordic API Gateway, said: 

The arrival of open banking has signalled the beginning of the biggest transition in financial data rights across the EU, and a new era of innovation. These sorts of directives don’t just seamlessly integrate into day-to-day operations without significant process changes, so it’s extremely positive to see that rather than just ensuring their organisations are compliant, organisations in the Nordics have already developed interfaces that work well and can be used by both consumers and businesses.

Finance 

The month in finance has been almost completely dominated by the continued spread and disruption caused by Coronavirus. As we know, and have discussed, banks and other financial institutions are being forced to make huge strides in shifting to digital resources in the absence of being able to meet customers, or inspect physical documents. 

As predicted, there has been a massive downturn in the use of cash over the last quarter. This has come about due to individuals being confined to their homes, and sops that are open no longer accepting cash due to fears over spreading the virus further. 

There has been several commentaries on this within the last month, including the FT [paywall], FT [paywall] and in Retail Gazette. 

Of particular note, is Charlotte Hogg, Head of Visa in Europe, stating in the FT (second link), that the shift from cash to card is likely to remain beyond the end of the pandemic.   

She said:  

It’s hard to say exactly what the [economic recovery] is going to look like, but we think it’s going to be digital, domestic spending is going to be important, and debit cards [rather than credit] are going to be important.

With less reliance on cash, there is expected to be a downturn in the mount of bank branches required. According to consultants Kearney, as many as 40,000 bank branches across Europe could be at risk. This would only exacerbate what we have seen over the last decade as branches have closed at an alarming rate. 

For banks then, it becomes vitally important to give current customers the best possible service. Unfortunately, according to Scottish based RegTech firm, Encompass Corp and conducted by Censuswide, 41% of businesses are considering changing banking provider due to a poor response to the Coronavirus outbreak. They further report that 49% of those surveyed had not been offered any assistance from their banking provider and 40% agreed that their banks digital offerings are poor. 

Wayne Johnson, CEO of Encompass, said: 

The COVID-19 crisis has had a big impact on all sectors of British industry, especially financial services. In fact, many banks are being forced to run a skeleton crew of remote workers, and a number are still operating outdated legacy IT systems, which are unable to cope with the influx in demand for banking services.

Best of the rest in finance: 

• There has already been $1.4 billion worth of crypto stolen from exchanges in the 2020 calendar year. 2020 is on track to be the second worst year in record, but could be down substantially on 2019, following the introduction of new regulations. 
• Does the UK lead the way in digital banking? Yes, according to an interview with nCino in FinTech Magazine.  
• How much reliance will we have on AI within financial services in the near future, ask FS Tech? 
• Sifted investigate the rise of ‘Messenger banks’. There is a lot traditional banks can learn from them. 

FinTech 

In a truncated look at the world of FinTech, we have mixed news for FinTech’s in their quest for growth. First up, Morgan Stanley CEO, James Gorman has stated that banks are beginning to chip away at the lead that FinTech’s have built. He claims that even small glitches are unacceptable when you are dealing with people’s money. As a result, there has been a “flight to quality” he says.  

Moreover, like banks, FinTech’s are (in some cases) having to scale back their 2020 plans because of Coronavirus as reported by PaymentEye. They stress that those that succeed in communicating the right messages over the rest of the year will be the big winners.   

DirectID News 

The impact of Coronavirus has, of course, been an ongoing theme throughout this month’s newsletter. And while many of us will be tired of hearing about it, it is important to recognise the impact that it is having in our daily lives – and how to mitigate against it. 

Financial services are one of the most impacted sectors, and with so many standard pieces of the machinery of the sector out of action as a result of Coronavirus, now is the time to start thinking about solutions. 

Our colleague Chris O’Driscoll has used this thinking as a starting point for his new article published on our site last week. In this piece, Chris notes some of the ongoing problems that we are witnessing in the sector, and then illustrates how Open Banking and bank data can remedy many of them.  The theme of how FinTech's can help the sector is fleshed out further by Stephen Ingledew, writing on the SDI website. Stephen writes on a number of different companies, including DirectID, who are coming together to help individuals and companies alike weather the current pandemic.  

Our CEO, James Varga also notes how a better future for all can be built on the back of Open Banking and bank data in an interview with everly. In the interview, James gives a number of different use-cases for Open Banking, including customer onboarding, portfolio management and collections and recoveries, all of which could be supported through the use of bank data.  

💭 James also lends his thoughts to a guest post from Procurious on scaling up a Fintech business.  

💻 Finally, another large audience watched our most recent webinar at the start of the month. Produced in conjunction with our partners TargetB, we discussed how Open Banking and bank data is key to kick-starting a mortgage revolution.  

Mortgages are cumbersome, slow, and involve a huge amount of paperwork that needs verified. There is a better way though, and built on DirectID’s Insights proposition, have built a new better and faster way of attaining a mortgage. You can find out all you need to know by watching the webinar replay. 

That’s all for this week. As ever, do let us know any thoughts or comments. We’re available through our social channels and on email – frictionlessfinance@theidco.com.  

Stay safe.