Frictionless Finance Report - Thursday 26th March

This month in the Frictionless Finance Report we examine the continued push towards a system of Open Finance, the impact on the financial system of a pandemic, and a big awards win for DirectID.
Published on
March 26, 2020
Author
Category
Finance & Fintech

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 continued push towards a system of Open Finance, the impact on the financial system of a pandemic, and a big awards win for DirectID.

But first, a word from the CEO;

I know this newsletter has brought knowledge and understanding to thousands over the last two years. I’m also aware that reading this today, it will lack the gloss that readers may have experienced previously. 

I barely need to explain why. The current public health crisis is unlike anything seen in a century, afflicting the entire globe in the process. 

We’ve taken the decision to publish the Frictionless Finance newsletter as usual this month – as well as continuing to work as normal, albeit from home.  My reasoning comes from my conversations with Executives from across the world which have given me confidence that bank data will play its part in bolstering and reviving the global economy.  As such, we’re as determined to continue developing the best possible product suite to the benefit of consumers, business and governments.

My thoughts are with all at this difficult time. Stay safe.

- James Varga, CEO, DirectID

Overview 

There has been some commentary provided by the regulators over the last month which is always worth considering. Colin Garland of the CMA, and Imran Gulamhuseinwala, Trustee of the OBIE have written on the progress made through Open Banking thus far, noting some of the extensive changes that it has already brought about, and pondering the impacts still to come.  

Open Banking 

The move from Open Banking to Open Finance continues to gain traction from different actors across the ecosystem. Indeed, it was the header for last month’s copy of this report. Over the early months of this year, we at DirectID have heard an increasing clamour for a system of Open Finance to be introduced. 

So, what has been the impetus? There has been much domestic legislation that has paved the way, particularly  at European level. The introduction of the EU’s digital strategy, for example, is a significant precursor to an Open Finance system.  

Then there has been legislation passed within other jurisdictions that have provoked the relevant discussion on whether it could work closer to home. In Australasia particularly, we have seen the Consumer Data Rights (CDR) passed in Australia, and in Hong Kong, the Monetary Authority of Singapore (MAS) has also been pushing forward with implementation of its own system. 

Then we have the APIs, the plumbing that allows Open Banking and Open Finance to take place. Over the last two years we have seen a growing reliability in the API quality. As their reliance grows, we can begin considering how APIs can further support us in our objectives. 

As Eli Rosner of Finastra points out, there is an overall shift in emphasis within banks to recognise that consumers are being driven ever more by experiences, and are looking for more from their bank than just transactions. 

Carlos Figueredo of Open Vector explains to Finextra, this requires a shift in cultural mindset as well as technical specs. The rewards are great though – social inclusion and sustainable finance can both be brought about through a move towards Open Finance.   

For a contrary look at how the future of banking may play out, FinTech Futures considers the system in the far east, where a few dominant players dominate entire ecosystems. In the Chinese variant, the system is very much not open, but closed.  

Open Banking & Mortgages 

There has been considerable coverage this year of the impact that open banking can have within the mortgage industry. This is not unfounded - DirectID published a blog last year on the impact that Open Banking would have, and DirectID is now powering a mortgage provider to make near instant and paperless decisions.   

Mortgage Introducer has covered the overall benefits that can be felt for brokers, such as removing the need for pay slips and making more accurate decisions that take affordability into consideration. They acknowledge that consumers are not yet crying out for Open Banking, but that once the convenience is displayed to them, they will come round to the concept of using Open Banking to get a bespoke offer.  

Mortgage Finance Gazette meanwhile, note that extending Open Banking to Open Finance would be beneficial for the industry to include mortgage account data. 

Open Banking Abroad 

In a slimmed down recap of the latest news from outside the UK, this week we focus on the US and Brazil. 

📊 United States 

The concept of whether the time is right for the US to consider the implementation of Open Banking is considered in the Financial Brand. While limited amounts of data sharing have been made available through concepts such as the Financial Data Exchange (FDX), at this time there is no push from Federal Government to make it happen. Recognising that the US is already quite far behind other countries, the article posits that it could allow banks to disseminate their products through third parties, and bring new product-lines to market, faster. 

📊 Brazil 

There is expectation in the south American country that Open Banking legislation will pass next year. Currently, there is a lot of conversation in Brazil over who the beneficiaries of Open Banking will be. There is concern among some of the incumbent banks – as there was in the UK – that smaller FinTech’s will be in a position to eat the bank’s lunch once Open Banking is made live.  

Finance 

Of course, the coronavirus outbreak has had a devastating impact on the financial services sector across the globe as individuals are confined to their homes and businesses shutter for the forseeable future. 

The markets across the globe have suffered some of their worst falls since 1987, and banks have been at the forefront of those impacted. 

The other points of conversation for finance houses around coronavirus include:

💥 The limit for contactless payments have been raised to £45 in the UK, as well as rises in other EU countries (Finextra)  

💥 Banks across the UK have brought in a raft of measures to help consumers who have been adversely financially impacted by the virus. These include the introduction of mortgage holidays, increasing overdraft options and relaxing interest charges (Credit StrategyFT [paywall], Money Saving ExpertGuardian

💥 Many bank branches are now closing or working reduced hours (BBC

💥 Banks have been urged by the Chancellor and the Bank of England to continue lending in these unprecedented times (City AM

💥 Huge stimulus packages have been revealed by the ECB, Federal Reserve and Bank of England 

 

rishi sunak
The new Chancellor, Rishi Sunak, has enjoyed a baptism of fire in his new role

American Revolution

Major American banks are potentially looking at expanding out of the US, with many eyeing the UK as a potential destination. Reports are surfacing that JP Morgan are looking to launch a digital bank in the UK. This follows the lead of Goldman Sachs, who launched their digital offering – Marcus – last year. JP Morgan already has a substantial payments based business in the UK.  

Also this month, there has been a considerable amount written on the launch of new digital currencies. Reuters are reporting that Facebook is going to overhaul the proposition behind their Project Libra offering – potentially offering digital versions of government backed currencies. At the same time, Quartz and Bloomberg are reporting that both the Bank of England and the Bank of Canada are exploring options to create their own digital currencies.   

In other news in the finance world, away from coronavirus:

💥 Revolut has launched an app for kids as well as applied for a UK banking license (Finextra and AltFi

💥 The importance of bank branches has been highlighted by the Financial Brand 

💥 As we have highlighted above, the rise in experiential banking has become ever more important to the success of banks. Which-50 has more.    

FinTech 

We have discussed the possibility of customers being granted financial services on myriad occasions, on these pages. In a recent survey, 64% consumers said they would be willing to try a financial product from one of Google, Amazon, Apple or Facebook. That said, 69% said they think it more likely that one of the tech companies will suffer a data breach than a finance house. News via Lend Academy and Banking Dive

Best of the rest in FinTech 

✅ Softbank is considering selling up to $41 billion worth of assets to return to profitability. The firm will buy back around $18 billion worth of shares to firm up financials. The firm has been negatively impacted by the Coronavirus outbreak and its investments in We Work. 

✅ FinTech Alliance and FinTech Scotland are joining forces to boost engagement and opportunities to attain funding. 

DirectID News 

DirectID were delighted to be announced as winners in the FS Tech Awards last week. While the event had to be made virtual, the company were delighted to top the list for ‘Open Banking product or service’. The competition in the category was exceptionally strong, making the win, even more enjoyable. 

The full list of nominees and winners can be found on the FS Tech website. The press release from DirectID can be found here.    

In these difficult times, we recognise that many of you are probably at home, possibly looking for new content.  

Content  

DirectID has a plethora of content related to finance, FinTech, Open Banking, Open Finance that we’re delighted to now steer you towards.  

Get detailed insights into your customer's financial behaviours

Discover how the simplified DirectID process can cut the normal application time from 7 days down to 1 hour and provide you with enriched data insights about your customers to enable you to make smart credit and risk decisions.

Latest posts

Showing 0 results

Advanced credit & risk insights

Affordability

Assess how much your customer can afford to repay. Use enriched data to identify income, and fixed vs flexibile spend.

Affordability

Assess how much your customer can afford to repay. Use enriched data to identify income, and fixed vs flexibile spend.

Income verification

Verify your customer's income across all income streams, whether it's salaried wages, freelance earnings or benefits.

Categorisation & classification

Cut through the noise of a bank statement and understand how and where your customers spend their money.

Emerging financial distress

Identify emerging financial distress to enable early intervention before your customer defaults.

SME financial health

See the balance trend of an SME’s accounts with a view on income, stability and fluctuations. View the money a business earns, spends and saves on a regular basis.

What our customers say

Testimonials - Fintech X Webflow Template

DirectID began working with Target at the beginning of 2020 to provide open banking data for their new Mortgage Hub. It is the first digital mortgage platform to be designed from the ground up, and the first to use open banking data as the backbone for customer experience.

Global vehicle manufacturer

Automotive financing

Testimonials - Fintech X Webflow Template

DirectID began working with Target at the beginning of 2020 to provide open banking data for their new Mortgage Hub. It is the first digital mortgage platform to be designed from the ground up, and the first to use open banking data as the backbone for customer experience.

Shieldpay

Multi-award winning payment platform. Designed for highly secure & efficient transactions. Trusted by over 100 law firms, lenders and professional services.

Testimonials - Fintech X Webflow Template

DirectID began working with Target at the beginning of 2020 to provide open banking data for their new Mortgage Hub. It is the first digital mortgage platform to be designed from the ground up, and the first to use open banking data as the backbone for customer experience.

Target Group

A Tech Mahindra company and a leading business services provider in lending, investments and insurance, managing over £25bn+ assets.

Testimonials - Fintech X Webflow Template

DirectID began working with Target at the beginning of 2020 to provide open banking data for their new Mortgage Hub. It is the first digital mortgage platform to be designed from the ground up, and the first to use open banking data as the backbone for customer experience.

Best Egg

Consumer-lending platform developed by Marlette Holdings, Inc.

Testimonials - Fintech X Webflow Template

DirectID began working with Target at the beginning of 2020 to provide open banking data for their new Mortgage Hub. It is the first digital mortgage platform to be designed from the ground up, and the first to use open banking data as the backbone for customer experience.

Dana

A lending as a service provider using open banking to strengthen their credit scoring engine

Get started using open banking data

Talk with one of our specialists to find out more about using open banking data.

  • Demo of the guided customer consent journey

  • Walk through of our real-time data & insights

  • Coverage check in your markets

Frequently asked questions

Schedule a call
01

What is open banking and how does it work?

Open banking is the practice that allows people and businesses to share up to 12 months of transaction data. DirectID is regulated by the Financial Conduct Authority as an Account Information Service Provider (AISP) - the intermediary who safely facilitate this process.

02

What is transaction categorisation?

Transaction categorisation is the process of adding context to raw transaction data. The process gives you an understanding of what your customers' spend their money  and where.

03

How does bank account verification work?

Using the bank account verification API, DirectID matches the details provided from your customer to those on their account. We apply a set of sophisticated algorithms and rules to verify the name, and then tell you what does and does not match.

04

How do you verify income with open banking?

After a customer shares their data, DirectID identify recurring credits to the account and group these. Using an algorithm we identify the monthly income for each income stream. We then return the calculated income and confidence score to you.

Speak with one of our specialists