Karen Wheeler, Vice President and Country Manager UK, at Affinion


Open Banking has just celebrated its first birthday. The hope was that it would increase competition within the financial services industry and unlock innovation that would transform and improve the customer experience. It sounded so promising but one year on, has it had any real impact?

YouGov research  shows that 72 per cent of UK adults have never heard of Open Banking and according to PWC, only 18 per cent of consumers are currently aware of what Open Banking means for them. However, just because consumers don’t exactly understand the vision, doesn’t mean the changes aren’t filtering through.

Progress so far

Since the managed rollout began at the start of 2018, the Open Banking Implementation Entity (OBIE) reports there are now 100 regulated providers, of which 17 Third Party Providers (TPPs) are now using Open Banking in the UK. Open Banking technology was used 17.5 million times in November 2018, up from 13.9 million in October and 6.5million in September, with Application Programming Interface (API) calls now having a success rate of 97.7 per cent.

One of the first Open Banking initiatives was Yolt, a venture of the Dutch ING Bank. Yolt synchronises a customer’s accounts in one place so they can see their spending clearly and budget more effectively. Similarly, Chip aims to help people save more intentionally. Customers give read-only access to their current account (details are protected using 256-bit bank-grade encryption) and then sophisticated algorithms calculate how much a customer can afford to save, and puts it away automatically into an account with Barclays every few days. The interest rate on the account is 0 per cent, but increases when a customer introduces friends to the app.

High Street banks have followed the lead of the fintechs. HSBC was one of the first banks to release an Open Banking app last year and on its app, HSBC customers can see their current account as well as online savings, mortgages, loans and cards held with any other bank. The app is able to group customers’ total spending across 30 categories including grocery shopping and utilities, making it a really helpful budgeting tool. Santander, Barclays and Monzo have similar apps on offer.

Perhaps, most advanced of all, Starling Bank allows customers access to its “Marketplace” where they can choose from a range of products and services that can be integrated with their account. So far, the offering includes digital mortgage broker Habito, digital pension provider PensionBee, travel insurance provider Kasko (AXA), Wealthify, a place to go for your Isas and investments, as well as a number of external integrations such as Moneybox, Yoyo Wallet, Yolt, EMMA and MoneyHub.

Imran Gulamhuseinwala, trustee of OBIE, says the past year has shown that “banks have very firmly moved from viewing Open Banking as a compliance exercise to an opportunity to compete and innovate.”

Obstacles to Open Banking

One of the big questions is whether Open Banking is self-serving for finance companies rather than beneficial for customers. There is a general cynicism regarding the real reasons for encouraging Open Banking and this is exacerbated when the majority of customers aren’t seeing the benefits.

Also, there is the issue that the philosophy of Open Banking seems in direct contradiction with the priorities of GDPR and this is leaving consumers confused. In this day and age, do consumers really want more organisations to have access to their data? Can they trust the banks? How does Open Banking marry with GDPR regulations and a tightening of data sharing? According to PWC, 48 per cent of retail banking customers and 54 per cent of SMEs state that security is their biggest concern with Open Banking data sharing and this is a significant barrier to overcome.

Customers are understandably nervous about the new capabilities – it is now possible for a mortgage lender using Open Banking to look into a bank account and assess a potential customer’s spending before deciding how much to lend. Some may not like the sound of this though it does speed up the process and remove the need to provide paper bank statements. Similarly, an insurer could find out what someone currently pays for all their different insurance policies and offer a cheaper bundle. There’s no doubt these initiatives benefit the customer but they also raise questions regarding privacy.

The way forward

It is hard to overcome cynicism and doubt. Perhaps, once customers begin to enjoy the positives, they will be less sceptical about Open Banking, leading to more opportunities to build longer term customer engagement. For example, if products help them avoid going into debt or nudge them when new mortgage rates are on offer, they will see that banks are using the technology to support wise financial management rather than just serve their own marketing purposes.Gulamhuseinwala of OBIE says there is a real opportunity to develop apps that “help address some of society’s issues, in particular in the debt advice area.”

It is also hard to change entrenched consumer habits. To encourage consumers to get in the habit of comparing and switching, financial organisations must create truly compelling propositions. They need to focus on delivering intuitive, useful new digital products which make a real difference to customers’ daily lives.

They also need to demonstrate they take their responsibilities seriously and are trustworthy with data. There is a job to be done in terms of educating the consumer about how Open Banking works and how data is totally secure. Customers need to understand that they can choose which regulated apps and websites they want to use and decide what information they can access, and for how long. As an industry, now is the time to underline that one of the key tenets of Open Banking is security. Open Banking uses rigorously tested software and security systems and is stringently regulated by the FCA.

Placing the customer at the centre of their finances and giving them complete control is a brilliant vision. This ability to move deposits, accounts and investments between financial institutions without hassle or penalty increases competition and brings a myriad of everyday benefits to the customer. There is huge opportunity for traditional banks, fintechs and disruptors to use Open Banking to pioneer new products that truly transform and improve the customer experience, building longer term customer engagement. However, the priority for this year is communicating to the masses the huge advantages and opportunities that Open Banking brings and reassuring them about the integrity of providers.



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