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Banking

ARE CONSUMERS ACTUALLY BENEFITTING FROM OPEN BANKING?

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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Banking

FOUR WAYS OPEN BANKING AND AI WILL REVOLUTIONISE ACCOUNTANCY

Ed Molyneux, CEO and co-founder of cloud accounting software company, FreeAgent

 

It’s been just over two years since the term Open Banking became a tangible reality in the UK. Since then, the nine largest banks and building societies in Great Britain and Northern Ireland have signed up to take part in the initiative, meaning they must allow regulated businesses to access their customers’ financial data, as long as the customer has provided permission.

Open Banking was imposed by the Competition and Markets Authority to spur competition between banks and make customers’ banking information more accessible to third parties. And this phenomenon has already been transformative for accountancy, providing third-party financial service providers standard ways to access consumer banking transactions, and other data from financial institutions – a seamless alternative to the teetering piles of paperwork traditionally associated with accounting. Paired with other new innovative technologies, including artificial intelligence (AI), Open Banking has the power to change the day-to-day lives of accountants and more broadly, the world of finance.

This article examines the fundamental ways Open Banking and AI can and are already being utilised by accountants.

 

Real Time Insights

Through the use of Open Banking, accountants can have real-time access to their clients’ most up-to-date banking data every single day. This means no more chasing clients for the necessary information that you need to do your usual day-to-day work. This also benefits your clients, as they can continue with their daily workload knowing that their bank transactions are being shared with you directly, accurately and automatically. Suddenly their do-list looks a bit shorter!

 

Adios paperwork

Traditionally, accountants have had to deal with an enormous amount of paperwork, including invoices, expense receipts, bank statements and other important documents. Combined across the profession, this amounts to mountains of paper that have to be analysed and filed. One of the greatest benefits of technology and digital accounting is that it alleviates the stress of keeping important information in physical files. As well as less mess in the office, this means invoices, expenses, receipts can be kept in one place – online. This enables accountants to be more efficient on a day-to-day basis as they are able to easily find documentation by simply typing in what they are looking for to search for it.

Luckily for accountants, and also for the environment, Open Banking and cloud software platforms ensure that important data can transfer seamlessly and safely between your bank and your financial accounts. Already, cloud accounting software makes it possible to have one tidy dashboard that gives an overview of the business in its entirety. As well as being the guardian of files, using technology to set up a bank feed will allow accountants to track incomings and outgoings, link invoices and payments and view interactive charts of all their clients’ accounts.

 

Working from anywhere

The last five years have seen the progression to flexible working increase significantly. Millennials in particular have a desire to work out of the office. A survey conducted with over 19,000 working Millennials across 25 countries revealed their top five priorities when looking for a job, with 79% stating flexible working was a must. Further analysis from BBC 5 Live revealed a 74% jump in the number of people working from home between 2008 and 2018.

As well as the natural increase in the number of people working remotely, accountancy is one of the many professions being affected by the current turbulence being caused by the Covid-19 virus. This month, the government announced everyone should work from home if they can. Now, more than ever, people are away from the traditional office space and working instead from the confines of their own home, with technology acting as the glue that in many cases is keeping their business together. For accountants this means remote access to financial data is an absolute essential.

 

Add consultancy to the equation

With more efficient processes and easier methods of making and tracking transactions, technology and Open Banking will ultimately free up a whole lot of time for the accountants. Clearing up the calendar will make room for new kinds of work and enable accountants to spend more time on consultancy and value-added services, where previously these may have been perceived as a bonus service or from the client-side, a service at a much larger additional cost.

As well as consultancy, these technologies will have other, less direct impacts on the client-side. For example instead of needing a shoebox full of receipts, Open Banking and AI will lead to more confident and self-managed clients. If a client is keeping accurate books themselves, then the accountant no longer has to do all of the numerical admin. Rather, the value add lies in providing higher-level insights around the numbers and offering useful advice such as “it is time to put your prices up, as your profits are lower this year“.

Ultimately, AI and Open Banking are opening the gateway to a more efficient and effective accountancy industry. While benefiting the clients by making new space for consultancy and added value services, new technology ultimately streamlines an accountants’ entire job. Because they are constantly dealing with stacks of financial information, the consequences of misplacement of one document or inefficiently tracking systems hold higher stakes than usual. Luckily there is no need for accountants to grapple with old-school methodology anymore as AI and Open Banking are already readily available and at their fingertips.

 

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Banking

LOW-CODE TECHNOLOGY BOOSTS THE GROWTH OF SPECIALIST BANK

That’s where Netcall’s Liberty Create came in. Create is a new breed of low-code software solution, built for both business users and professional developers

Hampshire Trust Bank (HTB) is a digitally-focussed specialist bank staffed by experts that enable UK businesses to realise their ambitions. Primary operations include development finance, specialist mortgages and specialist business finance (including wholesale, block-discounting, structured asset finance and classic cars). HTB also provides award-winning savings accounts to individuals and businesses. With an ambitious growth target in mind, the bank targeted digital as key to its expansion.

 

A fresh approach to change

HTB was frustrated with relying on external resources for technical developments on tasks that they didn’t deem to be particularly challenging. Results were slower than expected, often failed to match business requirements, and the associated price tags were unreasonable. The team knew the job could be done better in house and began searching for a way to utilise the knowledge within the business without hiring an additional army of developers. Low-code clearly stood out as the solution.

That’s where Netcall’s Liberty Create came in. Create is a new breed of low-code software solution, built for both business users and professional developers. By using its drag-and-drop interface to configure, rather than code, it allows users to build a new app fast. And once the app exists, it can be tested, refined and improved on an ongoing basis.

The low-code platform has enabled HTB to form a small team that can now build the systems the bank needs and manage process improvements easily.

 

Modernising the front office to improve customer experiences

“Our journey with low-code development started because we needed to modernise the front-office application suite, across the business and across all of our products. We invested in Liberty Create initially for our specialist mortgage division, to replace manual processes, improve workflow to drive cost efficiencies, and increase consistency in process execution across the team,” explains David Patterson, Head of Solutions & Delivery at HTB.

The initial mortgage division project was successful and Liberty Create is now driving cost efficiencies and business improvements throughout the organisation. The platforms that have been built by using low-code have become core assets, assisting with vital areas such as linking the bank’s API infrastructure to data services, fraud prevention, credit risk, and Companies House data.

The use of Liberty Create has enabled HTB to focus on the time it takes to serve customers (and serve them well) and as a result, it has positioned the bank for exceptional growth.

HTB’s latest platform a property development finance system, has replaced a host of manual and spreadsheet-based processes that handle client customer and credit-rating data. Low-code lends itself to an agile improvement approach, so the system can be continually enhanced and added to.

“This project has come in at less than one-third of the anticipated cost. Plus, it will be delivered four months earlier than planned. These very short timeframes are enabling us to move towards weekly deliveries of capability enhancement, and with confidence in the quality of delivery,” adds Russ Fitzgerald, CIO at HTB.

 

Delivering – and delivering faster

The delivery model of Liberty Create matches HTB’s agile project approach. Without getting bogged down in the process, the development team utilises the elements of agile that work best in digital transformation in banking, especially for a small bank. Liberty Create lends itself perfectly to that capability.

During its low-code journey, HTB invested heavily in testing capabilities, providing value with an improved turnaround time for any defects. Previously, developers would publish a change, finishing in the evening, then the test team would arrive the next morning and start the test pack, which could run for 3-4 hours, ensuring everything worked correctly and highlighting any regressions. The developers wouldn’t get feedback until lunchtime, therefore losing half a day of development time.

Now, the developers publish an update and leave for the evening. Liberty Create takes 30 minutes to package the release and push it to the test environment, waking up the testing platform automatically once complete and running the series of tests. By 9 am, the test team starts the day with the results and the developers work on any fixes needed immediately. As a result, an extra half a day per developer is gained from every push. This acted as the first step for HTB on its journey to seamless integrated testing and DevOps.

 

Changing the relationship with off-the-shelf for good

Today, HTB’s confidence in front-end building capabilities now influences how the bank approaches new potential suppliers with a clear strategy that needs to work with low-code. By tailoring its own front-end capabilities and utilising API services, the bank can pick the best out of the industry suppliers and create USPs for its customers.

Low-code has also changed HTB’s attitude towards buying tech – with no more front-to-back services that are not delivering value, or slow releases and outdated legacy systems. The bank commoditises its back-end systems suppliers based on the ‘best-in-breed approach’ to build or buy. It has become the cornerstone of HBT’s technology strategy, increasing innovation, flexibility, and creativity.

 

Growing with a trusted vendor

With the introduction of low-code, HTB has moved from being a user of a legacy core banking platform into building out its own capabilities. It has honed its ability to develop systems efficiently, change direction when needed, and react to an industry position or an operational challenge quickly.

“We can definitely say we’ve seen time and cost savings by using low-code to solve business challenges,” says Russ Fitzgerald, CIO at HTB.

Today, the bank sees itself as a five-year start-up. With investment, a new leadership team and many specialist hires, it has experienced exceptional growth and developed thriving specialist lending propositions for SMEs.

“Initially, we worked alongside the Netcall team, which started our delivery and then worked extremely well with us to hand over to our small but very talented internal team. We’ve had very strong engagement with Netcall, from the CTO all the way down – we value this support and attention greatly. For us, it is amongst the highest criteria we look for in a supplier – and there are only a handful of suppliers where we genuinely feel we get that top level of support, plus the ability to feedback, request and input on product road mapping,” adds David Patterson, Head of Solutions & Delivery at HTB.

The HTB Development Team is now building a portfolio for the year ahead. Like any innovative business, the team has more ideas than resources. Reflecting their confidence in using low-code as a front-end tool, the team is considering using it for internet-facing services and a number of digital services to improve internal workflow and processes. “This will become the blueprint for how we do it going forward,” comments Mike Beveridge, Business Analyst at HTB. A number of ‘microservices’ are also on the agenda.

“We’re looking forward to growing our technology capabilities using Netcall’s low-code, adding to our current technology estate and allowing the bank to move towards the next generation of banking technology,” adds Faizal Danga, Project Manager at HTB.

The team aims to utilise the workflow insights provided by Liberty Create in a wider element across the bank to improve back-office efficiency, data governance, data quality, and control, while also improving the operational efficiency of the bank.

 

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