5 important things that happened to Open Banking in 2019
Open banking has been hailed as one of the most important - if not THE most important financial industry regulation of our century. Open banking ensures that banks have to share consumer transaction data with regulated third-party financial services. Traditional banks no longer hold the monopoly on consumer transaction data, enabling transparency, consumer data ownership and greater industry-wide competition.
The new standard, launching in the UK on January 13, 2018 has been in force and operational for more than a year, with the biggest UK banks on board. Here are 5 notable things that have happened to open banking in the year since its launch:
Open Banking reportedly valued at £18bn a year
A report by the Open Banking Implementation Entity revealed that, open banking could realise £18 billion in value for British people and small businesses over the course of a year, but only if the industry, government and regulators act to ensure the project realises its potential.
CasThe report argues that open banking can usher in an era of more tailored and better value financial services. Research figures reveal that people in the UK could gain £12 billion a year, with businesses realising a further £6 billion in value.
2. Clear consumer pains and needs outlined
The same report also outlined how open banking can help address specific consumer needs, identifying four segments of UK customers. 17% are specified as being “on the margins”, 18% are considered “overstretched”, with 20% defined as ”aspiring” and 45% classified as “asset rich”.
Representatives of each segment have their own pain points when it comes to their financial health and general relationship with money. The report stresses that open banking can be hugely beneficial to all financial groups. Services using open banking can offer the “marginalised” better income management and access to digital financial products, the “overstretched” - better debt and credit management. The “aspiring” could benefit from AI technology helping them improve the speed and ease of their everyday transactions, and enable the “asset rich” to make smarter choices for the future of their savings.
3. Growing list of licensed Open Banking providers
OpenBanking - the UK's official service regulator currently lists 137 official regulated providers that can offer services using open banking. Apart from traditional banks, the list also boasts fintech providers Plaid, Revolut, Salt Edge, Spendee, Transferwise and Truelayer, as well as challenger banks like Metro and Starling. Plenty more are estimated to be awaiting their licenses.
Commenting on the growing ecosystem, Imran Gulamhuseinwala, trustee of the Open Banking Implementation Entity (OBIE), the body overseeing the UK’s open banking roll-out says that “We expect the ecosystem to develop with even greater momentum and pace – not least as we see greater conformance with the implementation of the standards, as well as greater innovation in the market.”
4. Global financial hubs follow suit
EU's PSD2 directive and UK's Open Banking initiative have highlighted the benefits of regulated data sharing systems for businesses and consumers worldwide. And the biggest financial hubs are paying attention. Singapore and Hong Kong, for example are currently analyzing and observing the UK’s approach, while some are already pushing ahead.
Australia, for example has just commenced implementing its own open banking initiative. From July 1, 2019, Australia's four big banks - Chart, CommBank, ANZ and Westpac will be able to grant third parties access to "product data" about their accounts. Banks will likewise start beta testing of allowing third parties access to transaction data on debit and credit cards, transaction accounts and mortgages.
Open banking is reported to being able to transform East Africa's digital financial services. According to Willie Kanyeki, Myriad Connect Business Development Director for Africa, “East Africa now has an opportunity to build on the experience of other markets that are already embracing open banking, and move directly to a more effective model in the region.”
5. Improving consumer digital experiences
In their 2019 Retail Banking Trends and Predictions report, The Financial Brand surveyed global financial organizations about their most important strategic priorities for 2019. More than eight in ten respondents (84%) indicated their eagerness to improve customer experience. The same priority was mentioned by only 72% in the same survey in 2018.
Improving consumer experiences is a core mission of open banking. Consumers can grant their data access to those financial service providers that can add real value to their lives - help consumers manage their finances, suggest the best offers and help them navigate the financial landscape.