By Andrew James
As with other blog posts that I draft, I suspect there are people within PKF Francis Clark that are much more knowledgeable on this subject area but, sparked by the question “what is open banking?” from a colleague, I thought it timely to put metaphorical pen to paper. I see this as the first of a trilogy, or maybe even a tetralogy of blog posts.
Before I go any further, I should acknowledge that a lot of the text below is lifted from a most useful article on the subject of Open Banking: “What is open banking and why does it matter to business?”.
- What is Open Banking?
“Open banking refers to the concept of banks opening up access for their data to third parties…” or “Open Banking is a term that describes a secure set of technologies and standards that allow customers to give companies other than their bank or building society permission to securely access their accounts. This means customers can, if they choose, easily use services from a range of different types of regulated companies without the need to share credentials with any third parties. They may, for example, choose to aggregate a view of all of their accounts through one provider or allow a company to analyse their account data to offer automated budgeting advice or cheaper overdrafts.”
Also, see more info here.
- Why is it being seen as important (to the consumer)?
“The ultimate goal of open banking is to encourage innovation by making it easier for specialist providers to compete with banks on a more equal footing, and hence to improve outcomes for consumers by making more choices and options available to them.”
“Financial services regulators around the world have tried various initiatives to boost competition and consumer choice. Of all the strategies that are being employed to achieve this, perhaps the most significant and far-reaching is open banking.”
- Who is involved?
“Open banking is being introduced at the behest of regulators, such as the Competition and Markets Authority (CMA) in the UK” – see further information about this here.
In January 2018, the CMA forced the nine largest UK current account providers (Allied Irish Bank, Bank of Ireland, Barclays, Danske, HSBC, Lloyds Banking Group, Nationwide, RBS Group, Santander) to open up their data.
A list of ‘providers’ enrolled in Open Banking can be found here .
- When does Open Banking start?
“Open banking, having only formally been launched at the start of 2018, is still a very new field. Consequently, it is only in the core retail banking sector that incumbents have established a presence.”
“From January 13 2018, banks must allow customer data to be shared with FCA approved financial organisations and third party providers. Data will only be shared if the customer gives consent for their data to be shared.”
- So, what are Application Programming Interfaces (APIs)?
It is impossible to read much on Open Banking without coming across the term ‘Application Programming Interfaces’ and/ or the acronym API. Again, thanks to Verdict, : “APIs have emerged as the favoured mechanism for transferring data between banks and third-party providers (TPPs) in an open banking environment. There are two broad classes of APIs: read/write APIs and read-only APIs. The former applies to APIs that govern access to personal customer data for the purposes of account information and payment initiation, while the latter covers APIs that access public data such as branch and ATM locations and product specifications. An increasing number of banks around the world, whether through their own initiative or as a result of regulation, are rolling out APIs for specific types of data.” – so essentially a piece of tech!
I hope this has given you some background information and I will now look for a willing bank and alternative financier to give me/ us their perspectives on Open Banking.