Insight: Faith Reynolds
The great potential of Open Banking lies in the possibility of genuinely delivering for consumers while still achieving commercial objectives. It’s now much easier to get suitable, engaging products to consumers more quickly and cheaply than it has been in the past. Events, like Forgerock’s Open Banking Hackathon and the FCA’s Techsprints on ‘access’, ‘vulnerability’ and ‘mental health’ show what it’s possible to achieve when a few developers put their heads together.
Innovation brings fresh energy and, more importantly, fresh purpose as fintechs and entrepreneurs see how they can help change the world for the better. Recent interviews with Open Banking leaders as part of the Code Collaboration (an industry initiative assessing the value of a code of conduct for Open Banking), show strong consensus that Open Banking should be a ‘force for good’.
Improving the financial life of the end-user has important ramifications, for individuals, but also for SMEs and the health of the economy. As a society, the savings ratio (the percentage of disposable income that is saved) has fallen to its lowest level for over 30 years, at just 7.1%1. Approximately 27% of the population live on a knife edge and 4.8m are defined as being in financial difficulty2. Consumers – people – want help to live life better and Open Banking products can help them do that, improving financial inclusion, reducing stress and finding products which are a better fit for their needs.
SMEs in the UK employ over 16 million people, with a combined turnover of £2trn3, but for a variety of reasons they are less productive than their G7 counterparts. 35% of small businesses say they spend approximately 4 hours a week on late payments4. Four of the largest banks own 83% of business current accounts5, innovation has been stifled and trying to get access to credit is long and protracted. Paper and bureaucracy slow down SMEs and make it hard for them to find time to actually understand their business performance so they can plan. The sector and the economy are ripe for revolution.
Revolution means the forcible overthrow of a social order or a dramatic change in conditions and attitudes6. Amid Brexit, hate crime, climate change and rising inequality, there is growing appetite for shared action and a renewed sense of purpose7. Financial exclusion and the exploitation of consumers’ behavioural biases for profit over people is the status quo. To be a true revolution, Open Banking – open finance – must focus on creating, deploying and facilitating the movement of money to help us achieve our goals as individuals, communities and society as a whole8. It is not enough for Open Banking to make life a bit more convenient. We need to see a decisive shift in the balance of power towards consumers, with a purpose that reflects the needs of our society to address issues like an ageing population and climate change.
Open Banking, data portability and machine learning could be ‘revolutionary’ but only if they serve the ultimate goals of people and planet, as well as profit. That means consciously working, not just towards changing the technology, but the culture and ethics of financial services too. What’s your purpose and are you ready to step up to the revolution?
2 FCA, Financial Lives, 2018
3 Department of Business, Energy and Industrial Strategy, 2018
4 BACS 2016 and FSB 2016
5 CMA Retail Banking Market Investigation. 2015 data.
6 Google dictionary, taken 10th January 2018