As has been widely discussed elsewhere, one of the primary reasons for the introduction of Open Banking was to open up the proverbial treasure trove of data on which banks sit.
Everything in our financial histories is known to the banks, and with 90 per cent of consumers banking with one of the big nine UK banks (the CMA9), these institutions know – or at worst can infer – almost everything about us.
Our banks know if we have mortgages or rent; if we are married or single; if we drive or do not. I’ll wager they could tell if you were cheating on your spouse, based on your bank account information.
And so, here we are: Open Banking has been introduced, opening bank data to consumers, from which they can derive value.
Open Banking, through bank data, will provide opportunities for us all. We are witnessing a plethora of apps based on aggregating consumer information, as well as some – such as our own DirectID Insights – working with banks and financial institutions.
In the future, and at our request, our data will become available for us to use across a whole range of services, both inside and outside financial services.
Over the course of our product development at The ID Co. we’ve analysed somewhere in the region of one million bank statements to glean the information that is crucial to financial institutions. This has been no small undertaking. The breadth and complexity within even a standard bank statement make them a modern-day Gordian knot of information.
It’s important to remember the words of the Open Banking Implementation Entity’s (OBIE’s) Imran Gulamhuseinwala when he said that Open Banking is an “enabling technology”. It needs services to be created for it to have a proposition to consumers. That’s why I’m so optimistic about the prospects for Open Banking, as some of the products and services being brought to market have superb customer propositions.
For the same reason I’m even more excited about how consumers will be able to exploit their financial data to save money. I genuinely believe that Open Banking has the capacity to save consumers thousands of pounds across all aspects of their financial lives. Whether it be big-ticket items such as loans and mortgages, utilities, right down to the removal of merchant-fees when purchasing items online, there is almost no end to the possibilities.
I’ve been really intrigued by developments that are currently under way, both in the UK and across the globe. The roadmap from the OBIE still has releases planned for 2019, so Open Banking functionality will continue to be enhanced.
The idea of bank data becoming our own (rather than a bank’s) hasn’t really taken off in the UK yet, but I can see this idea moving into the mainstream over the next few years. This will probably be based, in principal, on the Australian Consumer Data Rights. Whether it has the same look and feel remains to be seen, but the underlying idea is the next step for Open Banking in the UK.
The effects of putting data in the consumer’s hands are sure to be gargantuan. Take one very simple example. It’s a well-known “quirk” of the financial system that the less money you possess, the more you pay for your financial services. Setting aside the moralities of the issue, putting bank data in the hands of each consumer, combined with the intrinsic power of Open Banking, will give those that are underbanked, or paying over the odds for their financial services, more power to leverage the system in their favour.
An open future
I’ve heard a lot of talk over the last year on ‘open APIs’, ‘open future’ and ‘open finance’, and I feel this direction of travel is correct. Open Banking is the first strand in handing each individual true responsibility and power over their financial data.
Open Banking in the UK has only just begun to change the financial landscape here. I haven’t even mentioned the changes that incumbent institutions are currently undertaking in order to respond to the opportunities that Open Banking can bring.
Our financial data is possibly the most valuable currency in the world, and it is only when we have a real stake in its use, that we can take responsibility for it and make data work for us.
The ID Co. builds products that help businesses like online lenders onboard their customers efficiently by solving pains such as affordability and credit risk.