View From The Top – the jump towards premium APIs
Back in 1993, Javier Sotomayor became the first man to clear eight feet in the High Jump. A world record that still stands today.
Like most elite sports, there’s an entry level to compete: a set of requirements and a minimum standard that must be met.It would be dull if competitors just turned up and everyone jumped the same entry height. The bar would not get raised and competitors would not inspire one other to go higher and better.
Perhaps this is a slight creative leap, but let’s apply this analogy to the world of Open Banking. Entry conditions have been defined by UK and European regulation (the CMA Retail Banking Marketing Order and PSD2 respectively). The stadium has been created through the delivery of the UK Open Banking Standard, a Trust Framework and Directory with supporting tools such as the sandbox, as well as assurance and conformance tools to make participation easier.
To date, the main focus of banks and account providers has been to meet the regulatory requirements. We can already see the creation of an emerging dynamic and vibrant market with over 450 participants in the UK Open Banking ecosystem delivering real innovation and bringing innovative propositions and services to consumers and businesses.
We’re looking forward to more propositions and services coming to market, once all the banks have implemented the legislation (PSD2). But I’d argue that there is even more that could be delivered by going beyond the current regulatory requirement. To move from compliance, to competing, to innovating.
Regulation has defined the start of the competition, but not the end.
For example, not all financial products are covered in the regulation; so to enable true Open Finance, account providers could make more product types available (such as fixed term savings, ISAs and mortgages). This will add greater value and richer insight to make financial management propositions work better.
If we think about the initial Open Banking payments capability, it’s clear that a good start has been made but to really unlock the opportunity, further functionality is required. This might involve moving from single payments (with secure authentication each time) to variable recurring payments, where an ongoing consent can be agreed with the third party based on limits and rules to support more frictionless buying experiences.
This in turn would enable much easier sweeping between accounts in financial management platforms, frictionless merchant payments (think Amazon one-click or Uber) or even smarter B2B payments (supplier-initiated payments within an agreed rule set).
Banks and account providers can access rich identity data and insight that can help customers have more frictionless digital experiences elsewhere in their lives. Imagine a “bank grade” Facebook log in or auto completion of long forms by giving your bank the consent to allow access to the right information.
The potential for a seriously game changing competition is huge. But, to unlock all of this, we need to move beyond regulation.
At OBIE we call this Premium APIs. Essentially, additional capability built into the Open Banking Standard to provide greater functionality and potential for innovation. For Premium APIs to extend beyond regulation, it may well require additional agreements and / or commercial relationships between banks and third parties to be formed.
This opens the door for banks to place Open Banking at the core of their business model, enabling better partnerships with third parties to be built, more innovative product and propositions to be created and, in turn, new business models and revenue streams to be developed.
To avoid significant fragmentation, the Open Banking Standard must continue to evolve and deliver richer capability. Core enabling capability built on top of the existing robust foundations laid by the Open Banking Standard will enable greater and quicker innovation, giving greater accessibility to the entire ecosystem.
The alternative is that each bank builds completely different proprietary interfaces and the market becomes fragmented; and progress slows. Premium APIs are just one of the many initiatives that will keep the Open Banking Standard world leading, and record breaking.