Open Banking: what changed on January 13?
In October 2015, the European Parliament adopted a revised version of the Payment Services Directive, PSD2, aimed at promoting the use and development of innovative and mobile payment services through the opening of banking services. Contrary to what usually happens with community directives, which usually leave ample space for member countries to implement them, PSD2 does not: its road map is very strict, and we are already beginning to see its impact.
The United Kingdom saw many opportunities in PSD2. A pioneer in fintech, it realized that the new regulations could galvanize the market: in August 2016, the UK regulator, Competitions and Market Authority (CMA) published a directive requiring the country’s nine largest banks to allow licensed startups to access their data directly if the user so required, up to the level of transactions in account, and set the date of January 13, 2018 as the limit for the new rules, the first country to do so. Such is the UK’s commitment that it will continue implement PSD2 whatever happens with Brexit.
Open Banking has been widely explained: through infographics, articles and reports by consultants. What we need to know, basically, is that the new directive changes the performance model of traditional banks, obliging them to present their data as APIs that can be accessed by approved agents at their customers’ request. Open Banking is not so much an application, nor a service as such, but instead a way to facilitate the exchange of data at the request of the user, who is provided with complete control over it: in short, banks no longer have exclusive rights over data management.
What has happened since Jan 13 and the arrival of Open Banking in the United Kingdom? Not much. The regulator has sent letters to the main banks with instructions on the matter and some have requested extensions to finish adapting. At the same time, because there hasn’t been much media coverage, the general public has little idea about it, while the companies that want to participate must register and be approved for it, a process that is not particularly simple, given that we are talking about the biggest change in banking for decades, if not centuries, and that will create a new ecosystem.
The idea is to open up the management of our money to a much higher number of players, provided they meet certain requirements and that there is user control. This could open the door for many new companies within the Fintech world, as well as for big online players such as Google or Facebook. Under the new rules, any approved entity can not only manage payments or transactions without having to reach agreements with banks and without having to indulge in scrapping users’ data via their username and password, as was the case until now. The initial phase has a limited scope and only incorporates data from current accounts: credit cards and other payment accounts will be added over the next two years as part of a complex phase that could see negative media coverage, biased articles highlighting dangers, and with traditional banks trying to convince customers they have been doing this for ages, and even trying to make out this is more complicated than it really is.
Despite the limited media coverage, have no illusions: this is going to change banking forever: we now have the option of new players and intelligent software to manage our money.
If the traditional banks want to be more than simple commoditized containers, they will have to improve their value proposition and, above all, become more attractive in the eyes of a general public that doesn’t hold them in the highest esteem right now. For the banking world, this is a seismic shift.
(En español, aquí)
