Britain can lead world in app-based drive to change face of banking


Alexandra Frean
The Times, Business Columnist
15th February 2017

Is Britain’s open banking revolution a solution in search of a problem? It sometimes seems that way. Some 90 per cent of Britons don’t know what it is, according to Equifax, while half as many say they get it (sort of), but would probably not use it.

In reality, open banking could be a game changer for the way individuals and businesses manage their finances and, if the UK plays its cards right, it could be a world leader in the field.

The world of open banking is one in which banks build open application program interfaces (APIs) to allow third parties to access customers’ data, with their permission. The hope is that this will lead third-party developers to create a wide variety of consumer-facing retail banking apps. These could help users to manage their money better by analysing their past financial history, comparing products on offer and suggesting the best services and behaviours for their individual needs. You may, for example, use an app that alerts you when you risk slipping into an overdraft or, better still, recommends you switch your overdraft to a lower cost provider and then handles all the formalities.

In the UK, the debate about open banking has got bogged down in arguments about breaking up the big banks’ stranglehold and concerns about data security. The Competition and Markets Authority kicked things off last August when it announced that British banks must work together to create standards for sharing data securely, including individual customers’ transactions and the pricing of products, by 2018. The first stage of this comes into force on March 1, when banks must open up information on less sensitive information, such as branch location, prices and terms.

Nesta, the innovation charity, today launches the Open Up Challenge, a £5million prize, funded by the banks, to underwrite and inspire developers using open banking APIs to create apps specifically designed to help the UK’s five million small businesses.

But open banking is far bigger than any of these initiatives alone. The open API technology underpinning open banking has been a big driver in innovation in other fields, the simplest and most obvious example being Apple opening up its App store to allow third-party developers to offer a wide range of apps.

Throughout the history of the internet, the underlying theme of disruption is innovation driven by upstarts that unbundle supply and service. Look at the way file-sharing transformed the music industry and loosened the grip of record companies in favour of artists. Uber exists because users can choose to make their own location data open through their phones. Banking is ripe for unbundling.

We don’t yet know how far the ability to disintermediate banks and to get between banks and their consumers will take us or what products will be devised. But we know from the interest in new banks such as Monzo and Atom, and by the deals being struck by some big American banks and fintech companies such as Intuit, a provider of small business accounting software, and Mint, a personal finance app, that demand exists for new forms of digital banking.

It is no small achievement for the UK, already a world leader in fintech, to have got its nine leading banks to agree shared standards for open banking. The rest of Europe is closing in with its own standards, but no other country, with the exception of South Korea, is as advanced as us on this front. The challenge now is to inspire developers to come up with killer apps that solve real problems. But first we have to reassure users that open banking does not mean open season for hackers.


This article originally appeared in The Times. Reprinted with permission.