Open Banking in the UK – the Fox and Guinea Pig

Written by Di Princell

May 11, 2021

Success is never final and failure never fatal. It’s courage that counts ~ anonymous

Please don’t put me in the front line of a battle, charging forward where the arrows are coming towards me; no time to think, only react. Sometimes coming in second has its advantages especially when there is a learning curve like open banking in the European financial market. The U.S. takes second seat to many of Europe’s financial innovations, like the deployment of the secure chip-and-PIN EMV cards, replacing the outdated mag stripe card. So here we are again, looking over UK’s shoulders, examining their roll-out of open banking in their financial institutions. Maybe America is dumb as a fox, sitting back, observing, as Europe charges forward.

According to Investopedia…

Open banking is the system of allowing access and control of consumer banking and financial accounts through third-party applications. Open banking has the potential to reshape the competitive landscape and consumer experience of the banking industry. It gives greater control and visibility to consumers allowing banks and 3rd party financial service providers secure access to their banking and financial data.

The surge of Zelle and Venmo as peer-to-peer payments (P2P) are timely examples of the fast, frictionless, and visible payments that attract consumers. The restrictions of Co-Vid accelerated online, digital banking and opened consumer and business minds to its ease, speed, and level of security. The more value a business can add to a customer relationship, the more desirable and profitable it will become.

Since expanding and enhancing the customer experience has finally arrived in the payments industry, banks and credit bureaus will be obliged to relinquish their choke holds on consumers. Updated financial information will replace outdated, irrelevant information so that more people will gain access to credit. Eliminate the mystery, make it easy for consumers to understand and make decisions on how their money can work for them. Open banking will offer free-flowing access and control of their financial information, as it should be. Hey, it’s my money so back off!

Craig Vosburg, Chief Product Officer of Mastercard, in his Open Banking commentary offers an insightful definition.

“At its core, open-banking tech is software that lets you give lenders or fintechs access to some of your banking data,” Vosberg said. “It’s akin to the privacy permissions on your phone that allow an app to use your camera or storage. And, as with app permissions, you’re in control of how your information is shared.”

Open banking affords providers a gateway to shared financial information which opens the doors to new products and services that consumers and small businesses could financially benefit. It gives consumers greater control of their data, however, also exposes more personal data. As for risk, everything related to financial data is a target for fraudsters, reiterating the need for strong consumer authentication and fraud preventative measures. European consumers have the final say about sharing their information in accordance with various government regulations. The same will be true in the U.S.

Dale Laszig’s Green Sheet article on Europe’s Open Banking, quotes Jeremy Nicholds, CEO of UK’s Judopay. “My client created an app that plugs into a consumer’s bank account and initiates subliminal savings by using algorithms to analyze expenditure patterns,” Nicholds said. “This data science process saves money for users and gets them better returns. He adds that users grant permission, save money, and decide what they want to do with it.”

Obviously, open banking is going to require a lot of trust so as the Europeans make inroads and construct the roadmap, America will be anxiously awaiting the results. Vosburg reiterates that “the consumer needs to be at the center of what we do as we create this new ecosystem. Done right, it can create more financial opportunity for everyone.”

Rick Fiorito, new COO of RIBBIT.ai, formerly with MasterCard, says “RIBBIT.ai’s AI driven data analytics, services and technology leverages the trusted access to financial information available through open banking to empower account onboarding, faster payments, financial decisioning and affordability!”

 

Stay tuned . . .

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