Large, established, trusted brands, rich with data and with millions of loyal customers, are perfectly placed to use Open Finance technology to create more engaging and impactful customer experiences. Open Finance allows them to create hyper-personalised products and services, delivering a more holistic and supportive customer relationship and extending the customer lifetime value.
To misquote Robert Burns, the best-laid plans of mice, men and financial service providers often go awry.
I firmly believe that everyone in the sector puts the best intentions of their customers first in the vast majority of cases. Do we always get it right? No. Companies are made of people, and people don’t always make the correct choices. Decisions made around Open Banking are no exception.
It is human nature to put off the non-essential. We prioritise urgency at the expense of practicality, often for the best reasons. Meetings are held to decide what is ‘business critical’ and the agenda items that don’t make the cut are mothballed. Sometimes, as in the case of API implementation by CMA9 banks, that means the customer's best interests are unintentionally sidelined.
That’s not a dig at CMA9 generally. The FCA required certain banks to make data available to third-party providers (TPPs) via standardised Open Banking APIs by September 2019 at the latest. Among other requirements, the regulator insisted banks align their API offerings for TPPs with their own customer offerings. It was a big piece of work and, given the complexity, the FCA granted a selective six-month extension to the deadline of September 2019 to the 14th March 2020 (only for those that did not have APIs live at that stage). At a stroke, the implementation – already two years in the planning – was put aside by stretched teams with other urgent projects on the planning board.
As well as introducing a delay, moving the goalposts suggested the deadline was something of a moveable feast. In showing leniency, the FCA may have inadvertently given the impression that the legal requirement was more of a serving suggestion than a clear instruction. Naturally, some banks took a slacker approach to API than was in their customers’ best interests. Many still have open tickets to be resolved at the moment with fluid deadlines for correction.
Some of the banks, of which the CMA9 are included, are relying on MCI (screen scraping) technologies instead of APIs despite the deadline and an extension to the deadline having now passed. In addition, TPPs like Moneyhub are having to adapt their own data infrastructure to accommodate customers whose banks have not satisfied the FCA requirement
Those banks have run their projects too close to the line and failed to deliver products that are fit for purpose.
One of the very best measures of efficacy in data sharing is ‘Time to Consent’, the number of seconds it takes to return a request for secure customer data. The speeds are averaged over a three-month period and use standard statistical analysis to iron out irregularities.
And there is good news for CMA9, some of which – such as Nationwide Building Society (42 seconds) – beat challenger bank Monzo (47 seconds). That’s not as good as the frontrunner, mobile-only challenger Starling Bank (18 seconds), but to be applauded nonetheless.
But without the concerted effort of all the major players in Open Banking, customers are being left with a substandard offering. At Moneyhub, we believe that Open Banking presents opportunities for everyone in the financial services sector to benefit from increased transparency. While Open Banking is designed to level the playing field between CMA9 and emerging banks, it presents opportunities for all that operate in Financial Services inclusive of the large banks.
Disruption has been good for big companies which embraced new technologies and devastating for those who failed to see the opportunities it presented. Open Banking is the sector’s opportunity to do what is best for its customers – increasing financial transparency, making it easier to switch when more appropriate products are available and ultimately enabling financial wellbeing.
Disruption has been good for big companies which embraced new technologies and devastating for those who failed to see the opportunities it presented. Open Banking is the sector’s opportunity to do what is best for its customers – increasing financial transparency, making it easier to switch when more appropriate products are available and ultimately enabling financial wellbeing.
It is possible to see how making customers’ data easily, quickly and securely available to other providers might not be in the best interests of established market leaders. Of course there are those suggesting CMA9 banks are deliberately dragging their heels to stymie competition from challenger banks. We feel, and indeed hope, that the reason for slow progress is more benign.
At Moneyhub, our view is that the legislative efforts of the regulator are not being taken seriously enough. Because the implementation of secure, fast APIs has been pushed down some banks’ list of priorities, customers are not being put first. HSBC (which services the popular John Lewis partnership card) will be using screen-scraping after missing the deadline, Lloyds similarly has not been able to meet the deadline when providing the St James’s Place cash account. This really isn’t good enough. Our industry is better than this.
Open Banking is the future of not just banking, but an array of financial services in a truly digital era. As I have said, it is human nature, and therefore business nature, to put non-urgent matters to one side. Yet, we live in a fast-moving world where putting customers first is paramount. Those who fail to get in line face a fate worse than the FCA’s anger; they will incur the wrath of their customers.
And we all know what happens then.
Open Banking has already had a significant impact in terms of unlocking the market to make way for new blood. Where traditional banks historically held the monopoly over customer account information, the regulatory drive towards a (consumer consent based) data-sharing ecosystem has enabled a plethora of start-ups to innovate the delivery of financial services.
While the primary aim of PSD2 legislation may have been to foster innovation and level the playing field, it comes at a time where customer expectations of technology are higher than ever. Deep in the digital age, the tone has been set by trend-setters across all industries that if we can use tech to make consumers’ lives easier, we should. In fact, according to research from the Open Data Institute (ODI), 64% of UK consumers would share more personal data in return for new benefits that are more convenient.
The new wave of financial services products we’re seeing is underpinned by data aggregation and the categorisation of all transactions within it, whereby FinTech firms are granted access to transactional data across their users’ bank accounts in order to broaden the scope of their digital offering. Until recently, a technique known as ‘screen scraping’ has been the primary method of assembling this data. Screen scraping has undoubtedly delivered a valuable service to many, but the possibilities now available through Open Banking are truly game changing.
The UK Competition and Markets Authority (CMA) compelled all major UK banks to make customer current account transaction data available via API in January 2018 with the customer’s permission. On September 14th a further milestone will be reached with all transactional (payment) accounts being subject to this change through PSD2 legislation for the EU taking place. In addition, the API made available by law must use secure customer authentication (SCA) during login. This change will quite simply make screen scraping for all payment accounts impossible. PSD2 legislation makes it illegal to access payment transaction data via screen scraping for payment accounts from 13th March 2020, even if still technically possible.
The impact of Open Banking for the end consumer?
Open Banking was the next logical step towards finally breaking the banks’ monopoly on customer data. Complimenting GDPR and breaking the stronghold of incumbent banks, the initiative aims to level the playing field for new entrants and create an ecosystem in which consumer financial information flows seamlessly between different institutions with authorisation from and control directly by the customer.
For the consumer, Open Banking marks the start of a new relationship with the financial services industry based on trust, transparency and consent. By enabling them to share their data securely, Open Banking means they can easily evaluate personalised financial products and manage their own finances across several accounts without having to go through their bank, truly empowering the individual.
Does screen scraping still have a place?
With roughly 75% of organisations developing both internal and public-facing APIs and legislation encouraging this route as the industry standard, it’s clear API integration is the future. However, until we achieve full Open Data via API's, screen scraping is still required to view a customer’s full financial picture, as not all financial accounts are yet required to offer API access. We should also note, that the process of screen scraping (in a read-only format) is widely acknowledged as a ‘safe’ process, when done by an organisation that takes data security seriously and has the customer’s best interests at heart. It has been common practice since the 80’s by many financial institutions from credit bureaus, news organisations to the banks themselves in order to streamline processes involving legacy systems and to minimise the need for re-keying data.
Markets such as pensions and investments have no obligation to make data available by API anytime soon. Whilst some providers are embracing change, and proactively implementing API’s anyway, others are not. In the short term at least, offering a combination of direct open banking API’s and screen scraping for accounts where this is not an option, gives customers the most optimal solution to see all their finances in one place.
Moneyhub is, at its core, an Open Banking platform. Not only was our API one of the first live Open Banking integration, but our technology features the most data links of any aggregation provider in the UK.
We have invested considerable time and money in direct API Open Banking integration to deliver innovative, secure banking services to our users, and benefits beyond just data such as auto-categorisation and insights via personalised smart nudges. Certainly at this stage, however, coverage of all accounts depends on both API integration and screen scraping to deliver this seamless, holistic service. In light of this, we have established a triage system to find the best source of data when an account is connected. Starting with direct Open Banking API’s, then bespoke API’s that are available and implemented through to Screen Scraping when necessary. In addition to our account triage system we also have a set of migration tools in place to support the move from screen scraping to Open Banking API’s and more broadly Open Data API’s as and when these become available.
In the short-term, screen scraping will continue to be a workaround in the absence of available APIs – but it won’t be long until this method is a thing of the past.
With the end goal of opening a closed market and ultimately empowering customers the importance of any system has got to be about Trust, Transparency and Consent. The days of arguing about who owns the customers data are well behind us. The customer owns their data - every last transaction of it.
Samantha Seaton gives L&G magazine round up of how Moneyhub is disrupting the financial sector. Including insights on how the app is benefiting lenders and borrowers as well as how innovations in tech, such as 5G, will take the app to the next level. Asked what the future looks like, Moneyhub aims to unlock the power of Open Data and transform the way customers interact with financial data - truly maximising financial literacy nationwide.
What is Moneyhub?
Moneyhub is a truly unique financial management platform, deployed by companies in their digital propositions (directly as a white-labelled solution or embedded via APIs) enabling an entirely new level of personalisation and customer interaction.
As pioneers of Open Banking, the Moneyhub platform offers the most data links of any aggregation provider in the UK. Giving easy, consolidated access to credit cards, loans, bank accounts, mortgages, investments, pensions, SIPPs, ISAs for the end user.
Through AI, the platform will analyse an individual’s data and offer personalised ‘smart nudges’ to improve financial wellbeing. Standard nudges can be included or excluded on implementation by the company providing the solution, or bespoke nudges that are more tailored to the particular relationship they have with the individual can also be accommodated.
Moreover, by automating simple administration tasks like alerting when a loan-to-value threshold has been crossed on a mortgage, through to complex machine learning insights, Moneyhub removes the time and effort required to achieve optimal financial management.
Culminating with Moneyhub’s Payment Gateway to make nudges immediately actionable means a 40% increase on take up. All at a fraction of the cost of legacy payment methods such as Visa, Paypal and Stripe.
What are the greatest opportunities for borrowers and lenders using a platform like Moneyhub?
Lenders can benefit hugely from including a platform like Moneyhub in their proposition. It automates data capture and gives greater and more accurate insight into the spending patterns of their customers. Lending is no longer binary with a yes or no decision, a third option can easily be presented to help customers not yet meeting the lending criteria.
For borrowers, the platform enables them to be smarter about their finances and make more informed choices when it comes to spending and borrowing.
How do you see the generational gap affecting take up of mobile financial solutions?
In the digital age, consumer expectations are for smarter technology making it easier to achieve their goals.
With mobile financial solutions being utilised across the ages, it is the level of expectation from money platforms that divides the generations the most. Where millennials expect technology to present clear but highly personalised options, the older generation want to understand the reasoning behind any recommendations. In all cases the demand for speed, efficiency and seamlessness is increasing. One key difference is in the device that different generations use to manage their money, be it their mobile phone, browser, or tablet, so it is important to be agnostic and let people choose.
With effortless money management it is now possible to prepare for a sustainable financial future from an early age. It is equally attractive in later life when managing finances in retirement.
Even those that don’t directly embrace technology, and particularly vulnerable individuals, will benefit and be protected via Moneyhub Connect and chosen friends, family, advisers and solicitors.
And from a business perspective, the opportunity to engage with customers across generations and income thresholds is maximised by financial technology.
What will 5G and other innovations in communications make possible?
Knowing the next best thing to do with money and automating the action required will see consumers better off. Open Banking will become Open Data. This means the consumer will be in complete control of all their data encompassing pensions, insurance, medical, property, qualifications, driving profile and so forth. The result will be data working for the consumer to help them achieve their goals and improve their overall wellbeing.
Measuring how often people interact with our digital propositions will be a thing of the past. Outcomes will be the measure of success.
What are your aspirations for the future?
Moneyhub is a people first financial management platform designed to improve financial wellness by empowering individuals while providing businesses with insights that unlock growth. By championing the consent-based sharing of consumers’ financial data, we are seeing the maximisation of financial wellbeing across our client’s customers and employees.
Our goal is to unlock the power of Open Data and transform the way customers interact with financial data. By helping lenders and borrowers alike, we want to create a more sustainable and stable financial world.
The initiative may still be in its infancy, but open banking has already proved a catalyst for change – not only within the UK financial services sector itself but the savings landscape as a whole. Launched with the intention of increasing competition in the market and triggering innovation, it seems the momentum towards open banking is ushering in a new era of money management.
Just four years ago, research undertaken by the Social Market Foundation found that only a quarter of customers had current accounts with more than one bank. Today, our own analysis reveals that the average user now saves into three different accounts – often with a number of providers.
Thanks to the collaborative model made possible through PSD2, banking data is now actively being shared through APIs between unaffiliated financial service firms to deliver enhanced capabilities to customers. According to our findings, it seems these connections have quietly been encouraging UK savers to be more ‘savvy’, spreading their money across several accounts with different providers to boost returns.
While the majority of people are still more likely to save with their main provider – the average amount saved into a high street bank being £5,828 – the results of our study showed an increase in the number of users opting for challenger banks as secondary providers, with the average amount saved in these accounts sitting at £2,503.
Meanwhile, research published by the peer-to-peer lender Zopa supporting the increased breadth of bank accounts, found that one in three people hold two or more current accounts. It also found that almost half of those with a credit card do not have it with their main bank and more than one in four looks elsewhere for their regular savings and instant-access savings accounts.
These findings serve to illustrate the market shift that is taking place and the growing prevalence of the multi-bank approach; one that The Social Market Foundation cites as an indicator of a financially sophisticated customer who is more attuned to the benefits of shopping around.
Traditionally, savings were all managed with the same provider - customers held a current account, a savings account and any mortgages, loans or insurance premiums all with the same high street bank. However, the advancement of digital technology and enforcement of new regulations coupled with the ambition of FinTech entrepreneurs has sparked a savings revolution. Some users may still be tied to their banks, but when it comes to putting cash away for the future, society is moving fast towards the multi-bank model.
By splitting up savings into different cash pots, it becomes possible for users to tailor their returns to benefit from better rates. For instance, if one pot comprises of significant savings that you don’t intend to touch for five years, it might make more sense to invest it into stocks, shares, and funds in order to take advantage of more potential market growth.
Meanwhile, the money you might be saving for a luxury holiday in the near future could sit in a fixed-rate savings account while the safety-blanket cash you rely on for emergencies can remain in easy-access accounts that pay a lower rate.
Moreover, considering the cap on how much you can deposit to receive a good rate, separating your money is a smart way to mitigate risk. Under the Financial Services Compensation Scheme, you are only protected for up to £85,000 per bank or building society in the event of a collapse. With your wealth split across several providers, you can minimise the risk to own savings in the event your main bank goes bust as many did during the global financial crash.
When it comes to managing money, the younger generations are set to face stronger headwinds than those experienced by their parents and grandparents. With this in mind, there has never been a better time for a transformation in the financial services sector. Today, what people need the most are tools that encourage engagement with their finances; they need visibility across all the various pockets of money they have, be it insurance premiums, holiday funds, student loans, and pension pots.
Thanks to open banking, it is now possible to view all of your savings in one place on platforms like Moneyhub. No matter how many banks you have spread your savings across, you can gain a 360-view of your finances and control them through the same tool. With greater control over their money, UK savers are finally in a good position to improve their long-term financial health.
We’re living through an interesting period in financial services. From the revolution of open banking to the rapid rise of the robo-advisers, rarely has our industry seen so much disruption in such a short space of time.
For wealth managers, much of that innovation has focused on using algorithms to bring down costs and reach new audiences. The 130 (and counting) robo-advisers that have entered the market are a welcome addition, but is their potential being realised?
Underusing the algorithms
The problem isn’t with robo-products themselves – it’s with their scope.
Because the current crop of algorithmic advisers focus on only one aspect of users’ wealth, like their ISA or mortgage, they’re missing out on the opportunity to offer more holistic advice.
Open banking lets wealth managers take a much wider view of their customers’ finances and provide more suitable advice but few, if any, providers have yet to take full advantage of it and the market is due to see a surge of new players who will.
Let me give you an example.
Sarah wants to start investing. She’s been reading some articles online and thinks that a robo-adviser could be a cost-effective way to get started.
She’s not wrong. But what her ISA robo-adviser can’t see is that Sarah also has £5,000 of credit card debt and high-interest loan on her car.
Any human adviser would tell her that paying off her credit cards is a far more effective use of her savings. But with access to a very limited set of information, her robo-adviser can’t make that judgement call.
A better way
As any adviser will tell you, more information equals better advice.
Robo-advisers have the clear potential to offer truly holistic advice, but manual date entries and fact-finds fail are failing to unearth the required information. But by using open banking APIs to legally aggregate a customer’s date, the algorithms could access a much wider data set that includes credit cards, bank accounts and ISAs, and use it to generate suitable, targeted advice – while saving customers from spending hours on fact finding.
Providers could incentivise customers to add more APIs by giving them a reliability score. Adding one bank account would give you a lower score than if you also added your credit cards and ISAs, for example. It’s a smart way to encourage users to help wealth managers provide optimal financial advice.
Ultimately, we as an industry should always be looking for ways to improve the suitability of financial recommendations. Algorithms can go some way to facilitating this conversation – but surely gaining a better understanding of your customers’ date is the real answer, hidden in plain sight.
To find out how we can help your business evolve, get in touch on 0117 280 5155 or email enterprise@moneyhub.com.
As Open Banking turns one, we asked our CTO David Tonge, co-chair of the Financial API Working Group at the OpenID Foundation, to take a look at the state of the industry. Below, he examines its repercussions for customers and for financial services, and identifies the challenges and opportunities that are set to define Open Banking in 2019.
Open Banking is changing the way people interact with their finances for the better. It’s no longer justifiable that managing investments, pensions, debt or daily spending is so complex. It’s even easier for businesses to connect with their target audiences and provide them with a more personalised service: capitalising on deeper insights surfaced automatically to help people manage their finances more effectively.
It’s now been eight months since the Open Banking reforms were put in place. Designed to put the consumer back in control of their data, the top 9 banks (CMA9) had to provide an Open Banking connection (API) that regulated Third Party Providers (TPPs) with special permissions could connect to. This allows their customers to see all their finances in one place and use market leading tools to analyse their money.
November saw Lloyds Banking Group host the first design hackathon of its kind on Open Banking, the ‘Build an Open Bank Challenge’, with participation from 14 partnering organisations spanning from big corporates to startups. As Open Banking and the new Payment Service Directive (PSD2) regulations...
The EU's 2nd Payment Services Directive (PSD2) implementation deadline of January 2018 is fast approaching. This is having far reaching effects for banks and the wider financial services industry. In this article we'll look at the current state of play in the industry, the challenges and the opportunities that it brings.
Whether you want to create your own solution, or you want us to do it for you—we have the technology for it. Our experienced team is here to support you now and in the future.
