How Open Banking opens doors for banks in the UK

Six months on, did the open banking initiative help or hurt the country's banks and financial services institutions?
25 July 2018 | 660 Shares

One of the offices of HSBC Bank in the UK. Source: Wikimedia

As a user, imagine how easy life would be if you could just fire up an app on your smartphone or tablet and see exactly how much you had in savings and how much you owed those who issued you a credit card.

And while the wishlist is long, consumers in the UK are finding that they’re increasingly gaining access to more of their financial data, in real-time, on a single platform.

The change is a result of new regulations in the UK which aim to “open up” the banking ecosystem in the country.

In conversation with Imran Gulamhuseinwala OBE, Trustee of the Open Banking implementation, TechHQ learns why the initiative is a great idea and how it’s opening doors for banks in the UK despite the initial resistance.

“This is a remarkable project: one with the potential to change retail banking forever.  If we get it right, we will for the first time anywhere in the world, put customers in control of their financial data, their privacy and their money,” said Gulamhuseinwala.

The idea behind the project was to ensure that banks got the nudge they needed to work with fintech companies in the region, and could partner with them effectively, in order to ultimately benefit the customer.

Open Banking was created to enable innovation, transparency, and competition in UK financial services.

The OBIE (Open Banking Implementation Entity) is tasked with delivering the APIs, data structures and security architectures that will enable developers to harness technology, making it easier and safer for individuals and SMEs to securely give access to their financial information (should they so choose).

Open Banking, in time, is intended to bring about greater market choice and give customers greater control over moving, managing, and making more of their money.

“My vision for the medium term is that people will partly be choosing their banks based on the FinTechs that are supporting their proposition,” claimed Gulamhuseinwala, who’s also a partner and Global Fintech Lead at consulting giant EY.

In giving customers the ability to share their data, and allowing companies to initiate payments from their accounts, Open Banking hopes to create real choice in retail banking.

If banks leverage the Open Banking initiative, they might be able to create new products and compete with entirely new entrants who join the market with a vision to disrupt it.

Take HSBC for example. They’ve launched a new app they call Connected Money that lets users display accounts from 21 different banks, including current accounts, savings, mortgages and loan accounts on one screen, in real time.

“Connected Money follows the launch of HSBC Beta, which trialed the technology with staff and customers. The app allows us to cater to a range of customer needs through joined-up banking and features like Round-Ups, which helps customers to build their savings without heavily impacting their everyday spending,” said Raman Bhatia, Head of Digital Bank.

HSBC’s Connected Money also includes a range of tools such as spend analysis, bills calendars, and in-app insights based on transactions, to help customers understand their money better and have a more complete picture of their money, supporting them to take control of their finances.

From the get-go, it seems like the kind of app anyone would love to have on their phone, simply because of the connected, comprehensive dashboard it provides.

Then, there’s also the added comfort of linking up other accounts to an app by a real, reputable bank that you know. It’s not easy to claim that citizens and residents would trust fintech companies they’ve only heard of recently, with the kind of banking information and access necessary to create such an app.

However, it’s not just HSBC that’s benefited. Others, too, such as Barclays and the Lloyds Banking Group have plans to leverage the Open Banking initiative.

“Later this year we’ll be launching new services using Open Banking, designed to make your life easier and to help you make the most of your finances. In the meantime, you can share your data and make payments from your current account via TPPs approved by the Financial Conduct Authority (FCA),” says Barclays.

From the looks of it, it seems as though the Open Banking initiative, despite the initial resistance from banks, has only made their proposition stronger, and maybe better.