Open Up 2020: Innovative products for the Consumer

Open banking has the potential to transform financial services, opening up the UK banking industry by giving people control over their financial data. This will help consumers to access innovative products tailored to them and ensure that they benefit from the best deals on the market.

Since it launched in 2018, open banking technology has opened the door for new fintech innovators to create cutting-edge tools for everything from budgeting, debt management, switching banks, automating savings, and much more.
This wave of innovation holds particular promise for financially excluded individuals, including:

  • the 1.5 million UK consumers who don’t have a bank account
  • the 1 million plus consumers every year who need debt advice
  • the 50 per cent of consumers who are not confident making financial decisions
A condition of entry is that the Open Up 2020 finalists listed above are either FCA regulated in their own right, or an Appointed Representative of an FCA regulated entity to provide their service.

Helping FinTechs transform finance for SMEs through open banking solutions.

Hear Chris Gorst, Open Up Challenge Lead at Nesta; Olly Betts, CEO & Co-founder of OpenWrks; Conrad Ford, Funding Options’ CEO & Founder; and Andrea Reynolds, CEO & Co-founder at Swoop, discuss the impact the Open Up Challenge has had on their businesses.

Open Banking: innovation delivering regulatory reform

By Chris Gorst, Nesta’s Challenge Prize Centre

Most people wouldn’t think of regulation and innovation as easy bedfellows – in the public imagination they have come to be seen almost as the opposite of one another. But the digital revolution, which has disrupted so many industries, is also now disrupting regulation. In particular, it is creating new opportunities for regulators to harness the power of innovation themselves to achieve their goals. Open Banking is an early and prominent example of this.

While many regulators are struggling to cope with the nature and speed of technological change, in the case of Open Banking the Competition and Markets Authority (CMA) has instead sought to capture the power of technology to transform a market for the better.

Responding to the CMA Order

The package of reforms introduced by the CMA in 2017 that included Open Banking also included the Open Up Challenge; a high-profile prize designed to unlock and accelerate the next generation of financial products and services for small businesses.

The government specifically called out the UK’s small business community believing that they could benefit most from the CMA’s reforms, and it’s clear that SMEs want this extra help and support. There is a broad consensus that SMEs have been particularly poorly served by lack of competition in UK retail banking and resulting lack of useful innovation. More than 60% of SMEs said that they would use new services from their bank – such as Bitcoin and peer-to-peer lending – if they were on offer, and 37% of SMEs already use non-bank financial apps to make B2B payments suggesting that they are comfortable with fintech and alternative financial service providers.

Nesta’s Challenge Prize Centre & Open Up

The Open Up Challenge was run independently by Nesta’s Challenge Prize Centre, with backing from the CMA and funding from nine of the UK’s largest providers of SME banking – Barclays, HSBC, Lloyds Banking Group, RBS, Santander, AIB Group (UK) plc, Bank of Ireland UK Danske Bank and Nationwide. Nesta’s Challenge Prize Centre uses challenge prizes to stimulate innovative solutions to big challenges, and we see huge potential to improving regulated markets so they work better for ordinary consumers and small businesses; in areas such as accessing legal advice, affordable credit, energy and pensions.

Funding which could help transform how people manage their money has been awarded across 15 financial technology firms. The ‘Open Up 2020 challenge’ – which has a total £1.5 million prize pot – encourages firms with ideas to help people better manage their financial lives. All of the solutions use Open Banking technology, and the prize is run by Nesta Challenges, in partnership with the Open Banking Implementation Entity (OBIE).

Open Banking has the potential to transform how businesses engage with financial services and the kinds of services on offer so, working in partnership with the CMA, we designed a prize that targeted specific market gaps and would attract the UK’s best FinTechs entrepreneurs. These market gaps included solutions to problems that small businesses face on a daily basis such as managing cash flow, applying for overdrafts and filling in loan applications, general budgeting, invoicing and taxation.

Fuelling FinTech Innovation

The Open Up Challenge 2020 is designed and timed to boost consumer awareness and adoption of open banking-enabled products by:

  • Providing up to 15 finalist teams with £50,000 each, growing to as much as £300,000 each for three to four winning teams
  • Promoting their products in a national digital awareness campaign
  • Offering expert non-financial support so they can accelerate their solutions

2020 timeline of the Nesta Open Up Challenge

View the Full Nesta Open Up Challenge timeline.

A key benefit of a challenge prize is the flexibility the model offers to get the right support to the right innovators to tackle the problem at hand. Both successful Stage 1 and Stage 2 participants were provided with access to expert advice and technical support throughout including marketing, legal and regulatory expertise. Importantly, the entries were given exclusive early-stage access to data in the Open Up Challenge sandbox – the largest anonymised UK banking transaction dataset ever released – which was of huge value to many of the participants, as well as APIs aligned with the standard enabling teams to test their products.

Judged by an Independent Panel of Experts

The independent judging process was also critical to the success of the Open Up Challenge. An expert, independent panel was kept informed by assessment reports prepared by specialists in user experience, customer acquisition, financial modelling, law and regulation as well as documents, videos and presentations submitted by the teams. It was important that the judges had enough information to reach fair, informed decisions while allowing participants to continue with their projects free of bureaucracy.

The Finalists

This year, 15 finalists have secured funding to develop innovative solutions that use open banking to transform how the nation manages its finances. The finalists were selected out of 107 entries, and many of these FinTechs are live and in the market already:

  • Cleo An AI assistant with a sense of humour which helps Gen Z/ Millennials budget, save and track their spending.
  • Kalgera A personal finance platform for older or vulnerable people. Kalgera uses neuroscience and AI to detect and predict financial vulnerability to help prevent fraud.
  • Moneyhub A financial management platform that empowers people to do more with their money by offering actionable insights to consumers to improve financial wellness. Moneyhub uses machine learning to categorise financial data by aggregating accounts.
  • Toucan helps people who need extra help managing their money because of impairments like dementia or mental illness. The app allows them to securely share spending alerts or financial information with someone they trust, typically a carer.
  • Tully is a digital debt adviser for those struggling financially – providing online budgeting, debt advice, flexible repayments and money coaching to alleviate financial stress.
  • Moneybox This innovative app helps customers save and invest for their future. You can set money aside through round ups or regular deposits and choose from a range of products including ISAs, savings accounts and pensions.
  • Plum An AI assistant that boosts your bank balance through automated savings, easy bill switching and investments.
  • Creditspring An affordable credit subscription service offering small interest free loans for short term credit to help those with limited savings or persistent debt cope with unexpected expenses.
  • Portify A holistic credit builder for modern workers with unconventional earnings patterns, Portify’s solution analyses these earnings and spending behaviours to prevent overdraft and interest payments and offer a fee-free credit line.
  • Updraft A solution which automates day to day decisions involved in managing money, designed to help millennial users clear their overdraft, pay off their credit cards, save more, and reach their life goals faster.
  • Wagestream allows employees to stream a proportion of their income as it’s earned, save directly from their salary, track wages and get impartial, financial education in real-time.
  • Canopy have developed RentPassport, a portable digital rental identity which helps renters improve their credit score, as well as access a range of financial wellness products such as deposit free insurance which offers the same protections as with a cash deposit, except for eight weeks instead of five weeks.
  • Currensea is the first travel debit card that connects to customers’ existing high street banks accounts, offering competitive exchange rates and saving up to 80% on bank charges when spending abroad.
  • Mojo Mortgages have designed MortgageScore™, which will combine credit and open banking data to determine if a customer is mortgage ready. Once a customer’s score is calculated, the MortgageScore™ coaching feature will provide personalised advice on how they could improve their score.
  • Sustainably A platform to give to good causes, making it easy for businesses and consumers to do good as part of everyday life by using open banking data to round up retail transactions and donate to charities.

Responding to Real Demand

A survey that came out half way through the Challenge stated that business owners wanted more government support for their companies, especially in the area of finance. 1 The Open Up Challenge is a great example of this happening in practice, supporting SMEs at all stages of their lifecycles to come to market. The Challenge is a powerful example of how public authorities are combining a new approach to regulation with targeted investment to help make markets work better.

At present, challenge prizes are mainly associated with “moonshot” projects requiring spectacular technological advances, with the Apollo programme perhaps being the ultimate example. But increasingly they are gaining momentum among diverse organisations who share a common ambition to promote innovation that meets the needs of ordinary citizens and small businesses. Particularly when there is support from a forward-thinking regulator, willing and able to capture the power of innovation to make markets work better, the result will be better solutions to society’s longstanding and emerging challenges.

1. The research was conducted by Toluna on behalf of Specialist Bank, Aldermore via an online panel during March 2017 and March 2018. The sample consisted of 1,799 UK residents, including 642 entrepreneurs, self-employed people and business owners.