At the beginning of London Fintech Week in April, City Minister Andrew Griffith made a bold statement, declaring that “this will be the year for delivering the next generation of open banking”. As Chair and Trustee of Open Banking Limited (OBL), I couldn’t agree more. Open banking has already transformed the financial landscape, and we are now on the brink of something even bigger: ‘open everything’. The potential of ‘open everything’ is incredibly exciting, with planned legislation to enable data sharing across all industries – from finance to utilities – to create a truly connected economy. But before we can achieve this, we need to continue driving open banking forward and deliver further benefits for consumers and businesses up and down the country. I was thrilled to attend the Open Banking Summit in Manchester recently, hosted by FinTech North and Open Banking Excellence. With over 90 delegates from across the Northern fintech community attending, it was fantastic to see how open banking has become a catalyst for innovation and growth in all regions across the UK. This includes Manchester, a city that has been a real powerhouse for fintech innovation and which is now fully embracing open banking as a driving force for economic growth and prosperity. Open banking has been a game-changer for consumers and small businesses, thanks to the collaborative approach taken by regulators and industry players in the UK. But it’s not just about innovation and collaboration – our regulatory framework has also played a critical role in fostering competition and driving consumer benefits. The Competition and Markets Authority (CMA) played a pivotal role in mandating participation in open banking and setting a standard for performance. This pro-competition intervention ensured that we went faster and achieved more than our European counterparts. This helped to create an environment where fintechs and traditional financial institutions can compete on a level playing field, driving innovation and improving services for consumers and SMEs. Research in our latest Impact Report shows that the number of open banking providers has increased across the UK, with 169 regulated providers and 204 third-party providers as of March 2023. To date, there are over 1,400 fintechs operating outside of London, demonstrating the reach and success of the UK’s thriving fintech sector. The North-West and Scotland are home to the largest number of open banking providers, with 24 and 23 providers, respectively, as well as thriving fintech hubs. The North-West has also seen the largest increase in open banking adoption, with a 280% increase in API calls between Q4 2021 and Q4 2022. And it’s not just Manchester – Liverpool, Leeds, Edinburgh, Birmingham and many other places are also seeing a boom in fintech activity, with a rising number of companies setting up shop in those cities. Our report highlights case studies of open banking use across the UK, including a social housing provider in the North-East using open banking to improve rent collection, and a small business in the South-West using open banking to streamline accounting and invoicing. While the technology has played a significant role in fostering innovation and growth in regions outside of London, we cannot stop here. These hubs are not just important for their local economies, but for the UK as a whole. We must continue to push the boundaries and use open banking as a tool to level up the regions and improve financial inclusion across the UK. This means ensuring that all areas of the country have access to the latest fintech innovations and that everyone can benefit from the advantages that open banking brings. The COVID-19 pandemic highlighted the need for financial services to be more accessible, and open banking has provided a key solution, allowing for the development of digital financial services that can reach more people in need, regardless of location or financial background. To achieve our goal of ‘open everything’, we must continue to work collaboratively as an industry and with the regulators to create an environment that encourages innovation and competition. We must also continue to invest in education and training, ensuring that people have the necessary skills to take advantage of the opportunities offered by open banking. I am proud to be part of the open banking revolution and to see how it has positively impacted financial services in the UK. Open banking has the power to level up the regions and improve financial inclusion across the country, and I am committed to ensuring that we continue to support this. You may be interested in… Article How open banking can help consumers manage cost-of-living challenges 15 Mar 2023 Read more Thought Leadership Open banking – expert predictions for 2023 06 Jan 2023 Read more Thought Leadership VRPs set for commercial take-off 02 Mar 2023 Read more
You may be interested in… Article How open banking can help consumers manage cost-of-living challenges 15 Mar 2023 Read more Thought Leadership Open banking – expert predictions for 2023 06 Jan 2023 Read more Thought Leadership VRPs set for commercial take-off 02 Mar 2023 Read more
With record rises in the cost of living, and many of the UK’s households and businesses facing rapidly rising bills, it’s more important than ever for consumers to understand and manage their money in the most cost-effective way. A recent report from open banking platform Yapily revealed that around 95 per cent of consumers are concerned about increases in the cost of living. In addition, Bank of England figures for January 2023 show that consumers borrowed an additional £1.6 billion in consumer credit (net), compared with £0.8 billion borrowed in December 2022. This was split between £1.1 billion of borrowing on credit cards and £0.5 billion of borrowing through other forms of consumer credit, such as car finance and personal loans. Yapily’s research also reveals that 88 per cent of consumers have looked to financial products and services in the past year to help them manage their finances more effectively. We highlight some of the most common financial challenges and explain how open banking-enabled tools and services can offer simple and practical ways for consumers to take greater control of their finances. By consenting to share their banking data, consumers can:• Use personal finance apps and account dashboards that give them a clear view of all their incomings and outgoings to help them better understand their finances.• Identify ways to budget better and shop around for money-saving deals.• Help build a regular savings habit – however small – with round-up apps that tuck away spare change, or which move surplus funds to interest-bearing accounts.• Access affordable credit, particularly if they don’t meet traditional lending criteria.• See if they are eligible to switch to an affordable energy or broadband tariff.• Use budgeting tools to help navigate their way out of problem debt or to access professional debt services faster. These tools can boost individuals’ confidence in their ability to manage money, and, in turn, build financial resilience and improve financial wellbeing. Read our article on how open banking can help tackle cost of living challenges, and watch our short videos to see how it works in practice. You may be interested in… Case studies Salad Money uses open banking to deliver fairer finance 10 Jan 2024 Read more Thought Leadership Cyber Monday – how open banking payments are protected for consumers 27 Nov 2023 Read more Thought Leadership Open banking: a plug and play solution to responsible gambling 28 Sep 2023 Read more
You may be interested in… Case studies Salad Money uses open banking to deliver fairer finance 10 Jan 2024 Read more Thought Leadership Cyber Monday – how open banking payments are protected for consumers 27 Nov 2023 Read more Thought Leadership Open banking: a plug and play solution to responsible gambling 28 Sep 2023 Read more
Thought Leadership Cyber Monday – how open banking payments are protected for consumers 27 Nov 2023 Read more
Thought Leadership Open banking: a plug and play solution to responsible gambling 28 Sep 2023 Read more
UK Finance, the banking and financial services trade association, recently published its latest data on Authorised Push Payment (APP) fraud, revealing that £583.2 million was lost to these scams last year, 39% up on the same period in 2020. APP fraud – where victims are tricked into sending funds from their bank account to a fake or fraudulent account – now exceeds losses caused by card fraud and, at a recent industry webinar, it was likened to the ‘digital COVID’ of fraud. There were 195,996 incidents of APP scams in 2021, including: £214.8 million lost to impersonation scams, where criminals impersonate trusted organisations such as a bank, or the NHS, to trick people into giving away their personal and financial information. This was the largest category of APP losses. £171.7 million lost to investment scams, where a business or consumer is persuaded to invest in a non-existent fund. This was the second largest category of APP losses, largely because the amounts involved can be much larger than other scams. 99,733 cases of purchase scams, the most common type of scam – accounting for 51 per cent of all cases – although total losses were £64.1 million. This is where a business or consumer is persuaded (online, by email, text or phone) to buy something that doesn’t exist or is never delivered. There was a surge of these frauds during the pandemic as more people were working from home, spending more time on the internet, and shopping online. As this type of fraud looks set to continue to rise (the Financial Ombudsman reported a 30% increase in complaints about APP scams in the second quarter of 2021), we ask whether open banking can play a role in helping to fight fraud? How can Confirmation of Payee help? While not a silver bullet in stopping APP fraud, the Confirmation of Payee (CoP) account name checking service was launched by Pay.UK in 2020 to help prevent fraud and accidentally misdirected payments. When consumers and businesses make a payment, CoP lets them check if the money’s going to the right account. Before they transfer any funds, they can verify that the name on the recipient account is the same person or business they intend to send the money to, so funds end up in the right place. If the name on the account doesn’t match, CoP highlights the risks. Lloyds Banking Group said that the system helped reduce bank transfer scams by 31% within the first few months of its introduction in 2020. The CoP service has now processed more than one billion messages. Reducing misdirected payments The Payment Systems Regulator (PSR) also noted that, since the big six banks first introduced CoP in 2020, the service has had a positive impact on misdirected payments as well as scams. We work closely with Pay.UK to help deliver CoP, which is available in the UK through the OBIE Directory, and in Jersey, Guernsey and the Isle of our Man through our Crown Dependencies Directory. Kate Frankish, Chief Business Development Officer and Anti-fraud lead at Pay.UK, said: “We need to fight together, with better collaboration and knowledge sharing between banks, the government, regulators, telecoms and social media companies, and law enforcement. We need to increase public awareness of the risks of fraud. And we need to share data and technology that can spot the crime and enable banks and payment providers to intervene before it happens.” Ted Sidgwick, Head of Propositions at the OBIE, added: “Open banking has an integral role in Pay.UK’s CoP service, and we are pleased to support the open banking ecosystem in the ongoing fight against fraud by sharing our experience of the service with account providers who are considering joining the ecosystem. “This is particularly important as the PSR looks to extend the rollout of CoP, with the aim of encouraging further participation in the service by making it possible for all banks, building societies and PSPs to offer CoP. It will also help increase consumer confidence when setting up new bank payments.”
It’s been exciting to see the increasing speed of open banking adoption in the past six months. Today I’m pleased to share several key successes. First, the open banking community made a record 1 billion API calls during May 2022. This metric is a key barometer for the level of activity that the open banking industry generates each month. From information calls to payment calls – hitting the 1 billion mark shows the huge rise in activity since the first release of the API specifications in July 2017. Secondly, businesses and consumers made 5 million open banking-driven payments throughout May 2022. It is clear that end-users are choosing to ‘pay by bank’ and take advantage of all the benefits that come with using this fast, frictionless, and secure way to pay. With a record 1 billion API calls, 5 million open banking payments, and 6 million active users, it’s clear that open banking is continuing to deliver added value to the UK’s consumers and small businesses. Six million users and counting Finally, it’s taken just under three months for us to reach another milestone – we can now count 6 million active users of open banking in the UK. Once again this demonstrates that consumers and small businesses are reaping the rewards of using open banking to keep on top of expenditure and daily budgeting, cut card-processing costs, and shop around for better financial products and services. We’ve already found that 64% of consumers have claimed that using open banking savings apps increased their total level of savings and helped them develop a regular savings habit, while using money management apps improved their understanding of their finances, helping them to feel more in control of their finances. And our third Open Banking Impact Report, published later this month, contains unique new research which highlights how open banking-driven cloud accounting services are helping small businesses make better financial decisions, become more efficient, and collaborate more effectively with their accountants. It’s clear that open banking is continuing to deliver added value to consumers and small businesses in the UK, and our first-class open banking standard and ecosystem continue to lead the way in the uptake of this pioneering technology.
In 2021 we witnessed significant growth in the adoption of open banking. We saw more participants, more end users, and certainly lots more publicity about the benefits it can bring. But what will 2022 bring? We asked a few experts from across the open banking ecosystem to give us their predictions for what we believe will be another important year. We share their thoughts below. What will take open banking to its full potential in 2022? HMRC team “Effective collaboration to turn open banking data into services that are good to use and offer real value to customers and businesses. HMRC wants to be a big part of that, and we will be inviting interest in a number of open banking-related proofs of concept, such as splitting VAT at source. Following the success of implementing payment initiation services, HMRC is also looking to maximise the benefits of open banking by exploring the application of account information services. We are keen to continue engagement with the OBIE, Pay.UK and the Bank of England to explore how we can further align our strategic activities.” Oliver Shaw-Latimer, Head of Global Fintech, JustGiving “From our perspective, it’s VRPs. It’s huge for us. Replacing Direct Debits eventually would be awesome, because it’s all tech and it’s more flexible – it’s instant payments. And recurrence is huge for the charity sector. The other one is request-to-pay, which is sending out pre-invoiced requests for payments to our suppliers. A lot of corporates hand over funds so we can disburse them to a wider network of charities. The ability to send them that ask, and have them respond to that ask via the open banking network kind of closes the loop, without having human steps in the processes. That’s a big one for us as well.” Francis McGee – Consumer Representative, OBIE “2022 will be a transitional year. The implementation phase will end, and we need new structures that make sure open banking continues to be done well for consumers, and run well for the ecosystem. Let’s start 2022 by signing up to five principles to make that happen: Open banking must meet the needs of end users. Governance must always be independent and centred on end users. Government and regulators must ensure end users’ money, data and rights are protected. They must intervene if plans for open banking do not meet end user needs. Open banking’s destination must lie within a network of open finance and other services. Only then can its full potential be realised. An amplified end user voice must be at the heart of all decision-making about open banking.” Fliss Berridge, Director and Co-Founder, Ordo “Open banking has made life easier for businesses and consumers making and collecting single payments. The gap that’s left is to cover VRPs – regular repeated payments like monthly utility bills, and ad hoc repeated payments to the same retailer (in-person or online). Open banking makes these payments much smarter, more convenient and efficient – a ‘smart Direct Debit’ if you like. VRPs can be set up in minutes rather than weeks, payment mandate parameters can be changed dynamically, right up to the point of irrevocable payment, meaning businesses and consumers can respond to life events in real time. Payment transfers are in real time, without long processes and paperwork. Once open banking is used for our regular bills, we’ll wonder how we ever got by waiting.“ Hetal Popat, Open Banking Director, HSBC Group “During 2022 I expect we will see extensions from open banking to wider passporting of data from and between financial institutions. This will unlock enormous value for both consumers and businesses, and will be a pro-competitive force in many other industries outside of financial services. In parallel, the launch of VRPs will enable entirely new use cases to be fulfilled, embedding payments into wider customer journeys. The industry needs to co-ordinate in order to bring this to market, and the OBIE is well placed to facilitate this.” Billy Helm, Marketing Executive, Ecospend “2022 will be about consolidation and sustaining growth. Ecospend’s partnership with HMRC proves that, where there is consumer demand and an intuitive flow, the technology works well at scale. For open banking to reach its potential, consumer education will be vital. Also, we need to be realistic that this will not apply, in the short term at least, across every payment setting but will always be part of a mix. It’s perfect when the consumer has to pay a bill or when fast delivery of a product isn’t a prerequisite. Aligning with the banks will be crucial to broaden the opportunities, especially to ensure industry-wide consistency around the settlement status of payments.” Paul Lloyd, Co-founder and CMO, Snoop “We need a broad set of scalable propositions that make people’s lives easier. HMRC’s adoption of open banking is a good example. PensionBee and Plaid partnering to turn a two-week pension contribution process into something instantaneous, while helping people save more easily for retirement is another. And the work Snoop is doing to help make people better off is another example. With Snoop, every customer gets a unique money management experience based on their open banking data. Hyper-personalisation and the ability to connect people with relevant and personalised money insights at exactly the right time enables the app to be relevant, practical and useful in people’s everyday lives. We’re beginning to see just what a profound impact it can have. The implementation of VRP will be another huge moment for open banking in the UK. This, combined with the scrapping of 90-day reauthentication, will play a significant part in unlocking open banking’s potential.” Mark Chidley, Independent SME Representative, OBIE “As the implementation phase of open banking concludes it is essential that the CMA and its fellow regulators (the Financial Conduct Authority, the Payment Systems Regulator and the Information Commissioner’s Office in particular), orchestrated by government, ensure that: Open banking implementation is done well. Important end user protections and initiatives developed through the open banking programme are secured for the future. Transparent steps are taken to ensure that open banking is successful not just as a competition remedy, but also as a paving measure towards open finance and smart data. “We have been encouraged by the CMA’s 5 November open banking update to believe there is every chance that these important outcomes are delivered in the broad interests of the people and small businesses that open banking was always intended to benefit. “We eagerly await the CMA’s consultation response and wider regulators’ statement in the early part of the new year.” Nick Levine – Chartered Accountant and Fintech Consultant “VRPs will play a key role. The benefits of smart overdrafts and intelligent savings are highly compelling and made possible with the introduction of sweeping via VRPs. I expect many people to engage with open banking for the first time through these tools and for trust and confidence to continue to increase.”
Variable Recurring Payments (or VRPs for short) are a hot topic. They are a form of payment instruction that can be set up and used to make a series of future payments. At the moment it’s not uncommon to hear VRPs referred to in the same breath as a process known as ‘sweeping’, but VRPs will be used well beyond sweeping as well. Granted, if you operate outside of the financial services marketplace, the chances are you probably haven’t heard of VRPs or sweeping. However, they are at the heart of a new form of open banking-enabled technology that is set to make life a whole lot easier for small to medium-sized enterprises (SMEs). SME Think Tank views In a recent OBIE Think Tank we brought together representatives from across the business landscape to explain how VRPs work, both in the context of sweeping and other propositions that can provide big benefits, and potentially impact, the SME community. What is a VRP? A VRP will allow customers to safely connect authorised payments service providers (PISPs) to their bank account. Providers can then make a series of payments on a customer’s behalf within agreed parameters, offering more control and transparency than existing alternatives. For many consumers and small businesses, the most well-known method of collection for a recurring payment is via Direct Debit or continuous payment authority (CPA) – a type of recurring payment that a merchant makes using their debit or credit card details. Unlike these two well-known methods of payments, a VRP works by letting customers safely connect authorised PISPs to their bank account so they can make payments on their behalf. VRPs offer a range of benefits over Direct Direct and card CPA to both the small business making payments and the small business receiving payments, as the table below sets out. At a glance: Recurring payments Direct DebitCPAVRPTransparencyYou have visibility of the mandate and the last amount taken.You can’t see details, only the transactions that appear on your statement. Mandate and payment parameters are visible in your banking app. The payment parameters limit the amount that can be taken and also allow an end date for the mandate to be set.SecurityInvolves sharing a sort code and account number in an uncontrolled environment.Involves sharing all card details on a debit or credit card.Must set up via a secure consent journey. It has to be online and through your bank.FlexibilityTakes place on the same day (or nearest working day) every month and if the timing or amount changes, the payee has to be notified in writing (unless waived in terms and conditions).A company is given permission to take funds from your debit or credit card on a flexible basis. A set of parameters is agreed and a flexible payment can be made within those agreed boundaries. Why should you care about sweeping? Sweeping is a particular proposition which can be developed using a VRP to automatically move (or sweep) money from one of their accounts to another of their accounts. There are many examples of where this could be used, such as sweeping funds from a current account to a savings account, or a current account to a loan account. And of particular interest to our Think Tank was an industry consultation where the Competition and Markets Authority (CMA) mandated the leading nine retail banks to make VRP functionality available, for free, to any PISP as long as the payment is specifically for the purposes of sweeping. This means that PISPs can develop solutions for customers to help them run their finances run more effectively, and ultimately make their money work harder. For example, money can be automatically transferred between accounts, such as moving excess funds into an account where it can generate interest. Alternatively, it could be used to transfer money to repay an overdraft or loan account. However, we know that the industry is busy developing VRPs for other propositions as well. At a glance: VRPs for sweeping versus VRPs for other use cases VRPs for sweepingVRPs for other use casesAll CMA9 banks must offerOptional for all banksFree to usePotentially chargedFree to accessRequires a contractLaunch due summer 2022At the discretion of individual banks The real-world business benefits of VRPs for sweepingBy coupling VRPs with sweeping, the OBIE has identified potential benefits relevant for both consumers and SMEs. These include: Building up savings Currently there is £100 billion pounds tied up in the UK’s business current accounts earning little interest. However, though many businesses are cash-rich, many don’t have the time or inclination to do anything with their savings. An instruction could be set up with a savings company to monitor a business current account. Every time the balance goes over a certain amount, that money could be swept into a business savings account. Every time a balance drops below a certain amount, money could be swept back (though there is acknowledgment that current low interest rates make this of limited value). Preventing overdrafts There is potential for sweeping to create a form of unbundled overdrafts to bring more competition to the business current account market. The real-world business benefits of VRPs While there are pockets of opportunity for VRPs and sweeping for SMEs, our panel saw the real prize in non-sweeping use cases. This could be as a replacement mechanic for existing payment methods that carry particularly high cost, or as a route for better, more timely payments. These include: Cost savings on international payments According to a report in 2016, approximately £4bn of excess profit was generated by banks where small businesses default to make international payments. That number is only set to increase. VRPs for sweeping could be used to take the friction out of using an alternative payment company or FX business. Tax efficiencies As HMRC embraces open banking-enabled technology, we know the revenue is looking for more real-time options to support prompt and secure payments. Not all SMEs manage tax well – but what if tax could be siphoned off for payment at the point of invoice collection? Tackling late payments. With late payments the thorn in the side of many SMEs, our panel were more animated when discussing the wider use of VRPs to help them get paid, whether in a real-time retail environment, or in supporting instant payments. New options in the subscription economy The subscription economy continues to expand, with many SMEs participating. VRPs offer a method of payment which could combine the low cost of Direct Debit, with the speed and flexibility of cards, which could be a powerful alternative for this growing market. So what’s the verdict? Our discussion clearly demonstrated the appetite from the market to use VRP technology and take advantage of this capability. Helping mitigate late payments were deemed the real prize, but our panel also welcomed removing some age-old headaches, such as the indemnity claims associated with Direct Debit. The final thought was that the innovations discussed would be helpful if they provide a benefit that is easily articulated and saves time. The key to adoption will be in ensuring time and cost barriers are overcome to ensure SMEs get to the start line. Notes Report based on discussions at the OBIE SME Think Tank which took place on 23rd September 2021.
The Open Banking Implementation Entity (OBIE) has published the Open Banking Impact Report (October 2021) assessing the extent to which open banking is helping consumers and SMEs. It paints a positive picture. Our new research found that there are a growing number of services in the market, and these are increasingly being adopted by customers. Customers who are using open banking-powered apps want to continue using them and are interested in expanding their use of other similar products and services – particularly those that help them take more control of their finances. Most importantly, the findings are clear that most users say that open banking apps are helping to resolve their biggest financial challenges – such as helping them keep to budgets, reduce unnecessary expenditure, shop around for deals, and minimise bank fees and charges. And users of savings apps report that these apps are helping them to save – many for the first time. This is an exciting and unique piece of new research. It is the first cross-market quantitative research undertaken which seeks to understand verified customer attitudes to open banking-enabled services. Most users say that open banking apps are helping to resolve their biggest financial challenges – keep to budgets, reduce unnecessary expenditure, and shop around for deals Who is using apps? The research objectives were to establish the profile of customers using open banking-enabled money management and micro savings apps, to understand their reaction to using these apps and whether they were benefiting from using them. Our report forms part of our commitment to present a full picture on the development of open banking, and evaluating the benefit it is providing to end-users. Apps are easy to set up The results are clear, demonstrating that an overwhelming majority of users have a positive attitude towards using these apps. Ninety per cent of consumers find these banking apps easy to set up and over three-quarters (76%) of customers say that they will, or are likely to, continue using them. But the most important question is whether these services are actually helping consumers to be more engaged with their finances, make better decisions, save more, or get better deals? The results are extremely encouraging. Most customers using open banking products (76%) acknowledged that these services have helped them save more and build a financial cushion. Those customers using PFM apps told us that they were: helping them to keep on top of expenditure (75%) reduce unnecessary expenditure (62%) keep to a budget (64%) shop around more (59%) reduce fees and costs (55%). Creating a financial buffer Savings app users clearly believe the apps are helping them to save. For more than one in five, this was their first savings account, and overall, nearly two-thirds had seen their savings go up since they started to use their app. Three-quarters agreed that they now found it easier to regularly save money left over each month, with 71% now feeling more confident that they have a financial cushion or buffer to meet unexpected spending. This tangibly demonstrates the progress that open banking is making in helping to address one of the biggest financial challenges that UK consumers are facing, post-pandemic. One fifth of the UK population has less than £100 in savings, and one in 10 have no savings at all. For the first time we can profile the early adopters of two core open banking-enabled propositions. Twenty-seven per cent rate themselves as low on financial confidence and many of those adopting these services faced significant levels of worry about aspects of their finances: 43% worry they don’t have enough savings 31% worry about their level of debt and 18% struggle with their monthly bills. These are exactly the consumers who can benefit most from support to achieve better financial outcomes. Continued – and extended – use Alongside findings from consumers that they are happy using open banking apps, is their view that these services will continue to serve them well into the future. Indeed, so much so that 84% of respondents said they would be interested in expanding their use of open banking services. Only 8% indicated that they would not. Addressing financial needs The results demonstrate that, in the eyes of consumers accessing them, new open banking services are genuinely helping to address their key financial needs. We see positive, committed customers, really benefiting from using these services and a growing number of apps. An additional 13 open banking-enabled products and services have come to market in the first six months of the year. We also see rapid growth in the number of active users of open banking services – penetration among digitally-engaged customers has been steadily increasing: from 2.5% in January 2020 to 5 – 6% earlier this year, and now around 8%. As the pool of consumers and providers grows, open banking will increasingly empower customers, taking the stress out of finance and helping to cut the complexity of financial decision-making in a way that puts them firmly in control of their financial lives. You can read the full report here. What consumers say As part of our research, we also asked independent research agency, Marketing Means, to interview a small number of UK consumers, from a range of age groups and income brackets, who shared their experience of using some of the market-leading open banking apps. You can read the full report here and insights from the report below. How consumers use money management apps How consumers use savings apps Notes: The report is built using a methodology developed by the Personal Finance Research Centre at the University of Bristol. We produce a new report every six months. The insights are based on several data sources and research studies which we detail in the methodology sections. As part of our research, we also asked independent research agency, Marketing Means, to interview a small number of UK consumers, from a range of age groups and income brackets, who shared their experience of using some of the market-leading open banking apps. You can read the full report here and insights from the report here. How consumers use money management apps How consumers use savings apps
It was wonderful to see so many members of the open banking community at the recent Open Banking Expo and at our own ecosystem events. It reinforced how much we have all missed meeting in person and, even in the two short years since the pandemic, how much progress open banking products and services have made. We look forward to continuing this collaborative journey to help open banking reach its true potential. From our own point of view at the Open Banking Implementation Entity (OBIE), we are pleased to say that in those past two years, we have: delivered most of the agreed revised roadmap seen the launch of successful account-to-account (A2A) payments witnessed the rise of the QR code, particularly for charity payments, including the legendary Captain Tom campaign delivered the standards for Variable Recurring Payments (VRPs) for sweeping and seen HM Revenue & Customs (HMRC) take £1.5bn in tax payments via open banking. And some of these milestones turned out to be hot topics for discussions at Expo. Unleashing the potential of VRPs On the main stage, my colleague Alan Ainsworth, Head of Policy at the OBIE, chaired a session on VRPs. Niamh Greally, VP Product at Chip, explained how the savings app helped users save more easily, cut the cost of debt, and make money work harder, and that VRPs would make it easier to sweep spare money into interest-earning accounts. Fliss Berridge, Director and Co-Founder at payments platform Ordo, highlighted further opportunities for VRPs to play a part in smooth point-of-sale payments and invoicing, as well as the potential for managing irregular – as well as – repeated payments. Matt Parish, Product Lead, VRP, at API developer TrueLayer, which provides the platform for Chip, spoke about how 2022 will be the year of VRPs and that he hoped to see some APIs go live in January. The panel agreed that there were opportunities to challenge Apple Pay and Google Pay and that VRPs will be a game-changer for consumers and SMEs alike. Consumer attitudes to apps The OBIE launched its second Open Banking Impact Report which assesses the adoption of open banking services in the UK. It paints a positive picture, showing that customers who are using open banking-powered apps want to continue using them – particularly apps that help tackle financial challenges such as sticking to budgets, reducing unnecessary expenditure, shopping around for deals, and minimising bank fees and charges. The challenge, as always, is to build sufficiently compelling propositions to persuade both consumers and businesses to feel confident in sharing their data. HMRC – the ultimate use case At my own session, a fireside chat with James Hickman, Chief Commercial Officer of Ecospend, we discussed how the UK government became a global leader in open banking by using the technology to collect nine different kinds of tax, ranging from corporation tax to PAYE to VAT. Kevin Guest and Kseniya Shuturminska from HMRC were on hand to share that there are plans to extend that to a total of 30 different products next year. The HMRC team also revealed that it is helping other government agencies explore how they can use open banking to collect payments. And just in case you thought it was all about taking money from citizens, the team is also looking at delivering outbound payments to support vulnerable customers. Finishing up, our new Chair and Trustee, Charlotte Crosswell, delivered the closing keynote, sounding another note of optimism, in particular about payments. She said: “HMT and the Payments Systems Regulator have also indicated their support for the development of open banking payments. How can we unleash the potential for customers and businesses to pay and get paid by open banking payments? There are a lot of unknowns, but I do know that we as an industry can solve this.” Our thanks go to Adam Cox and his team at Open Banking Expo for getting us all together in an engaging, safe and enjoyable way. What is clear to me, is that two years without meeting is too long. We look forward to getting together soon to continue this collaborative journey to help open banking reach its true potential. We will be hosting more in-person events in the coming months to facilitate knowledge-sharing, networking and the continued growth of this exciting ecosystem we are privileged to lead. Watch this space for details of upcoming events!
The OBIE is a unique repository of insight, expertise, and experience gained from having brought the open banking programme to life in the UK. We are pleased to make this thought leadership available to the broader open banking ecosystem, as part of a new, regular, ‘The OBIE Op-Ed’ series. Contact press@openbanking.org.uk to request coverage of a specific topic. The Open Banking Implementation Entity (OBIE) is an organisation that was established as a competition remedy, and its commitment to accessibility and inclusion goes far beyond the industry it was mandated to disrupt. Part of its mission to be a public good extends to having an engaged, diverse and inclusive workforce. Such measures have led to the OBIE making flexible working opportunities available to staff, such as splitting full-time roles into part-time roles via role sharing. More recently, this has led the OBIE to be one of the first organisations to sign up for the Accutrainee Scholarship Programme. Legal trainee Chidi Onye Ogbuagu, who has been with the OBIE since March 2021, speaks about his experience of the Accutrainee Scholarship Programme, his role in the OBIE team and his ambitions for the future. Chidi Onye Ogbuagu, Legal trainee As I neared the completion of my studies, I shared the anxiety of my peers as we hurdled obstacles towards securing a Legal Training Contract. It’s a competitive landscape and we don’t all necessarily begin at the same starting line. I was in between legal jobs during the pandemic, and I came across the Accutrainee Scholarship Programme. Encouraged and excited by its affirmative action approach and its mission to create opportunities for talented graduates irrespective of background, I decided to throw my hat in the meritocratic ring. After undergoing a rigorous selection process, I was made a Scholar and awarded a placement within the OBIE’s in-house legal department. Having carefully observed the growing popularity, regulatory scrutiny, and potential of financial technology firms, I was delighted to hear the news. Not only because I would be working in my first-choice sector but also because I would be supporting the government’s own ambitions to promote innovation and financial inclusiveness. My experience at the OBIE has so far been outstanding. My role has involved lots of new exposure to different policies, regulations, and stakeholders, which has greatly informed my perception of the industry and future career ambitions. In addition, I have gained insights into the fintech world, not just from a legal standpoint but also from a consumer perspective, as I got to observe OBIE’s innovative thinking and the complex work that has a direct and measurable benefit to consumers such as variable recurring payments (VRPs) and Sweeping. It has also been a different experience joining a new organisation during a global pandemic where the entire office was, and still is, working remotely. Despite me only just starting to meet my colleagues in person, I couldn’t have felt more supported and valued throughout my secondment. I have not only been able to establish myself within OBIE’s Policy, Legal and Communications team in which I sit, I have also expanded my professional network by getting to know the wider OBIE team and be exposed to all of their respective areas of expertise and experience. I am very grateful for the opportunity that the Accutrainee Programme has given me. Through its mentorship scheme, training sessions, and unparalleled network of trainees and legal professionals, I feel as though I am being expertly shaped for a career as a solicitor. I am working for OBIE in this placement until March. I would then like to be placed within another company, or law firm committed to positive change to build on my legal and professional experience. Finally, I am very appreciative of the OBIE. Not just because of how seamless it has felt to work alongside its specialists, but mainly because of its decision to uplift those who want to enter the legal profession and feel they have a lot to offer but who might not have the same chance otherwise. – – – ENDS – – – About the Accutrainee Scholarship Programme If your organisation is interested in supporting the Accutrainee Scholarship Programme please see further information below: The Accutrainee Scholarship Programme offers a simple solution for legal leaders to make a positive impact in supporting diversity in law through the delivery of high quality junior resources. The Scholarship goes beyond simply offering short term work experience to scholars but rather a genuine root to qualification through training contracts or qualifying work experience opportunities as well as meaningful contributions to their studies and exams. For more information please contact susan.cooper@accutrainee.com.
The OBIE have worked extensively with Government to support HMRC’s £3 million tender for open banking enabled services. While we had no input into the deliberation process, the contract was subsequently awarded to ecosystem participant Ecospend. OBIE is also supporting HMRC on wider opportunities for using open banking to automate and simplify the calculation and collection of tax, as well as reducing reconciliation risk. Here, Simon Lyons, Head of Ecosystem Engagement talks to Nick Down, Head of Payments at HMRC: Simon: Just for the readers, can I ask you first of all what is the scale of the operation you head up? We know that UKPLC aka the UK Government, is the biggest business in the land but many will not quite appreciate the numbers and volume of customers and transactions. Can you give a brief overview?. Nick: Virtually everyone in the UK is a customer of HMRC – either as a taxpayer, as someone who receives financial support payments, or both. We collected £636.7 billion in tax revenues and paid out around £40 billion in benefits and tax credits in 2019-20. That means payments are a crucially important part of what we do. We need to provide easy to use, secure payments for customers that are cost effective for the nation’s taxpayers. We are very much focussed on becoming a trusted, modern tax and customs department as outlined in government’s 10-year Tax Administration Strategy. It is a big task, but we are making steady progress and are particularly pleased to have gone live in March this year with what we understand is the first open banking payment service implemented by any government globally. Simon: You went live with open banking payments for Self-assessment on 24 March 2021. That process took around three months to deliver and complete which is quite staggering when we consider the size of HMRC. What were the key benefits that drove the decision to choose an open banking provider? Nick: We were looking for ways to make it easier for customers to pay which were good value for public money. Open Banking gives customers the option to have their payment details prepopulated from their bank account, letting them pay more quickly and reducing the risk of them making a mistake. Open Banking uses Faster Payment, which is a quick and inexpensive payment method. Implementing the new system so quickly was a great piece of teamwork between the Open Banking supplier and our digital delivery, payments and commercial teams. Simon: What are the internal reactions within HMRC and the wider government ministries to the implementation? Any nuggets you can share? Nick: There’s been a great deal of interest and universally positive reactions. Customers like the new service, too – they paid more than £1 million using open banking within two days of go live. Simon: OK you went through a process and engaged with a small fintech (Ecospend) I personally think this was the best part of the process. HMRC led the way by choosing a true fintech. It could have been one of a couple, but choosing a new emerging open banking player was so beneficial to open banking adoption. What problems did this present when we think of your legacy procurement process? Nick: We didn’t set out to engage with a small fintech. We would always promote adoption of Small and Medium Enterprises where appropriate but this was new technology, and therefore unfamiliar territory in terms of who the best providers were likely to be. Our biggest challenge was building requirements for a brand new solution, unprecedented in government; so, with support from OBIE, we explored the market to understand what good should look like. We brought in expert consultants in financial services to support the procurement and set out qualitative measures to provide a good basis for assessment. Some of the best responses were from the smaller fintechs, who were able to meet all of our requirements better than some of the larger businesses. Simon: You sit in a key strategic position in HMRC, what were the challenges you faced when considering embracing open banking? There were two main ones. The first was doing the groundwork to move where we were a few years ago, with payments being designed as part of each tax regime, and therefore inconsistent and somewhat confusing for customers paying several taxes, to where we are now, with a much more consistent approach to paying HMRC that provides a firm foundation for launching new payment services. The second was mindset: we knew we need to look outwards and worked hard to understand more about the potential of fintechs and make connections with the innovators in payments. You and your OBIE colleagues were a big part of opening our eyes to the new potential being created in the world of payments, and I’m very grateful for the help you gave us. Simon: What has the reaction of your bankers been to the initiative? Nick: That the new Open Banking payment service as a very good option for our customers Simon: HMRC has a very large procurement function, the biggest in the UK. Many of our OBIE ecosystem members really struggle when engaging with them and big corporates. Learning from what HMRC did what advice would you give/or what would you recommend? Nick: We have a large overall procurement function, made up of smaller specialist teams, such as the team working in financial services procurement. It is actually quite small, so we’re not as impersonal as some of your members might imagine. And we want to engage with Open Banking Ecosystem members as we know they have the expertise and ideas we are looking for to feed our innovation, as well as the required financial accreditation. We would encourage members to scan public noticeboards for any of our Procurement Information Notices and innovation days that we hold – and respond to them! We also make a point of attending industry forums and award ceremonies so they should look out for us there. We’d love to hear from them. Simon: The benefits of open banking have been recognised by HMRC by the plan to launch Self assessment, PAYE (early May) followed by CT and VAT. Are there any other plans in place that you can share. Nick: Throughout the coming year, we will be rolling out the Open Banking service to all our other taxes and regimes that can be paid by bank transfer, as well as looking for ways to improve the ‘payment journey’ (horrible term!) to make it as simple and efficient as possible for our customers. Simon: The million dollar question – You are meeting with a large UK plc, they ask “should we use/consider open banking” what would your answer be? Nick: Take the plunge! If you have thought about how Open Banking might dovetail with your payment strategy and your customers’ expectations, talk to OBIE about Open Banking. You won’t regret it. And if correcting customer payment errors or allocating payments to the right customer account is a significant task for your organisation, you should definitely consider Open Banking which pre-populates payment data with the correct bank account details.
The OBIE is a unique repository of insight, expertise, and experience gained from having brought the open banking programme to life in the UK. We are pleased to make this thought leadership available to the broader open banking ecosystem, as part of a new, regular, ‘The OBIE Op-Ed’ series. Contact press@openbanking.org.uk to request coverage of a specific topic. Open banking is at an inflection point, where positive action needs to be taken to maintain momentum and ensure the benefits currently provided to over three million users of open banking services extends to many more millions of people. Here Alan Ainsworth, the Open Banking Implementation Entity’s (OBIE’s) Head of Policy, explains what it will take to ensure that open banking, fintech development and innovation continues to prosper. “We pioneered Open Banking, which has now taken the world by storm.” City Minister John Glen MP If we look to the very origins of open banking, the objective was to increase competition and choice in financial services, and while many different actors have brought it to life, we cannot ignore the role of regulation in getting it going in the first place. In the case of open banking, the progress we have made to date has only been possible because (through a combination of PSD2, GDPR and the CMA Order) the CMA 9 have been mandated to implement the standards and implement them well. As the Smart Data Report makes clear, “feedback from those involved in open banking is that mandatory participation is a key step, open banking was around for a decade before it picked up pace and the key impetus was legislation requiring banks to participate and fund an implementation body.” Fast forward three years, and it’s clear to see how much progress has been made. We have more than 3 million consumers and small businesses who access a wide range of open banking enabled services each month. Our thriving ecosystem of more than 300 regulated Third Party Providers (TPPs), who are collectively bringing innovative new products to market, serves as an exciting example of fintech incubation, development and innovation. Our annual report serves to highlight the journey we have been on to make this happen, and that this progress is by design and not by accident. But we cannot afford to rest on our laurels. The recent publication of the Kalifa Review of UK FinTech, explicitly recognises open banking as a leading UK success story. In his foreword, Economic Secretary John Glen MP stated, “We pioneered Open Banking, which has now taken the world by storm.” This view is also backed by the Financial Conduct Authority (FCA), in its feedback statement on the future of open finance, and by the Department for Business, Energy and Industrial Strategy, as part of its Smart Data report. Yet for all these plaudits we stand at a critical juncture, as decisions have yet to be taken about how open banking will be managed, monitored and supervised. Out of the many proposals that have been put forward, it is positive to see overwhelming support to put whatever entity we evolve into on a more permanent footing. However, there are some real gaps in what has been proposed thus far, that if not addressed will have worrying and far-reaching consequences. On March 5, the CMA launched a consultation on the future governance of open banking. In his consultation submission, the OBIE Trustee Imran Gulamhuseinwala outlined a proposed model for the future governance of open banking that satisfies the CMA’s four specified priorities, that the new service model is independently led and accountable, adequately resourced to perform the functions required, dedicated to serving the interests of consumers and SMEs and sustainable and adaptable to the future needs of the ecosystem. The CMA is soon to publish all of the consultation responses, while a formal decision is expected in early June 2021. While everyone involved in the evolution of open banking will all be invested in seeing this become a great success story, one that we can look back on in a decade with pride we know that although we have much to be proud of, we are still pretty early in our journey. Firstly, as we know open banking didn’t happen overnight – in the years since PSD2 made open banking a regulatory requirement, the OBIE has been hard at work getting the right foundation ready. Yet there seems to be a wrong assumption that in terms of the implementation we are largely finished and are ready to evolve to a new phase. This is simply not correct. More work needs to be done – not only to get the roadmap complete and successfully implemented but to finish implementing the dashboards and to finish our work on making it easier for people to sweep money between their accounts. Even if we only looked at completing the roadmap as we are today, this would still take us well in 2022. Secondly, for open banking to solve the very problems that mandated its existence, we must ensure the continued quality of implementation and that the CMA9 continue to deliver on their obligations. We cannot ignore that this is a competition remedy and needs to be managed as such. The OBIE Trustee is proposing that the role is split into two, with the continuation of a Trustee, in addition to the Chair of the new entity. This would give an individual the teeth to ensure that the CMA9 continues to deliver high quality API’s that allow the TPP’s to develop products and that we address customer experience issues. Given that two out of every three customer journeys fail we are simply not there yet. Thirdly, when we look at ecosystem stewardship, there are a number of gaps. The CMA wants to see a vibrant, healthy competitive market that ensures positive consumer outcomes. Our statistics evidence that we are delivering improvements for more than 3 million customers and growing. We only have to look at the fact that we have more TPP’s in our ecosystem than the rest of Europe combined to see what can be achieved when ecosystem stewardship provides incubation, an environment to test products and to iron out issues. For that to continue, proportionate and logical funding provisions need to be established. The CMA9 should not have to pay the lion share – the Trustee has put forward a funding model that levels the playing field based on an FCA style levy, which means a contribution based on size, and doesn’t price out and therefore stifle innovation of smaller start-ups. Lastly, given all of the work and investment that it has taken to get open banking to where it is now, it would certainly be a missed opportunity if all of the learning and development is not utilised as open finance and smart data evolve. Yet, I have personally watched as repeated attempts at driving progress in this space have failed because of a lack of resource and the continued misalignment of incentives. Lessons from midata and the onset of PSD2 itself – coupled with the failings of jurisdictions outside of the UK to capitalise on the new regulatory environment – prove that an authority figure, as well as dedicated resources is required. In conclusion, as I said at the start when it comes to open banking in the UK, we are far from finished. We have been tasked with delivering a public good – in the case of open banking that would mean 15-20 million adults using open banking services. I wholeheartedly believe we are on track to deliver this, and while I welcome any steps to put the governance of open banking on firmer footing, let’s just collectively (and strategically) ensure that what comes next allows us to keep moving forward, to keep building, and crucially, to keep growing.
On 27th January 2021 the OBIE convened an expert panel to discuss the role that open banking can – and indeed should – play in addressing vulnerability. Revisit the recording of the OBIE’s Consumer Forum event from 27th January 2021, which featured the insight and contributions of: Faith Reynolds, Independent Consume Representative to the OBIE (Moderator)Chris Fitch, Vulnerability Lead at the Money Advice TrustDiane Burridge, CEO at Moneyline UKDr. Leda Glyptis, CCO at 10x Future TechnologiesJoe Gladstone, Assistant Professor at the Centre for Consumer Financial Decision-Making at the University of Colorado Boulder – Leeds School of Business Open banking and vulnerability: asking the big questions Who defines vulnerability? How should your financial data be interpreted, and who decides whether you match the definition? Who acts on this decision? These big questions inspired a highly engaging discussion at the OBIE’s most recent Consumer Forum in January 2021.They’re not simple, and they sparked a discussion on the broader use of data and the morality of making assumptions on an individual based purely on interrogation of that data. With the FCA suggesting that nearly half of all UK adults could be financially vulnerable, we probed how open banking could enable better products for everyone, no matter what life throws at them. Vulnerability to what? Chris Fitch, Vulnerability Lead at the Money Advice Trust, argued that any discussion had to start with the specifics: “What is the customer actually vulnerable to?” He returned to this point again and again – explaining that we have to think beyond assumed causes or overly-broad definitions. “Life events, health conditions, financial resilience, financial capability – these don’t tell us about harm, don’t tell us about detriment, or the pain a customer may face. They don’t provide guidance to the outcomes a consumer might face and, therefore, the action we need to take.” Building a bridge to better financial behaviour? Diane Burridge concurred in challenging the idea of ‘vulnerability’ as a monolithic concept. She used the phrase ‘State, not Fate’ to distinguish between an individual’s financial history and circumstances, and their future behaviour if certain vulnerabilities or other external factors could be addressed. She went on to explain that, in the course of using open banking data in their credit underwriting service, Moneyline are moving towards being able to direct customers towards non-financial support systems for vulnerabilities that might be indicated in their financial data. She said: “Where we can’t help responsibly with a credit product, we look to ways we can help maximise financial resilience. The rounded picture of circumstances with open banking data acts as a triage so we can signpost different forms of help in an informed way.” But who designs the bridges? The question of ‘informed support’ and intervention led to a hotly debated talking point: who makes the judgment that someone needs help? And, crucially, how to ensure that any such intervention is meaningful? Dr Leda Glyptis of 10x Future Technologies was clear that this responsibility should not sit with banks – and indeed could not. She explained that, while banks sit on lakes of data, the data isn’t structured in a manner that can be easily interrogated. So, due to systems, policies, talent, and resource, “unless you can ask clever questions, you don’t get the right information back.” And that is why, as she went on to say, “[Banks] are part of the solution rather than the solution. They should participate in discussions, so that we can get to a place where servicing vulnerable customers and communities is something you can do as part of your normal business.” Big data. Bigger questions. This idea of ‘data lakes’ and the sheer masses of information being held within financial institutions raises another point – that of privacy. Moving the conversation beyond the confines of open banking, Joe Gladstone argued that the metaphorical data genie has been let out of its bottle, never to be put back in. He went on say that, while open banking is a ‘gift’ for the purposes of understanding customers, society was lagging behind what is technically possible. This perspective is not often aired at our Consumer Forum events – and sparked renewed debate within the panel – summed up by Chris Fitch when he posed the question, “just because we can do it, should we do it? And if we should do it, are we ready?” The customer must always come first Open banking – the data it leverages, and the services it enables – is ultimately focussed on empowering each of us with the potential of our financial data. And, our panel all agreed, the key to unlocking that potential in a responsible and ethical way is to ensure that Customers are at the heart of product development. Designing simple, clear and effective propositions, with end user input, will be the key to realising the opportunity of open banking beyond simply developing products, but in transforming the financial experiences of all of us – and especially the vulnerable within our society. By improving the focus on actual vulnerabilities, and by bringing ‘real people’ into the heart of design alongside Product Managers, Chris laid out a route towards addressing the outcomes of these vulnerabilities effectively using open banking data.