What you need to know about the Open Banking revolution.
‘Open Banking’, aka ‘PSD2’ launched in mid Jan. We believe it’s a silent revolution in the making. Driven by a new EU directive and new UK competition rules, it means that banks will have to share customer financial data like transaction history and spending patterns when an account holder requests it.
‘FinTech’ has been attacking markets where banks have been complacent for some time. From the extraordinary profits in foreign exchange to customer experiences that haven’t moved with consumer habits, there’s plenty of opportunity. That’s reflected in the huge sector growth - and in a boom in investment where FinTech businesses account for almost half (£2.99bn) of all the funds invested in UK tech companies last year. Open banking has the potential to accelerate progress further, break down barriers to markets and increase competition.
Here’s our top list of resources to get you up to speed on the start of a FinTech revolution.
McKinsey on Data Sharing and Open Banking.
Read this because it’s a great introduction to understand the global implications of the open banking revolution. The Consulting Monolith provides a very corporate perspective on the challenge and opportunity. It gives you a brief overview of the jargon - from APIs to regulation and the potential impact that banks should expect feel.
Which? on Open Banking and your financial data.
Read this because it’s an interesting insight into consumer concerns. Data ownership is a big issue. People are worried, despite clampdowns through GDPR. It outlines some real consumer problems - including who’s responsible should you experience unauthorised payments.
The Times on Open Banking Collaboration at HSBC.
Read this because it’s an interesting insight into the big bank’s response to Open Banking. HSBC seem to be embracing it (though mind that this is an advertorial). What’s not clear is whether is how seriously banks are taking the threat yet: if it’s a PR exercise for shareholders or addressing a serious threat that could commoditise their services, reduce switching costs and increase churn. We’ll leave you to make your mind up.
Evry on PSD2.
Read this because it’s comprehensive. Simple. Informative. It’s also very pretty. Evry are an insight company. They focus on consumer behaviour. They make some sensible predictions on what they expect to happen over the next year in the banking space, thanks to the introduction of PSD2. They focus on proactive strategies for banks, but it’s a valuable report for experienced fin-tech founders too.
Tech Crunch on TrueLayer.
Read this because TrueLayer is the hottest startup in the PSD2 space right now. It’s created an API of APIs - an easy way for new FinTech startups to connect to the new sources of data the banks are obliged to provide. What’s special about them? It’s the speed to market that they are enabling other startups to seize - removing the barriers of building their own code.
Chris Skinner on FinTechs vs Banks, Round One.
Read this because it’s a more technical overview of the opportunities and challenges of Open Banking and PSD2. Chris Skinner is a prominent commentator on financial markets. He’s knowledgable and no nonsense. In this article, he outlines the issues, opportunities and the startups tackling them.
A few last words.
We believe that change is coming. That there's huge opportunity for banks and startups as consumers begin to understand and accept Open Banking. If you're a financial professional, I'd love to know your thoughts about the challenge.
Drop me a line with your questions and comments. Let’s grab coffee and a natter. Email me at firstname.lastname@example.org.