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Open Banking - Comments on CMA Year 2 Report

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Last week, the CMA released a report on the status of open banking after 2 years in place in the UK. This blog will reflect and challenge the comments from the blog “Open Banking year two: Insights from the CMA9” and what the various banks perceive as progress.

To set the tone, none of us who were part of the original team under the first trustee and the first director, had any idea that this movement would become as relevant as it is today, but even then, it was NOT considered to be simply a regulatory requirement and check box. We knew even back then that open banking was much more than that. To state the obvious, open banking is by far the biggest impact to the financial sector, period. Why? Because open banking has opened the door to open finance and eventually to open data that will see cross sector integration and an impact to true social and financial inclusion to not only the banked but more importantly to the unbanked. 

But this opportunity of social and financial inclusion can only happen through culture changes to traditional banking, true collaboration and allowing innovators to innovate providing consumers with true “open” products and services that allow them to take control and make sound decisions using their own data. Yes, consumers owning and making decisions on their own data by deciding how and when their data is to be used. 

In reading the comments of the banks in the article mentioned above, you have to seriously question what some of those banks deem as success through the offering of aggregation services. Now, most of these banks have incubators where so many fintech firms participate and fight for the spotlight of their solutions and with London declaring itself the fintech hub of the world, it is very difficult to understand why all that we can show after 2 years are aggregation API’s(?). We can and should do better than that! 

Supporting what the article states, banks in the UK continued to miss deadlines and failed to truly bring forward relevant solutions even though the OBIE presented a set of guidelines to further support the banks. To further highlight where banks stand, they have held consumer data for as long as they have existed so to say that, in the case of one of the banks, that they “have entered open banking in a position of strength” by aggregating credit card and savings accounts is very much missing the mark of the potential this movement has.

Not surprisingly, one of the Nordic banks did present a slightly more innovative approach but this comes from a region that has been innovative in the banking sector for many years. Another UK bank states how they have focused all this time on complying with PSD2 and open banking requirements which again shows that they are only seeing this as a regulatory checkbox.  

Culture changes in traditional banking, true collaboration and allowing innovators to innovate

So why are we not advancing in the UK?

  • Because banks in the UK have maintained a strong traditional view and are reluctant to change the culture needed from top to bottom to truly embrace “open”.
  • Because banks are not allowing innovators to innovate. Most banks have incubators and innovation departments full of extremely talented people but are not allowing them to unleash what they are developing. Why? Because it goes back to the first bullet point. A lack of willingness to change.
  • Because banks continue to have unreasonable procurement processes that are not in line with today’s need to quickly on board a new fintech. A 9-month procurement process is no longer valid in today’s fast changing world.

The result of the above will be once again that banks may become a background process ruled by the products and services that the big fintech’s will bring forward. Maybe that is what the banks actually want, to take a step back and not be innovative and instead just be a processor. 

It is not news that Generation X will most likely never step foot in a bank but what may be news is that banks will disappear as we know them if this way of thinking continues.  

 

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