Open Banking: how the rhetoric is becoming a reality

Conrad Ford, Funding Options: we need to change the first five pages of a Google search from cynicism to positive stories

It has been ten months since the birth of Open Banking and it has been a tumultuous road since 13 January 2018.

Theorisation about its future have been rife, however, while the public debate has played out, behind the scenes a raft of private and public sector organisations have been working hard to bring innovative products and services to market.

Open Banking Limited reports that headway continues to be made; their July – August 2018 statement shows that there are now 67 regulated providers made up of 44 third party providers and 23 account providers with over three million uses of API calls in July – up from two million in June.

And as we head towards year-end, the fruits of the sector’s labour are now becoming evident as the first wave of consumer and business facing products start to deliver real and positive results. These solutions are designed to solve some of the biggest issues that individuals and businesses face when it comes to money management and are excellent examples of how Open Banking data is beginning to make an impact.

With so much great work happening, why are the first five pages of Google filled with cynicism and negative projections? One reason could be that it still hasn’t filtered into the national consciousness. In fact, a recent YouGov survey showed that just 28% of adults quizzed about Open Banking are aware of it. Matt Palframan from YouGov recently commented that, instead of a revolution for the financial sector, what we are actually seeing is more of a slow and silent evolution and that financial service providers need to ensure that there are real benefits for consumers. This month, our organisation was part of Open Banking in practice – a loan application from a Kent beauty salon – a process that meant the business received a loan, from application to approval, in one hour 23 minutes.

According to PWC, 71% of SMEs and 64% of adults are expected to adopt it by 2022 and 40% of small and medium enterprises (SMEs) have indicated they would not be averse to sharing their financial data for Open Banking if offered by their current account providers. This is music to the ears of the current regulated providers. However, to achieve these numbers, there is a big job to do and the fintech sector must demonstrate success and provide reassurance – especially around security.

As a group, we are agile risk-takers used to new ideas and innovative approaches. We need to apply these principles to communicating with small businesses and individuals; we have built our products and services but we cannot wait for them to come – we must go out and bang the collective fintech drum demonstrating how we are helping consumers with their financial management and small businesses solve some thorny issues that are restricting their growth and expansion. We’re in a position of strength; ultimately our combined efforts are predicted to boost the economy; PWC estimates a £7.2 billion revenue opportunity created by Open Banking by 2022.

So what’s next?

Highlight the issues

We need to demonstrate to consumers and businesses that they no longer need to put up with the status quo. For many businesses, for example, financial management is complex and soaks up valuable time and resources – mainly because they have got used to the existing traditional “systems” and ways of doing business. But Open Banking is changing this; issues no longer have to be issues and it is our job to tell them the good news.

For example, small businesses that need to access additional finance are used to the traditional long-winded process operated by the traditional lenders; SMEs might end up scanning their paper bank statements, only for the data to be manually re-entered into the underwriting systems of modern online lenders. This is laborious, and for many businesses who failed to be awarded a loan, it was a time-wasting exercise after which they still faced the challenge of lack of capital. Worse still, thousands of firms are discouraged from applying for loans and have never approached a bank about it citing fear they will be declined or subject to poor treatment.

However, with Open Banking data, new insights and supporting intelligence are able to detect how a small business is performing and their likelihood to default based on a number of factors including current account performance, cash flow and behaviours. This is significant for small businesses; no one business is like another yet, until Open Banking data, the traditional processes lumped them together and assessed them in the same way.

Say it, say it, say it again

Expecting a deep understanding of Open Banking amongst the nation in just a few months is expecting too much. While we have all been talking about the advantages of Open Banking for years, for the majority of people, it’s a new concept that they’re not familiar with.

Leveraging the good news stories, the innovative nature of the UK, the advantages and the people will gradually win over the nation. While the innovators and early adopters will trailblaze our products, we need to move up the bell curve rapidly to encourage the early and late majority through word-of-mouth, friends and family, ambassadors, influencers and endorsers.

Collectively, or individually, if we focus our efforts on developing the stories and emphasising security and safety, then confidence and trust will build and we will start to experience a sea-change as trial turns to loyal users. Much of this can be done by showcasing successes.

Showcase success

There’s no doubt that we need to demonstrate very real successes and we can only do this in partnership with our clients, end users and customers. They are our ambassadors who will talk to friends, family, colleagues and so on to build a ground-swell. We need to develop closer relationships with them ensuring that we can use their credentials, their anecdotes, their stories and experiences.

How have we made a difference? Have we saved them money, time, resources, reduced their headaches, enhanced their businesses? This is the power of Open Banking but it needs to move from the technical to the accessible; language that is used by the everyday small business owner or consumer so that they incorporate Open Banking into their own vernacular – rather than forcing our own on them.

Setting the pace globally

My feeling is that we have been hiding our light under a bushel as a sector. We attract investment from all over the world, significant government and private sector support and as a result, we are setting the pace globally for fintech innovation. These are attributes that we need to leverage when demonstrating credibility to a nation that is currently focused on Brexit and associated issues.

Our sector is a powerhouse at home and overseas and we need to turn heads. One of the reasons for our success is our extremely favourable regulatory fintech environment. Just look at the work done by Nesta backed by the CMA with the “Open Up Challenge” – a successful demonstration of how private and public can come together to unlock innovation. In the case of The Open Up Challenge prize fund, it has stimulated the creation of ambitious products using Open Banking data all designed to help small businesses save time and money, find better services, reduce stress and discover the intelligence in their financial data.

Having been a proud winner of the Open Up Challenge Phase 1, we understand just how much support is being put into our sector. Now is the time to demonstrate to the nation that we are part of future solutions – and that many of them are proudly homegrown.

As fintech companies working on solutions driven by Open Banking data, should we be working together more to promote our collective message? All I know is that we need to change the first five pages of a Google search from cynicism and hyperbole to those brimming with consumer and small business case studies, stories from advocates, testimonials and reviews from happy users and overall sector successes. Because that’s the real future for Open Banking.

By Conrad Ford, CEO and founder, Funding Options