During her one hour presentation to the Ladies Executive Club, Dr Beaumont stressed that the aim of the open banking group, (which includes industry experts from banking, open data, consumer and business communities), should be to create a regulatory and legislative environment in which disruptive, technology-driven firms can be successful.
Beaumont said: “Government realised that… the white gold of the financial services industry was data. And that data was the really valuable bit for the financial services industry. And they realised that banks traditionally have done three things with data. Your data. Hide it. Hoard it. And never ever look at it. “
She argued that the development of open banking will enable the provision of financial services that use data intelligently and in real time based on more accurate measurement of risk, based on past history.
The Key Open Banking drivers
Beaumont said the key drivers of this opening up of data or ‘open banking’ are four-fold:
• Regulation. Here in the UK it is driven by The Competition and Markets Authority (CMA). To deliver Open Banking, a new organisation was created and is working with the nine Banks mandated by the CMA (Allied Irish Bank, Bank of Ireland, Barclays, Danske, HSBC, Lloyds Banking Group, Nationwide, RBS Group, Santander), as well as challenger banks, fintechs, third parties, consumer groups and other parties to define and develop the required Application Programming Interfaces (APIs), security and messaging standards that underpin Open Banking.
• Technology. Variously known as machine learning and artificial intelligence it is essentially the technology that allow the ingestion of massive amounts of data and its analysis.
• Consumer behaviour. People now expect more personalised services in exchange for their data. Most commonly, on Amazon we’ve been well trained in this respect.
• Competition. This is where it all comes together in the form of innovative offerings from fintech companies.
She stressed that, while some of the fintech start-ups driving this innovation will fail, some won’t. Moreover, the tech Titans such as Google, Amazon or Paypal certainly won’t.
“If you look at the partnerships and investments that they’ve made over the past three years, you’ll see three overriding themes. Theme number one, be in payments. Why? Because that’s the moment where you can see what people are buying. That’s data, be in payments. You are there at the dopamine moment of payment. You know what the person bought, where they were, what they were doing.”
“They also bought heavily into API technology which is the technology over which the data flows. Huge investment made in API. The rails on which the future industry will run. They also made huge investments into the software interface … So Facebook, Messenger, Amazon Alexa, and anything else that you might be on or chat on.”
Thus, banks run the risk of losing their customer relationships. “If they don’t take advantage of open banking, what this means is they get to be a high-cost utility.”
She ended her discussion on a positive note, saying: “There are advantages for those people who can access and use the data that consumers provide to deliver services that are pre-emptive and predictive and valuable and based upon the risk of that individual. If you did that, you’d fundamentally improve, at a time when we really need it, the UK economy, because money would flow to those people that need [it the most] at a price that fairly represents the risk that they present.”
Key innovations likely to affect the mortgage market
Open Banking Standards could help drive innovation and deliver a better service to intermediaries and customers.
• Lenders could offer borrowers better terms for loans. If customers could securely share their transaction data with third parties through an open API (technology that enables data to be easily shared) potential credit providers could use it to better target their loans.
• Small businesses could save time on their online accounting. An API from their current account provider would make it easier to reconcile payments — all a business owner would need to do is log into their accounting platform, select relevant bank accounts and give their permission for the data to be shared.
• Faster, better product development. For challengers in the industry having access to open bank data, and clear, secure ways to integrate it with shared customer data, will mean they can quickly develop new, or better, products and services.
• Improved service from banks. Being able to make their interactions with customers smoother and simpler will help them to find efficiencies, improve customer service and deepen their customer base.
Dr Louise Beaumont (SPEAKER)
Alison Beech, managing director, Valunation
Lynda Blackwell, (until 6 October) mortgage sector manager, FCA
Martese Carton, head of intermediary distribution, Leeds Building Society
Esther Djikstra, director of strategic partnerships, Lloyds Banking Group
Nicola Firth, product development director, Compass Systems
Gemma Harle, managing director, Tenet Group (until October when moving to Intrinsic)
Maria Harris, director of retail mortgages, Atom Bank
Amy Harland, press and publications officer, BSA
Victoria Hartley, group editor, Mortgage Solutions
Karen Hedges, mortgage manager, First Complete
Rachael Hinchcliffe, client relationship manager, Legal & General Surveying Services
Paula John, editor in chief, Mortgage Solutions
Clare Jupp, director of people development, Brightstar Financial
Fiona Kitchin, head of marketing mortgages, Aldermore
Paula Mercer, intermediary business development manager, Atom Bank
Samantha Partington, editor, Specialist Lending Solutions (now at Property Week)
Emma Payne, national account manager, Mortgage Brain
Oonagh Sheehan, commercial manager, Mortgage Solutions
Louisa Sedgwick, director of sales, Vida Homeloans
Toni Smith, sales operations director, First Complete
Liz Syms, director, Connect for Intermediaries
A huge thanks to our hosts on the day Atom Bank.