Frictionless Finance Report - Thursday 18th March

Welcome to the Frictionless Finance Report, our monthly look at everything new in the world of Open Banking, FinTech, and consumer experience. If you’d like to receive this in your inbox, fill in the form at the bottom of the page. This month we examine industry’s response to the Kalifa review on FinTech and the consultation on a new replacement body for the OBIE.

Open Banking 

The role of the Open Banking Implementation Entity (OBIE) in getting Open Banking off the ground in the UK has been of paramount importance. 

Over the last three years, since its inception and birth out of the Competition & Markets Authority (CMA), the OBIE has cajoled, reassured, informed, inspired and articulated the way forward for Open Banking. 

With Open Banking in the UK reaching an inflection point, the CMA has begun consulting on how to take Open Banking forward. 

Early suggestions from the CMA suggest that UK Finance have proposed a new body be created to take on the responsibilities of the OBIE. In their article, Finextra posit: 

It is proposed that the new entity will provide a set of service capabilities which meet the needs of the OB ecosystem and help ensure its stability and resilience. These include managing the centralised OB directory, maintaining technical standards and enabling future improvements. 

It is thought that as part of the new proposals, the new body will the power to pave the way for the introduction of Open Finance, an extension of Open Banking that is more encompassing, covering products such as savings, investments, pensions, mortgages and more.  

Trustee of the OBIE, Imran Gulamhuseinwala, said: 

Open banking has been critical to supporting the UK's emerging and growing fintech industry. We have pioneered the technology and as the Government said only last week, it is now taking the world by storm.

As OBIE comes to the end of the implementation phase, we look forward to working with the CMA, who will set out the next steps and we encourage any external stakeholders to contribute to the consultation.

Jana Mackintosh, managing director of payments at UK Finance, said:  

We know that it is vital that the industry works together to realise the opportunities for even greater innovation of a new generation of banking-related products and services. Our proposed model for the future service company will help facilitate these exciting developments for years to come. 

There has been heavy coverage of the news across many news outlets, including Sky News, AltFi, Reuters, Finextra and the Paypers. 

Elsewhere, what we are seeing more and more of on a daily basis is calls to action for Open Banking to assist or supplement another part of the financial world. To that end, it feels like the introduction of Open Finance, allowing consumers to manage their entire financial lives from one screen or one dashboard, may not be that far away. 

This month we have read articles advocating for more use of Open Banking within payments, mortgages and savings.  

In Mortgage Finance Gazette, Jack Tenwick of Yolt notes that mortgage process, even in 2021, is still slow and cumbersome. Using bank data to prove income and affordability, and assisting in ID & verification, could markedly increase customer onboarding, and crucially, allow people to buy their homes faster. 

He also counters however, that at present, too few consumers are aware of, or trust Open Banking technology. Both lender and consumers, therefore, need to be educated on the benefits and security implications of using Open Banking. 

Two further articles in Finextra note how Open Banking could help both those who want to save more and in payments. Mike Peplow of Paynetics writes that with the use-case for Open Banking, having been proven beyond doubt by the introduction of Covid-19, it is now only a matter of time before it begins to surpass BACS as the preferred way to make payments in the UK. Using Open Banking, real-time banking alongside ‘request to pay’ allowing for real-time reconciliation of accounts.

Meanwhile, Josh Rix of Woodhurst Consulting writes in the same publication that Open Banking could be a real boon for those on lower earnings or who find it difficult to put money aside from month to month.  He earmarks some of the new popular savings' apps which round up money automatically, using Open Banking, and writes that next stage will be for apps to switch products when a better rate of interest can be found on another product.  

Best of the rest in Open Banking: 

• Natwest is implementing Open Banking payments for its business customers. It will allow customers to send money to recipients without having to know their banking details. News via pymnts.com 
• In a survey from Yolt, 42% of banking leaders want more information, support and guidance on data security within Open Banking. News via Mortgage Introducer.  
• In a separate survey from Temenos, and based on responses from 300 banking professionals, it found that 45% are set to change their business models to become a digital ecosystem. 29% have specific plans in place for Open Banking. News via Finextra 

Finance 

As we approach and pass the first anniversary of the beginning of the Coronavirus pandemic, we can begin to look back and assess some of the impact that it has had within the banking and finance sector. Undoubtedly, the shift to digital has been pronounced, perhaps accelerating plans by five years or more. 

As a result of this, and the possibility of it helping to spread the virus, cash has been left behind. Aside from some remote communities and older generations who rely on it, many of us will not have handled a note or coin for the best part of the year.   

Of course, profits have been hit as customers stayed home and did not use their money in any of the normal outlets, but as we move through the Spring of 2021, bank’s share prices have recovered to around where they were 12 months ago, and in some cases, dividend repayments have restarted. 

Still, however, we are seeing the continued fall out from Covid. For customers who cannot or will not visit bank branches, Open Banking - as we have seen – has become a necessity as paper statements have been replaced by digital statements, and new digital products are launched by both challenger bank and incumbents. 

This week, we take in some of the examples of both banks, and their customers moving to digital. 

• Spurred only the fact that Covid has forced the closure of 82 of its branches, HSBC has launched a new campaign to help its customers go digital. The bank reports that 90% of its customer interactions now take place over the phone, app or web. The new campaign will be hosted via webinar by specially trained bank staff.  
• Also recognising the need to move to digital is Lloyds Banking Group which has announced £4 billion has been spent working with FinTechs over the last three years. Like HSBC, Lloyds have announced that their ‘digitally active customer base’ has soared by almost 18m. 
• Some banks who are keen to keep their branches open have had to go some lengths to do so. So called ‘banking hubs’ are being set up in a few select parts of the UK that will contain a number of different banks, as well as a post office.   

FinTech 

There is only one place to start this week in FinTech, and that is with the long-anticipated review of UK FinTech published by Ron Kalifa, the former CEO of Worldpay. 

The review, commissioned by the Chancellor of the Exchequer, has made a number of key recommendations to try and ensure that FinTech in the UK remains well supported and companies have the resource required to remain competitive as other competing states and FinTech hotspots begin to assert themselves. 

According to the report, it will be possible for the UK to add £8 billion per year on to the economy if the country adds just a further 2% of the global FinTech market. 

The recommendations centre around ensuring that the UK FinTech industry has access to talent, is interconnected, is able to gain access to investment, and that the right skills are taught at schools, colleges and universities. 

• As we have covered above, Kalifa gave significant coverage of Open banking and Open Finance, suggesting a paving of the way for the roll out of Open Finance.  
• A new FinTech visa is expected to be accepted as a suggestion by the Government. The ability to continue to recruit some of the top tech talent from abroad has been highlighted as a concern since the UK exited the European Union at the start of the year. Currently, 42% of the UK workforce in FinTech are recruited from outwith the UK. 
• To ensure that UK FinTech companies have access to the finds they need to grow and flourish, the report states that a £1 billion fighting fund should be set up. 
• Finally, to ensure that the UK continues to lead internationally, the report suggests the creation of an action plan for FinTech, driving international collaboration through the Centre for Finance, Innovation and Technology (CFIT), and by launching an international “Fintech Credential Portfolio” (FCP).  
• Further tightening of regulation around cryptoassets was suggested, however reforms to existing payment services laws was also covered. 

As expected, there has been an explosion of coverage on the report, including the link to the report on the Government website, City AM, Finextra, AltFi, Fintech Futures, Pinsent Masons blog, FinTech Alliance and The FinTech Times. 

Best of the rest in FinTech

• UK Finance has called for the Financial Conduct Authority and Bank of England to improve links with foreign nations in order to improve collaboration between FinTech companies. News via P2P Finance News 
• Techcrunch has examined the private equity flowing into FinTech companies, looking particularly at ‘mega-round’ investments of $100m+. 
• FinTech magazine relays their top 6 tips for Fintech firms to succeed.  
• Klarna has announced a $1 billion funding round, valuing the company at a whopping $31 billion. 
• Is FinTech becoming bland? AltFi pose this question in a very intriguing article.  

Atto News 

As a visitor on the Atto website you may have noticed a few changes, reflecting a month filled with activity within the business. 

If you’ve followed us over the last decade, you’ll know that our Open Banking platform has developed in scale and capability. Our insights are now utilised across the globe by businesses to attain the most comprehensive, truest understanding of their customers’ financial health. To reflect the recent developments of our platform we’ve updated our website with information on the new insight engines we provide. Explore our insights here and find out more about how Atto utilises bank data to enhance the credit risk lifecycle. You can also browse the use case pages for the most prevalent Open Banking use cases in 2021. 

After a record-breaking webinar attendance in January, we’ve been biting our tongues to announce the second of the year. This time our CEO & Founder James Varga is hosting the session, sharing his thoughts on emerging Open Finance use cases - see the five learnings from the webinar here.

Atto were also delighted to be involved in the Open Finance World Case Studies eBook – a collaborative effort to share some of today’s most interesting examples of open banking (and open finance). As well as highlighting the benefits that open finance is starting to deliver, this eBook aims to offer a deeper understanding of what’s involved – how banks, FinTechs and other partners are overcoming challenges to turn opportunities into reality. Download the eBook here, keeping a special eye out for page 51 ‘The Mortgage Hub’, Target’s mortgage platform powered by Atto. 

As one the most successful and prominent Scottish FinTech’s, Atto CEO James Varga was asked to contribute his views on what is required for Scotland and the UK to continue to hold an edge in the FinTech sector.   

The Kalifa Review was set up by the Chancellor, Rishi Sunak last year, to examine how to maintain the UK’s lead within the sector, and what steps the Government can take in supporting the sector.  

Read the news release on our website.  

That’s a wrap for this month. As ever, do let us know any thoughts or comments. We’re available through our social channels and on email – frictionlessfinance@theidco.com.