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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 celebrate Open Banking’s third birthday in the UK, the evolution of payments in Open Banking, and the impact of Covid on consumer’s money.
Open Banking
It barely feels like it, but this month, Open Banking in the UK turns three. Without question, there have been bumps on the road, and disagreements over technical standards, the roll-out and implementation, but what cannot be denied is there has been a meteoric growth in the volume of data API calls as measured by the Open Banking Implementation Entity (OBIE).
The suggestion appears to be that consumers and financial providers alike, are unaware that they need Open Banking, until such time as they use Open Banking, and find it a massively more convenient method of conducting business.
Of note also, is that while our everyday lives may have been stopped in their tracks over the last 12 months by the global pandemic, that it has been a boon to digitisation within financial services. Digital projects planned for 12 or 24 months time have been implemented or executed – because the cost of not implementing them is the difference between doing business or not doing business.
In many ways, and despite the tragedy of the situation, Open Banking has allowed for many businesses to endure through modern methods, using API calls in place of physical documentation to discern business critical information.
And while we all hope that the current crisis comes to a sudden halt, we also hope that companies and consumers alike continue to consider new, innovative, and ultimately, safer and secure methods of doing business.
There is much still to be accomplished. Whether it be in adding credit cards, mortgages and pensions, or in simplifying the user journey, or the actioning of premium APIs, challenges in Open Banking abound. The progress made to date however, suggests that Open Banking has a bright future.
Open Banking by the Numbers
The API growth that has been reported has been gargantuan. In 2018, we saw around 66m API calls being made. By this month, this number has grown to over 5 billion. Similarly, the volume of payments made through Open banking has grown from over 300,000 in 2018 to 3.4m in 2020. The number of registered users in the OBIE directory has further grown to almost 300 today.
Open Banking in Quotes
Imran Gulamhuseinwala OBE, Implementation Trustee, The Open Banking Implementation Entity (OBIE), said:
Open banking used to be the best kept secret in financial services. We have worked hard to develop the open banking infrastructure and functionality over the past three years and our significant progress is reflected, not only in the millions of active users of open banking technology each month, but in the sustained momentum of growth we are seeing.
Hetal Popat, director of global Open Banking at HSBC, said:
We have seen a significant increase in the number of Open Banking customer propositions being launched across a whole range of use cases spanning personal financial management, accounting integration and automation, payments and credit support.
Chris Jones, strategy and innovation manager at Nationwide, added:
While relationships between banks and TPPs have been really positive, ensuring all parties understand the impact of changes they make on the other parties to benefit from even more dialogue and further building of collaboration.
News via Finextra, ComputerWeekly, Business Insider, YourMoney and a second article in Finextra
Payments in Open Banking
The growth in digital payments and the impact upon the role of cash within the economy is likely to only grow in scale and continue as consumers across the country become more accustomed to using their mobile phones to pay for their everyday goods and services.
FinTech Magazine ponder whether, in conjunction with QR codes, Open Banking could make a big splash in payments. Using these two emerging technologies (although in the case of QR codes, it is only emerging in the west), allows customers to make payments quickly and easily.
The need for payment infrastructure to be seamless is reinforced in Bobsguide. The need for companies of all sizes to reap the rewards of large volumes of data, aligned with the need to give consumers a seamless experience. Open Banking and QR codes are once again at the fore of the conversation.
Head of Payments at Nuapay, Nick Raper, said:
The rise of seamless mobile payments enabled by technologies like open banking will lay the foundation for superior customer journeys. As the pandemic has moved more business online than ever before, and face-to-face trust cannot be built, merchants will need to become creative.
Reducing the volume of fees that merchants pay on transactions, and a reduction in fraud, is highlighted as a key benefit of using Open Banking in payments in an article by Yapily in the FinTech Times. The writer notes that particularly with the UK’s exit from the European Union, finding new payment systems that reduce fees for consumers and ensure the free flow of trade and services will be critical.
Open Banking Abroad
As we kick off 2021, the big news from this month stems from the Arabian Gulf. Saudi has become the latest country to endorse the merits of Open Banking.
The Saudi Arabian central bank, the Saudi Arabian Monetary Authority (SAMA), has announced that it intends to introduce an Open banking framework into the country. In the policy paper announcing the decision, they state that they envisage Open Banking to be made live in the first half of 2022. For the next 12 months, SAMA will invite market participants to provide their feedback into proposals.
News via Forbes Middle East, CNBC, pymnts.com and wamda.
Finance
It will have escaped the notice of no one, that 2020, and most likely, large swathes of 2021 will be extremely challenging for consumer finances. Continued lockdowns, job cuts, furlough, and in some instances, limited Government relief, have meant that many families are in a worse financial situation than they were going into 2020.
While schemes such as furlough payments, bounce back loans and more have all helped to play their part in supporting both consumers and business, many are calling on financial service providers themselves to do more to help consumer finance.
Finextra highlight the plight that many are currently going through. They dryly note that the three “big C’s” are all taking their toll on families – Christmas, Covid and (access to) credit. According to research by FinTech HyperJar, almost 20% Brits have no savings in place, and a further 19% state that they are in their worst financial position ever.
Of concern to the industry though is the 70% who said their banks were unable to help them plan, budget and manage their money.
Banks and other financial providers are however, beginning to consider what further they can do to help. One suggestion that has recently come to light is from UK Finance, and involves raising the contactless limit to £100. Banks are also encouraging and assisting their customers to make best use of mobile banking. It has been shown that those who use mobile banking are better in control of their money, and with the pandemic, it has forced many consumers who cannot access banks directly, to begin to embrace mobile technology.
Some consumers meanwhile, have used Covid as a reason to give their finances a “spring clean”, while almost a third of people no longer use cash at all.
Buy Now Pay Later
UK politicians have become increasingly concerned about the impact of Buy Now Pay Later (BNPL) firms and their impact on consumer’s finances. The prospect of paying for an item gradually over time has been shown to be very attractive to consumers, and some watching the industry are concerned that consumers are now loading themselves with too much debt.
Last week Westminster had a chance to vote on further regulation for the sector, The vote was however, defeated, and there will be no change in the law. An article in the FT [paywall] prior to the vote called for stricter regulation on the grounds that there is little to no regulation for the sector currently, while Finextra has highlighted the issues that BNPL can cause – with particular reference to Christmas spending.
As it is the start of the year, we have a wealth of articles exploring what the top trends in the finance sector will be. Amongst those highlighted in our three featured articles from Fintech Futures, European Financial Review, Finextra and FinTech Magazine are that payments and e-money services will struggle as the pandemic surges and profit margins are tight, FinTech and banks working closer together. Banks offering more digital services, specialist finance firms replacing high-street banks for niche products, Open Banking giving a more holistic view of consumer’s finances, and the change in the physical appearance of banks.
FinTech
The FinTech press likewise, have fallen in with their predictions for what will occur in the FinTech world through this year.
Amongst the highlights from the predictions made in Fintech Magazine and Financial Express, include further adoption of cloud technology, FinTech’s looking to find a path to profitability by highlighting a clear value proposition, Open Banking being key, more use of tools such as RPA, AI, biometrics and blockchain
Best of the rest in FinTech:
- Which 10 companies made it to Unicorn status in the shortest time. Sifted announce the winners.
- A review announced by the Chancellor, Rishi Sunak, and headed by Ron Kalifa is set to recommend giving UK FinTech companies special visas for EU workers. News via the FT [paywall]
- Despite Covid, City AM looks at the burgeoning start up scene in London.
Atto News
Despite the Christmas slow down and a seasonal break from the Frictionless Finance Report, the Atto team have been ever-busy working on exciting new projects.
To mark the start of this period, Atto were shortlisted as one of 30 companies to join the FCA 2020 Digital Sandbox pilot. The pilot will run until early February and will focus on 3 pressing areas impacted by the pandemic:
- Fraud and Scams
- Financial Vulnerability
- SME Lending
Using machine learning and transaction data, the Atto project will highlight emerging financial distress through key indicators derived from an individual’s historical and predicted cash flow.
We’re already engineered some fantastic results that will play a crucial role in combatting financial vulnerability as a result of the pandemic.
For the third year in a row Atto are delighted to announce the continuation of our webinar series. On the upcoming webinar ‘Unpacking The FCA's Vulnerability Guidance Consultation’, the team will be exploring how lenders and financial institutions can better protect vulnerable customers.
After many successful years working alongside the Financial Data and Technology Association (FDATA), we were grateful for another mention in the FDATA member spotlight. You can access the short case study here and gain insight to an Open Banking powered P2P lending business.
For the second time, James featured in an article written by i-CXO, an independent thought leader platform powered by Fujitsu. In the article, accompanied by Amiquis’s Callum Murray, James outlines the growing imperatives for successful collaboration between start-ups and the giants of finance. Access the article entitled ‘Fintechs sense a new appetite for collaboration across financial services’ here.
Atto is recruiting! As the team and company grows, we're looking for a range of positions across our Commercial, Development and Customer Success teams. Find out more here.
To close the news section, I’d like to warmly welcome David Freeman to the team. David has joined us as the new Chief Operating Officer to help us continue to scale throughout 2021. He has already launched a number of key internal projects that will shape our exciting roadmap for the year.
As ever, do let us know any thoughts or comments. We’re available through our social channels and on email – frictionlessfinance@theidco.com.
