What is Open Banking and what impact will it have on my business? This is not a question you will be asked every day because there is very low awareness of what ‘Open Banking ‘means and what impact it will have, but its impact promises to be very significant.
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Open Banking is a reform introduced by the CMA (Competition and Markets Authority) in 2016 to help smaller and newer banks and financial institutions to compete against older and larger banks. The purpose of the Open Banking initiative is to enable personal and small business customers to find a “better way to move, manage and make more of your money”. The Customers of banks will be able to easily “give companies other than their bank or building society permission to securely access their accounts” (Source: Open Banking Org).
According to PWC “39% of bank customers would share their financial data with other banks and third parties (such as Amazon, Apple, Tesco) if in return they received benefits” (Source: PWC). This means that there is a huge appetite from individuals and businesses to use their data in a way that helps them.
As a result of these changes, there is already a large number of Fintech start-ups who are pushing to build new tech products. Some of the traditional banks have tried to ignore these start-ups but there are also banks that see the opportunity and are looking for tech businesses to partner with.
It has been assessed that more than 50% of UK Banks will miss the January 2018 deadline for Open Banking including HSBC and Barclays (Source: City A.M.). So it looks likely that the changes will take some time but will gradually come into being. City A.M. highlighted the opportunities for start-ups to develop new technology such as a money management app that meant “you never had to log in to your actual bank again” (Source: City A.M.).
It’s clear that there is a big change on the way which creates opportunities for digitally focused services providers to innovate and take advantage of short comings or gaps in how more traditional banks are utilising technology to improve their offer. More competition in banking service providers and wider scope for UK fintech companies to innovate in this sector can only be positive, particularly as indications are that UK fintech start-ups are enjoying success in securing investment at an early stage in their development process.
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