By Jodie Paula Cohen, Producer, Open Data in Finance, www.open-data-finance.com
When I first started following the open data initiative, my banking contacts described it as “a major shift in the established business model of the financial services industry”; while alternative lenders and fintech companies spoke passionately about the power of an open API framework to “change everything about the way that we bank and operate our finances.”
This article condenses an intensive research process into the open data initiative in the UK and Europe, conducted with the industry’s major incumbents, challengers, fintechs, alternative lenders and regulators. It gives you a concise yet comprehensive insight into the current state of play, how the most influential industry players are positioning themselves for this sea change, and where open data and data sharing in finance is heading.
What does ‘open data in finance’ mean in the real world?
A director from Fingleton Associates, who has been closely involved with the open banking initiative, recommended that the driving force of the initiative should be about competition. He told me “you don’t hear anymore about how open banking will change competitive intensity, and why it will produce a more functional market. The process has lost sight of that. Because of the barriers around the huge banks, the economy is locked into their highly inefficient services.”
Most of the people I spoke with felt it was about time the industry came together to discuss how open data will affect the finance sector, at a strategic and business-focused level. Lead Architects from Citi and Alfa Bank said that “people need to watch the journey that others have taken from non open data to open data, and understand how they can use it. Everyone knows what open data is – but they don’t know about the real life experiences of others.”
A senior compliance manager at Nationwide mentioned that “most conferences about open data focus on one particular market segment. However, there is value in seeing where the commonality is, as the framework needs to suit everyone. Also, understanding other companies’ perspectives shapes your own approach.”
Opportunity or burden?
Despite the fact that open data is being pushed so heavily by the regulators, one of Pinsent Mason’s senior partners highlighted that most of the people she speaks with today are thinking about “how to shape the opportunity it presents, how to commercialise it, and how to use data in a way they haven’t done before.”
Around 70% of my contacts agreed that open data represents an opportunity for the sector, rather than a burden; and this point was most eloquently made by a Lead Developer at RBS: “banks need to grasp this opportunity and capitalise on it. It will be market-changing, and we either adapt or other organisations will feel the benefit.”
Governance – the elephant in the room
Governance was reiterated as a massive issue for financial services companies, and “the biggest question that the open bank working group was supposed to have answered, but didn’t”. It is a topic the industry is keen to discuss, which is why it has its own panel session at the Open Data in Finance conference in June. The key questions that people are asking is “What should governance look like?” “Who will dictate how standards change over time?” and “How can we make sure innovation is baked into the process?”
The UK may be leading the way – but Europe is watching our every move
While all eyes are on the UK Open Banking initiative, and the current activities of the UK Treasury and the Open Banking Working Group, everyone is conscious of developments with PSD2 that will come into force. The CEO of Funding Options summarised it this way – “the rest of Europe is watching the UK, and you should capitalise on that message at the June conference. Representatives from European banks and regulators want to be close to what’s happening here.”
It’s all about partnerships
The programme at the Open Data in Finance conference focuses heavily on partnerships between incumbents, challengers and fintechs, with a whole afternoon section dedicated to examining what level of information fintechs want from banks, and in what format, as well as experiences from from real-life collaborations.
According to about 80% of participants in our survey, including the Head of Openbank at BNP Paribas, “Partnerships are a top priority for making an open data standard work.”
Creating a win-win-win
If one message stood head and shoulders above the rest, it was about the need to recognise the potential of open data and data sharing to improve the way that consumers and businesses access financial services products and manage their finances.
Open Data in Finance
As the Chief Product Officer at Money Dashboard put it – “focus on collaborations – how can fintech and banks can work together and win by helping the consumer win.”
The Head of Public Affairs & Marketing at GLI Finance was similarly vocal about this topic, insisting that “you need to put the consumer at the heart of discussions, and explore how the industry can work together to create an open banking standard, which brings value to consumers and businesses.” Indeed, this will be the subject of the opening panel session at the June conference.
Come and hear more at the Open Data in Finance conference and workshops, in London on 14th & 15th June.
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