An invisible banking reform that ‘could fundamentally change how we manage our money’ is days away

A sign for Money Changed is seen on the border between Lifford in Ireland and Strabane, Northern Ireland, August 16, 2017.
Banking is coming — and it could change the way we handle
money forever.


  • ‘Open Banking’ begins in the UK on January 13.
  • The legislation required banks to open up data on
    customers to third parties and let them execute transactions on
    customers’ behalf — if customers agree.
  • The change is meant to encourage bank account switching
    but its long-term potential could shakeup the way banking is
    done in the UK.

LONDON — An invisible, but important, change is coming to British
banking from Saturday: Open Banking. 

Regulators in Europe and the UK are ordering banks and credit
card companies to share customer data with other companies if
their customers agree. The companies will also be able to carry
out payments on a customers’ behalf.

The changes are meant to encourage switching and comparison in UK
banking but it also has the potential to fundamentally disrupt
how banks operate and make it easier for rivals to compete.

Open Banking “could fundamentally change how we manage our
money,” according to the project’s chief UK architect.

Here’s everything you need to know about Open Banking.

What is Open Banking?

At the moment, many startups wanting to access your banking data
— transaction history, direct debits etc. — ask for your banking
password and username, and then login on your behalf. Then they
use relatively unsophisticated “screen scraping” techniques to
harvest data. Some do plug directly into the banks but these are
direct deals negotiated between startups and banks.

Open Banking forces lenders to offer a digital “fire hose” of
data that any third party can use to get standardised access —
provided the startup is registered with the UK Financial Conduct
Authority (FCA) and the customer agrees to share their data. They
won’t have to negotiate deals with banks, just plug into their
digital systems and go.

Bud George Dunning CTO Ed Maslaveckas CEO
CEO Ed Maslaveckas.


“Companies have access to building blocks that they didn’t have
access to before, which is the ability to pull data or do
transactions on behalf of customers wherever that customer is,”
said Ed Maslaveckas, CEO of fintech startup Bud.

Bud is
working with HSBC to build an app based on open banking
will scan customer accounts to make sure they’re on the best
phone and energy tariffs — just one potential application of the

Maslaveckas told BI: “No longer does the banking experience have
to be siloed in one specific app or website, it can start to feel
like your money is actually able to serve you wherever you might

Who’s behind it?

There are two main strands to Open Banking: a piece of EU
legislation — the second payment services directive (PSD2); and
the “Open Banking” project specifically spearheaded by the UK’s
Competition and Market Authority (CMA).

Both have forced the UK’s “Big Nine” banks —Barclays, Lloyds,
Santander, RBS, HSBC, Danske, Bank of Ireland, Nationwide, and
Allied Irish Bank — to open up customer data to third parties.

Credit card companies and other payment service providers, such
as prepaid cards, will also have to share data eventually under
PSD2 rules, although the timescale here is longer.

What is it trying to achieve?

The aim of Opening Banking is to give customers greater control
over their data and to encourage account switching.

A combination of four photographs shows (top L-R) a worker silhouetted against an illuminated sign in a branch of HSBC; Two people walking out of the headquarters of the Royal Bank of Scotland; (bottom L-R) a Lloyds bank branch near St Paul's Cathedral and a customer using a Barclays ATM, in central London July 23, 2010. Regulators have been looking at how banks would withstand another recession in an exercise similar to one in the United States last year which helped restore bank sector confidence. Some 91 lenders from 20 countries have faced the so-called stress tests. In Britain HSBC, Royal Bank of Scotland, Lloyds and Barclays, are being examined.
are going to have to share data.


An investigation by the UK Competition and Markets Authority in
found just 3% of customers switched their banks in the last
, meaning many were left with accounts that were not
right for them.

By opening up account data for analysis, people will hopefully be
able to more easily compare and contrast bank accounts. Banks
must provide a live feed of all the different products they are
offering, which will help the comparison.

Imran Gulamhuseinwala OBE, a partner at accountant EY, has been
running the Open Banking Implementation Entity (OBIE), which is
charged with spearheading the project in the UK.

He said in a statement before Christmas: “This is the culmination
of a huge amount of collaborative work done by the UK’s largest
banks and building societies, the OBIE, and companies from across
the technology and financial services sectors. It’s an
extraordinary achievement which, in time, could fundamentally
change how we manage our money.”

How does it work?

The OBIE has been working with banks since 2016 to design APIs.
These are a little like standardized digital doorways that will
act as the gateway to the data stored by the banks.

Because the APIs are standardized, companies that want to access
banking data will only have to build one API interface for all
the banks, rather than build technology for each lender.

The banks will continue to safehouse all customer account data.
PSD2 requires new security standards and banks have 18 months to
develop these systems.

What does it mean for consumers?

We’re likely to see much more sophisticated comparison apps
and financial analysis services, as startups take advantage of
the detailed product data that banks publish. One banking
executive BI spoke to suggested we could soon see the financial
equivalent of Strava,
the popular fitness app that tracks and shares exercise data.

Samantha Seaton, Moneyhub
Samantha Seaton, CEO


Beyond this, Samantha Seaton, the CEO of financial dashboard
Moneyhub, told Business Insider she is excited for the potential
to build totally new financial “apps” that weren’t possible

“When we did the Lloyds Bank hackathon recently we were able to
get into your bank account and set up default limits so that as a
consumer if your current account gets below say £300, you can
move money from a savings account to top it up to X,” Seaton

“Then when you have enough money, it moves back into your savings
account. That’s so that you never, ever go overdrawn. There’s
loads of stuff like that.”

Maslaveckas said: “The uses of open banking are so numerate. You
walk into a shop, you scan a barcode on an item, you press buy
and you walk out. That’s a new Sainsbury’s experience, a new
Tesco experience.

“That’s the kind of stuff that, while it won’t start happening on
January 13, over the next 3 to 5 years these things will start

But Peter Myatt, the CEO of subscription management startup Bean,
said: “In terms of new products and services that will come to
market, I don’t see that many new exciting products out there.

“Companies like ours have already been saying what interesting
stuff can we do with this data? There’s not a huge number of new
and exciting models that don’t exist now that can exist with the
read-only model.”

Products like Bean may become slicker but they won’t
fundamentally change, he believes.

What does it mean for banks?

Open Banking is both a threat and an opportunity for traditional
lenders. The threat comes from the fact that they will no longer
be able to control their interaction with their customers — an
HSBC mortgage could theoretically be sold on Google, for example.
The fear is that they will be reduced to mean “dumb pipes” —
providing banking infrastructure but with profit margins eroded
to razor-thin levels as banking becomes commodified.

ready for more comparison and dashboard apps like


The opportunity is the same as that offered to all other
businesses looking at open banking: a huge wave of new data from
rival banks could be used to build smarter, better products.

“I definitely think it allows challengers, whether challenger
banks or challenger brands, to push forward,” Maslaveckas told
BI. “Equally, it allows banks to innovate and do things they
couldn’t before because they can create new products and services
that sit outside of their ecosystem, so it’s not a tech risk.”

“A year ago, there were active blocking attempts [from banks]
because they thought they could stop it,” Myatt said. “About six
months ago that changed because they realised they couldn’t.
They’ve now tried to actively embrace it.”

Engineering Open Banking on such a tight timescale — the
government kicked off the OBIE in 2016 — has been hugely
challenging for banks dealing with a raft of other issues. Still,
one executive at a High Street lender who spoke to BI on
background said it is a “challenging but hugely opportunistic
time,” with executives hopeful that open banking could help spur
innovation internally.

What does it mean for startups?

Open Banking has the potential to improve startups’ services by
offering a reliable, rich stream of customer data.

Christoph Riech, cofounder and CEO of online small business
lender iwoca, said: “Innovative finance providers, like iwoca,
will be able to use Open Banking data, which only the banks can
currently access, to eliminate endless form filling and make
fairer credit decisions – helping small businesses and unlocking
faster economic growth.”

Peter Myatt, Bean
Peter Myatt, cofounder and
CEO of Bean.


But Bean’s Myatt says it’s not all upside for startups.

“Open Banking raises the bar and makes it harder to get access to
it [data],” he said. “Now we have to get authorised by the FCA,
we need to get a certain type of insurance, which is not cheap.”

Myatt adds: “It’s exactly the right thing to do — we should have
to be authorised by the FCA, we should have insurance that means
the customer is fully compensated. I’m 100% behind those parts of
open banking.

“We are moving from essentially a wild west to [a system of]
proper, authorised companies who are having conversations with
banks and customers to produce good products.”

Another downside is that customers will have to consent to share
their data every three months — meaning companies will
effectively have to re-win their business four times a year.

When does it start?

PSD2 comes into force in the UK on January 13, making the UK the
first country in the world to implement the idea of “open
banking.” However,
five of the nine banks involved have said they won’t meet the
deadline and have been granted an extension.

Bud is in conversation with many of the big High Street banks and
Maslaveckas argues: “Some of the delays actually show the
seriousness of this.

I really believe in three years time, when we look back, it will
have changed the landscape significantly

“A bank could throw out a bunch of APIs that are non-functioning
or not effective. The banks we deal with are very much taking
hold of the opportunity.”

Maslaveckas believes Open Banking will really start to take
effect in two to three years time, with more ambitious projects
coming in five years.

Bean’s Myatt said that many of the banks that are set to
launch some version of Open Banking on January 13 still have
kinks to iron out.

“From what I understand from those companies [working with the
APIs], it’s just not working,” he said. “If you try and
authenticate your connection and your documentation isn’t good
enough, it just physically doesn’t work.

“Realistically we should be entering another six months to a year
of private testing before it goes fully public. That’s
realistically where we’re at.”

Moneyhub’s Seaton said: “It’s not going to go viral but I’m sure
there’s a lot of people who would like it to. It is significant.
I really believe in three years time, when we look back, it will
have changed the landscape significantly.”

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