How mobile apps have opened up Open Banking
The competition watchdog the Competition and Markets Authority (CMA) bared its teeth to the banking industry in early 2018. The introduction of the Open Banking initiative was designed to increase transparency and competition within the sector – we explore the concept, ask if it’s working, and reveal how app developers and consumers can benefit.
The basics of Open Banking
On the surface, Open Banking is quite simple. It means a bank or building society – if they’re UK-regulated – are required by-law to share a customer’s financial data with approved companies, should they have permission from them.
The theory is this freer exchange of information will lead to greater innovations and competition in the banking sector. Customers will have more control over their data and be able to compare products and services offered by different banks much more easily.
In practice, banks could analyse customer spending patterns and come up with ways for them to make savings, or they could look at the financial products they use and suggest alternatives. Equally, the consumer can feed that data from their account(s) into their own choice of money management tool or budgeting app.
The possibilities for app developers
If you’re an app developer, the possibilities of Open Banking are manifold. Small agencies who spot a niche suddenly have access to new customers. There are also opportunities to work with small financial companies as they adjust to Open Banking and introduce it into their strategy.
Big banks and building societies by-law must share this data. Developing apps to not only help their customers share their data safely and efficiently is in their best interest to help retain bankers, borrowers and savers.
Mubaloo’s expertise can be invaluable in this emerging opportunity, with app developers and other sectors jockeying for position as Open Banking delivers a new era of possibilities for developers.
The benefits for businesses
Underpinned by the theory that competition is good for consumers, Open Banking may also benefit many players in the financial industry. In particular, smaller banking organisations who may have historically struggled to get a foothold in the marketplace and displace the major players.
It works both ways when it comes to helping these businesses. Smaller, nimble app developers can access bigger customers they were hitherto denied, and small financial institutions can get themselves noticed if they can offer something of genuine worth.
The benefits for consumers
The CMA’s intention is relatively clear. Open Banking is intended to increase transparency in the banking sector, helping consumers to be more flexible with their finances and create a more open market – designed to benefit them directly.
A third party can access a customer’s information – should they receive consent from them – and suggest ways for them to budget. Or it can offer improved versions of financial products like a credit card with a better rate than their current one, or a different savings account with improved interest.
Such companies must be regulated by the Financial Conduct Authority in order for banks to protect consumers. Customers can choose to share data with a non-approved company but should educate themselves of the potential risks.
Which major banks are driving the change?
Open Banking is still very much in its infancy, but its presence can already be felt. Both HSBC and Barclays have recently launched apps that utilise Open Banking.
Other major banks and building societies are following suit, meaning those who bank online will soon have a myriad of options for exploring the world of Open Banking.
Likewise, app developers have the opportunity to capitalise on potential business from these larger banking organisations looking to retain market share – and newer entries hoping to establish themselves in the industry.
Stay on top of developments in this area and others on our blog.