For ‘open banking’ era
Customers are given the key to their own financial data as part of the reforms – but a study suggests few will be willing to share the information ownership of current accounts that was king, now its ownership of data,” Ingram says.
Mobile app bank Monzo, which has some 500,000 users after a year of rapid expansion, believes the reforms could help it grow even faster this year. “If it works well it could help a start-up get five to 10 million users in a year. Of course we’d love that if it can be us,” Monzo founder Tom Blomfield says. “It’s an incredible opportunity.”
Forrester’s Morgan thinks Silicon Valley tech giants may also enter the fray. “Amazon is by far the biggest threat in our eyes,” he says. “They hold a lot of customer data and they are already providing loans to small businesses.”
High street retailers and grocers are also likely beneficiaries, with chains queuing up to offer services like faster refunds by bank transfer and in-store access to balances.
Accenture research last month found a third of big UK retailers would be ready to plug in to banks by the time Open Banking launched, increasing to 90pc by 2019.
It would be premature to say the UK’S incumbent banks face an unstoppable wave of change.
Two thirds of consumers in a separate Accenture survey said they would not share their financial data with a third party come the launch of Open Banking. And more than half said they would never change how they banked.
Their reticence comes partly from security concerns after high-profile cyber attacks that have compromised both major companies and the data of other organisations, such as the NHS.
This week, consumer groups Which? and Get Safe Online warned that the Online Banking reforms could heighten the risk of customers falling prey to scams if they were not vigilant.
But Gulamhuseinwala insists that “security has been built at the heart of what we’re doing”.
Customers who want to take up a deal at a rival lender should be redirected to their existing bank’s website in order to give permission.
Behind the scenes your current bank would check the third party is authorised to access the data against a central register controlled by Open Banking.
This system would either block or approve the data transfer, then redirect you back to the competitor’s site if all was well.
“No customer has to use Open Banking and they will never be required to share their username and password with another bank,” Gulamhuseinwala adds.
Customers should be given the option to switch on or off permissions for third parties to access financial data held by their bank, similar to the permissions systems offered by most smartphones.
A customer redress system will also be offered by Open Banking should consumers have concerns their data has been compromised.
Monzo’s Blomfield describes data security as “massively” important. “It’s as important as the money, they are now basically equal,” he adds.
Simon Paris, deputy chief executive at financial infrastructure firm Finastra, which has been working with banks to prepare them for the changes, believes customers will quickly be won over.
“What people don’t realise is how wide-reaching the benefits of Open Banking may be,” Paris says.
“It has the potential to remove barriers and create completely frictionless movement between payment and account information, which could improve services from credit ratings to mortgage payments to utility bills.”
What’s clear is traditional banks can no longer afford to be complacent. They have a fight on their hands to keep customers loyal and must offer better deals. The ultimate winners should be consumers.
‘If data is the new oil, payment data is the best quality oil out there. It stands to reason a host of new providers want in’