FinTech North News and Regional FinTech Developments

Event Round-up: Open Banking & PSD2 Forum 25th October 2019

FinTech North’s 46th event took place at DLA Piper on Friday 25th October, with a focus on the hot topic of Open Banking and PSD2.

Julian Wells, director of FinTech North, welcomed the audience, provided an overview of FinTech North and our events to date, and also mentioned the Whitecap Greater Manchester FinTech Ecosystem Research which is currently underway.

Luke Stubbs – Legal Director, DLA Piper

Luke highlighted that the value of FinTech investment in the UK in 2018 was estimated to be around five times what it was in Germany, the next closest in Europe. A report from DIT and Innovate Finance earlier this year found that FinTech adds £6.6bn GVA to the economy each year, which equates to 5% of the £132bn that Financial Services contributes as a whole.

Setting the scene for the rest of the event, Luke walked us through the origins of Open Banking, which lie with the CMA9 banks in the aftermath of the global financial crisis. In 2017, the implementation of PSD2 then created the new conditions for Open Banking to be regulated. Luke explained many of the key requirements involved in the regime, such as Strong Customer Authentication (SCA).

Adam Cox – Founder and MD, Open Banking Expo

FinTech North is a partner of Open Banking Expo, a major industry event which is taking place on the 13th November in London and expects to see approximately 70 speakers joined by over 400 attendees.

Robin Pollock – Co-founder and Partner at Jeremy James Partners

JJP is a change and digital transformation consultancy that specialises in Open Banking & PSD2. Robin explained how one of their clients, an un-named major retail bank, is engaging with Open Banking.

“Once the genie is out of the bottle, you can’t ignore it” – Robin Pollock

Robin took us through his client’s journey. Rather than worrying about the risk of exposing client data to competitors, the bank recognised the opportunities created by having more access to data. Banks can therefore begin to apply data science in order to tailor their services.

“The rise of FinTech has redefined customer expectations” – Robin Pollock

Robin envisages a future of:

  • global basic standards for integration
  • further expansion of blockchain into the mainstream
  • more agility
  • better understanding of the customer across a wider ecosystem – leading to improved decision making and better tailored software

Colin Neil – Vice President Business Development, Adyen

Adyen is a payments service provider head-quartered in Amsterdam – Adyen is Dutch Surinamese for ’Start Again’.

“A PSP should always put the customer experience at the heart of what they do’ – Colin Neil

The purpose of SCA is to elevate the customer experience; making it easier and more convenient and give the retailer confidence that the customer on their website is genuine. Colin took us through what a well integrated, frictionless checkout can look like to a customer using 3DS2.

PSD2 mandates SCA, but not 3DS2.  Colin pointed out it is important to remember that the vast majority of e-commerce retailers are not only domestic, so recent changes under PSD2 create a fragmented European Landscape that can be difficult for retailers to navigate.  Adyen believe that it should be the responsibility of the PSP to take the burden of navigating such regulations away from the retailer. The advice from Adyen is to be ready for 3DS on all transactions in scope of PSD2.

Emma Steeley – CEO, AccountScore

Emma explained what they are doing in Open Banking sector, taking us through their journey. AccountScore was spun out of a consumer finance lending business in 2016. In January 2018 they launched an AISP to provide “OBaaS” (Open Banking as a service). Clients include UK tier 1 banks and a top 3 bank in the US. Operate in US UK India, expanding into Canada Hong Kong and Spain.

AccountScore has seen a 68% increase in utilisation of Open Banking APIs from January 19 to September 19. Their app to app redirection has also produced a 10% net uplift since its launch in July. Open Banking is preferable to customers when compared with screen-scraping. “This shows that the Open Banking API’s are robust and they do work.” – Emma Steeley

David Smith – Chief Innovation Officer, Uinsure

David has been a regular speaker at FinTech North, and took us on a visual journey through Open Insurance in his unique, entertaining and knowledgeable style.

“Musical notes are like data – on their own they’re of no use to anyone” – David Smith

David used a musical analogy to explain how data works together to deliver a great experience to a consumer. Firms like Uinsure are the conductor, arranging all the data. Open Banking in Insurance means the consumer can have data presented to them in an exciting, personalised way.

Dan Rajkumar – Founder & MD, rebuildingsociety

Dan explained what is doing with Open Banking. Rebuildingsociety launched in 2012 and is a P2P lender that matches SMEs requiring loans with individuals who are looking to invest their money for a higher than average return (usually around 15%). Rebuildingsociety holds uninvested money in its client account and calculates what share and proportion of the client account investors hold.

Dan is working towards a vision of ‘Just in time investing’, which will enable the almost immediate movement of fund between an individual’s savings account and the client account, via a pre-authorisation, meaning they can avoid missing out on interest that is lost while money sits in the client account.

“Open banking has the potential for a paradigm shift for how fund manager access funds deployed in investments.” – Dan Rajkumar

On to the Q&A:

Q: How far along are we compared with other countries?

Adam – there’s been a lot of scaremongering with regards to Open Banking. OB to this point has been really successful and won’t stop at banking; open finance, open data, open life. Australia, Mexico and Latin America all have success stories, Nigeria too has also used OB to some success.

Q: The reason Open Banking was introduced to make banks work harder for their customers. How hard are banks working to keep their customers?

Emma – inherently customers don’t want to change their bank account every 3 months. Open Banking allows banks to deliver the experience necessary, the banks have had a very short timescale to deliver this and I think they’re doing really well.

David – for security I use my heritage bank, for innovation I use a challenger

Adam – the TSB data breach saw less than 2% customers change banks

Robin – one CMA9 bank has 2000 people working on APIs.

Q: SCA is a hurdle on the customer journey; huge effort and capital have gone into solve a problem that’s been created by the regulator to solve a problem that doesn’t exist (people wanting to leave), perhaps this solves the financial inclusion issue instead, have you seen evidence of financial inclusion happening?

Emma – absolutely yes, the CMA9 bank we have mentioned has stood up with us on this one

Luke – the rules have created a platform and an environment in which these things can happen

Q: Are there any examples of propositions outside of credit or lending that are helping customers with access to financial services?

Robin – Open Banking is the enabler but it’s down to the banks to deliver the services

Emma – Open banking is not set up to help the un-banked

Julian – for those who can’t get accounts, there’s brands like Arro Money and U Account which cater for the so called unbanked, and also there’s also The Change Account which is a bank account includes a number of budgeting tools to help people manage their money

Luke – when are we going to see the Pensions providers open their data up? I think the banks are helping people with access to services, e.g. money box and affordability on lending decisions.

David – I’m going to contradict that, I think they’ve been really bad. Everything my son hears from his bank is credit/debt focussed, nothing about saving money, his bank is awful at encouraging him to save, they’re really good at encouraging him to get into debt.

Q: Are we seeing much acquisition as a result of Open Banking?

Robin – I’m seeing more partnerships as a result, this doesn’t mean that in 12-18 months there might be more offers on the table.

Julian – There are not many examples of banks acquiring FinTechs in general, as the valuation multiples on these firms are so high.

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