There was a dose of realism last night as a cross section of the London technology scene agreed that the mandatory opening up of customer's financial data via APIs in January 2018 - otherwise known as open banking - may not be the instant revolution that regulators envision.
Speaking at the opening event for the Nesta Open Up Challenge - a competition to find teams creating the best digital services for small business customers on top of these newly opened up APIs - there was general consensus that open banking is over a decade away from mass adoption from consumers.
Open banking is basically an inevitability now as regulators in the UK and Europe ramp up implementation of new standards like PSD2 (Revised Payment Service Directive), which will require banks to open up anonymised customer data for third parties to access via application programming interfaces (APIs). The intention is to make banking more transparent, open and competitive, to the benefit of the average consumer.
Venture capitalist and global head of Fintech at EY, Imran Gulamhuseinwala, agrees that open banking is "inevitable", in that there is "an unstoppable march to using data and putting it into the hands of customers".
In reality though consumer adoption of new services may not be as drastic as regulators intend. Tom Blomfield, founder of digital challenger bank Monzo, said during the event: “People tend to overestimate the impact of technology developments in the short term and underestimate it in the long term. I feel that is what is happening with PSD2."
Monzo, to all intents and purposes, is very keen for open banking to be a success as its app-centric platform is set up to benefit from the opening up and unbundling of banking services, giving consumers a better interface to manage their finances from.
Blomfield, who also cofounded the direct debits startup GoCardless, knows that consumers don’t move that quickly though.
"People will be underwhelmed in the short term by what is achieved, but in the long term it will herald a real revolution, but that long term I don't think is five years, it might be ten to twenty years.”
Jeni Tennison, CEO of the Open Data Institute - a vocal exponent of open banking - agreed with the 2020 timescale. She said: "We won’t see much very different in terms of services until then as it takes time to create a business or service that brings extra value.
“Longer term we can foresee a time where banking operates more as a commodity, so you are less choosing your bank account based on the interface because you can choose the interface you want to use across multiple accounts in a way that suits you,” she said, referring to an approach otherwise known as banking-as-a-service.
Izabella Kaminska, a blogger for the Financial Times’ Alphaville site also doesn’t envision a groundswell of public adoption from day one.
“My perception is the industry is obsessed with this as a goldmine, it is going to be exceptionally revolutionary, in the short term actually, but the consumer side of the equation is a bit 'meh'. Most people I speak to just don’t care enough about their bank, it is seen as a utility,” she said.
Entries for the Nesta Open Up challenge are now open with up to £5 million in prize money and other incentives available to up to 20 teams that can build the best service, app or tool on top of the new open banking APIs. The aim of the challenge is to bring "game-changing value for UK small businesses".
For more information visit openup.challenges.org.
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