I was delighted to participate in one of the leading events focusing on new financial solutions across the industry. It was also amazing to see the number of women representing businesses and speaking at this year’s event, something our sector has historically failed in.
For both of these reasons, I was honoured to speak about one of the most disruptive legislative initiatives introduced into the finance industry - The introduction of PSD2 and subsequently Open Banking and how that impacts open finance. The panel featured some incredible speakers including Moneyhub’s Samantha Seaton, Barclay’s Caroline Ambrose, S&P’s Sophia Furber, Societe Generale’s Noumane Cherkaoui, and Virgin Money’s Chris Higham.
Open Finance and the other running themes throughout the event have never been more relevant. Open Banking in its infancy was dismissed by financial institutions, consumers and businesses who did not understand the benefits of opening up financial data for the masses. Today, with additional help from lockdown, Open Banking has seen its user-base double to two million Brits in just six months - an impressive feat.
At Akoni, we are proud to contribute to the discussion around driving changes in the finance sector where consumers and businesses can reclaim control over their money. Below is a recap of our illuminating discussion, and hopefully can give you some insight into why we believe Open Banking and Open Finance should become mainstream, and not just another legislation decree or buzzword within the financial sector.
Is the market ready for Open Finance?
In our opinion, and many of my fellow panellists' opinions, it seems the market is ready, but consumers and businesses are just unaware of what open finance means, and why they should care. Some, do not see the benefit of it just yet, especially in the financial world where there’s a lot more emphasis put on the long term benefits than on the short-term benefits. Consumers and businesses may not see or even understand why Open Banking is so beneficial to them. As a result, they dismiss it as over-complicated, unnecessary or even as a scam.
Additionally, consumers don’t think about ‘why’ they can connect their accounts. In the investment and insurance industries, and across many other sectors, the concept of Open Finance becomes very challenging, especially around how data should be shared amongst third-parties. Many of these products and services have their own set of regulations they have to adhere to, and so relaying all of these regulatory, legal limitations to consumers and communicating that in a positive light can be tricky.
Furthermore, confusing differences around the limits of protection for a consumer’s cash needs to be addressed. Currently, each product or service will have its own set of protection limitations, making it hard for the consumer to understand where it is safe to hold money, and which services they can use without having to do too much of their own investigation.
As brought up by Samantha Seaton of Moneyhub - one of our partners - when you set up a direct debit, you feel safe in the knowledge that your money is safe. But why do we think that? The reality is that the company you set up your direct debit can drain your account if they so wished. The money might return, but how long will that take? By then you may have missed a rent or mortgage payment.
The point of many of the services the fintech sector creates is to take away the friction felt by consumers who were using the traditional financial products and services on offer over the last few decades. Consumers and businesses want something easy to use, easy to understand, and most of all, safe. Open Banking will allow consumers and businesses to use new services to help them manage their cash and payments, whilst giving the protection they need, but only to a certain extent.
However, it is the communication around Open Banking and the need for Open Finance that needs to be stronger and more effective to help the initiative become ingrained into society.
Is the industry ready for Open Finance?
The industry is coming around to the idea slowly but surely, and we at Akoni are most definitely ready!
It’s hard work to communicate the benefits of Open Data to consumers and small businesses who may feel worried about the prospect of losing money, if they trust the wrong source. That’s why gaining consumer trust is the most difficult hurdle to overcome.
A few considerations include, how do we get problems raised solved quickly and fairly across so many different products and services? How do we shift thinking on a cultural level within older institutions who deal with legacy systems and processes? How do we standardise data across the industry especially with the use of both private and public APIs?
You don’t want a consumer to fill out several forms just to be able to use one service - as mentioned before the aim is to make it as simple and safe as possible for the them.
Instead, we should be able to link their identity across the board through the use of a simple identifier instead of this dispersed, confusing way consumers are currently dealing with their accounts. Two examples - a wealth manager may have several clients but no single way to view and prioritise them all. On the flip side, a small business owner may have several accounts both personal and business which they use for company transactions, and they don’t have a single view of everything.
Open Banking is allowing us to work together as an ecosystem to unify people’s financial products and services. Within the ecosystem, we need to consciously think about trust internally. We should all be working together to enable consumer confidence on a mainstream level. There are plenty of hurdles that need to be overcome, but if fintechs, and financial institutions, big or small, are ready to collaborate and push forward positive change, then we will be going in the right direction.
How are other sectors using Open Data compared to the finance industry?
It has been determined that the finance industry is one of the sectors not using Open Data enough. Currently, in industries such as healthcare or agriculture, the use of data is essential to the work they are doing. As a result, they can innovate and support the masses at a greater speed than the finance industry can today.
The idea of opening up data should not be restricted to just a few sectors, the aim should be that every industry should facilitate some sort of open data sharing system, so long as there are value-added benefits to both consumers and businesses.
In the finance industry, it should not just centre around the financial hub in London, it should expand to every corner of the UK, and on a global scale. Everyone and every sector could benefit from open data, allowing us to increase what we can do for each other to live better financially healthy lives, and as a result, live in a fairer, democratised world.
You can watch the full MoneyNext Summit session here.
About Akoni: Akoni is an award-winning UK cash platform, which provides a marketplace to SMEs and charities, as well as to individuals through our white label distribution partners including IFAs, wealth platforms, accountants and SME hubs. Akoni uses innovative technology to personalise cash planning solutions for clients, and also provides a full API solution to banks and insurance clients.