Opportunities surrounding open banking were presented to North East businesses at a recent event designed to draw attention to the emerging field.
A team from Open Banking Limited, including CEO Henk Van Hulle, attended a roundtable discussion at the headquarters of FTSE100 accountancy software firm Sage in which the benefits and challenges of the data-led system which proponents say could change the face of banking. The open banking “ecosystem”, which is said to be worth more than £4bn to the UK economy, features the exchange of current account and payment account data between banks and building societies and third-party providers such as fintechs.
Open Banking Limited was formed in the wake of the Competition and Market Authority’s 2017 Retail Banking Market Investigation Order, and tasked with delivering open banking with funding from the nine largest banks and building societies in Great Britain and Northern Ireland, including names such as Barclays, HSBC and Nationwide Building Society.
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Speaking to BusinessLive after the roundtable, Mr Van Hulle said he is keen to see industry adopt open banking and develop useful services it could unlock. He said: “The benefits of open banking are for everyone – it is beyond the banks. The banks, of course, have jumped on that too because now they have access to the data of their competitors, as long as they’re part of the ecosystem on what we call the TPP (third party provider) side, the fintech side as well.
“But there are more and more parties that can have access to that information. Companies such as Sage are enabled – they take that information and then fuel other propositions with that and with their partners. It takes it beyond the pure financial services sector.”
Research by Open Banking Limited, which was outlined on its first visit to the North East, points to one in five, or 18%, of small businesses thatare now using open banking and in December 2023, a record monthly high of 13.6m open banking payments were made – putting the UK ahead of European neighbours. Mr Van Hulle said that while there is a vibrant ecosystem of fintech innovators using open banking to ,create services, the industry has “barely reached basecamp” in relation to its potential and called on North East firms to become part of its development.
He added: “These innovators are focusing very interesting elements because if you have access to the data, and real time data too, then you actually look at the real behaviours rather than the assumed behaviours – and that’s what the old economy was built upon. For example, at one stage a 19 year-old would pay a lot for insurance but nowadays they look at how they behaved in the last one or two years and now the 19 year-old can have a personalised offer where he or she is not asked to pay the full premium.”
Jonathan Cowan, chief of staff at Sage, said: “At Sage we’re committed to addressing the challenges faced by small and medium sized businesses (SMBs), recognising the vital role that innovation in financial technology can play. Hosting this roundtable with Open Banking Limited provided the opportunity to explore how we can work on solutions to these financial sticking points with industry leaders from across the region.
“We all agree on the need to digitise processes, for Government help to incentivise digital investment, and the importance of UK-wide standards to promote adoption of innovations such as e-invoicing which can help SMBs grow their business.”
