So who is going to be the big winner from open banking: incumbent established banks, the challenger brands, digital start-ups or technology giants such as Google, Amazon, Facebook and Apple?
That topic will be top of mind at the Digital Banking Club debate I am very much looking forward to chairing on 21 March, the motion being “This house believes your next bank will be a GAFA (Google, Apple, Facebook or Amazon).
The regularly repeated argument heard in this parish is that the traditional banks still have much to do to rebuild their reputations following the financial crisis.
And a number of events in more recent years have hardly helped: think Wells Fargo and the revelations around setting up fake accounts to hit sales targets, Royal Bank of Scotland’s handling of the GRG scandal and HBOS’ Reading scandal for just three high profile examples.
The argument against the incumbents usually moves on to hammer their continued reliance on obsolete legacy IT systems built in the last century, compared unfavourably to the digital start-ups and tech giants.
Such arguments usually conveniently ignore the fact that many of the so-called legacy systems are proven and have stood the test of time but no matter.
The established banks are not modern day Blockbuster stores: they have customer numbers, vast resources and continue to be protected by regulation.
Most digital start-up rivals will remain niche, focused on a small segment and will not build scale though there are signs of exceptions to this from examples such as Monzo and Number 26 among others.
I’ve been around long enough to remember all of the hype from monocline mortgage and credit card companied and the telco mobile wallets in the early 2000s and other examples that failed to fly, so my starting off point has a degree of scepticism.
I also struggle at times to remain silent on stage during conference chairing chores when a few of the start-ups have the nerve to announce they are going to teach the established banks how to do their job and modestly re-invent banking. The reality in a few cases is that the same outfits have not even got so much as a basic current account off the ground or have a mobile banking app that can be politely described as dire.
But is it possible to create a truly level playing field involving the incumbents and the digital start-ups? That is the challenge posed by Allen Jones, MD at financial technology experts Copernicus in a recent note.
He makes the fair point that potentially the incumbents have much to lose, to other, challenger banks and the likes of Google, Facebook and Amazon, but goes on to say and I agree with him, do not discount the lobbying efforts of the traditional banks.
Francisco González, executive chairman of Spanish bank BBVA, noted recently; “If I need capital to lend then let’s have the same rules for everyone — for the internet giants too.”
As for the reputational argument: the egregious GRG business unit at RBS is mercifully an isolated embarrassment; Wells’ mis-selling is not the norm at the incumbents and those guilty of the HBOS Reading frauds are in jail.
What of the internet giants reputation issues? As Allan Jones and others point out, the internet giants have their own issues, such as allegations of tax avoidance, election meddling, anti-competitive behaviour and fake news.
Konsentus -Start-up to note
Despite the challenges (I continue to argue the self-inflicted own-goal) of Brexit, the fintech sector in the UK remains reassuringly positive. Among the new years fintech start-ups one catches the eye as one to watch, both from the point of view of the subject area and the names behind the outfit.
Konsentus, the first API based permission and consent management solution, enabling Financial Institutions (FIs) in Europe to meet PSD2 open banking requirements has been launched by three payment industry heavyweights.
With more than an estimated 8,500 regulated companies offering transaction accounts in Europe, there is demand for a simple service enabling companies offering their own APIs to ‘Third Party Providers’ to outsource the regulatory burden of access of permission management effectively and cheaply.
Konsentus will issue the consent management tokens on behalf of FIs through a SaaS platform, enabling the FIs to comply with EU regulation and provide open banking services to their customers, confident in the knowledge that they are only providing data to Third Party Providers (TPPs) who are regulated, and have the customers “explicit” consent to use their data.
Konsentus has been set up Mike Woods (ex e-commerce executive at NatWest and founder/CEO of Aconite Technology), Brendan Jones (former Product Development Director at MBNA) and David Parker, CEO of Polymath Consulting and is potentially one to watch.