Entrepreneurs at fintech startups have been left little surprised after more than half of the UK’s banks revealed they would miss a deadline for Open Banking - but how they implement it is of more concern.
Nine banks have been forced to make their data open to third parties - many of them fintech startups - under rules from the competition authority due to come into force in January
“We’ve had suspicions that implementation would be rocky,” Monzo’s Tom Blomfield told City A.M. after HSBC, Barclays, RBS, Santander and Bank of Ireland were granted an extension by the Competition and Markets Authority (CMA) of between a month and a year.
“We [Monzo] took a conscious decision not to rely on Open Banking or PSDII knowing that. Maybe in 10 years time you won’t need a banking licence, but you can’t rely on big banks to open up their data and APIs," he said.
Blomfield referred to a quote from US scientist Roy Amara and known as Amara’s law, that “we tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run” to describe the implications of Open Banking.
Concerns over the banks' desire and ability to make the changes have been voiced by many in the fintech industry over the past year. By opening data it means that, for example, a startup can build a money management app that meant you never had to log in to your actual bank again. Or, that a startup could easily offer the best priced mortgage to its users.
But Ed Maslaveckas co-founder and chief executive of Bud, a fintech startup that's working with several banks including HSBC, said that any reluctance is more likely down to classic bank risk aversion and has changed over time.
"They [banks] were more hesitant when it began but now there’s a bit of a foot race around what opportunities banks can offer their customers by next year," he said.
"We're on the side of let's get it right," he said about the delays, which he says came as no surprise. "Something to take as a positive is that it is being taken very seriously."
“It’s no surprise,” agreed George Bevis, founder and chief executive of challenger business bank Tide.
“They [banks] are just not good at software. Building an API is not hard. It’s down to them, but I recognise that it is a complex project management task, to knock out what is not a complex task. The truth is that almost 100 per cent could have all been delivered already if they [banks] were good at managing technology,” he told City A.M..
“The most important thing is that big banks develop user experiences which make it easy for customers to share their own data with organisations they wish to. My fear is that the UXs might not always be easier and that is more important than whether banks deliver two months late,” he said.
While technical standards for opening up data (with customers’ permission) were agreed in September, the exact consumer facing form this will take is yet to become apparent and won’t be until the launch in January - or now later in some cases.
"Any fintech betting on a 'big bang' moment will be disappointed. It will come, but in a year or two,” said Blomfield.
Maslaveckas said: "It might not come in January all at once. But the stuff we’re doing with banks is all guns blazing."