President Biden won a lot of praise when he issued a slew of consumer-friendly executive orders last week. One of them could have an impact here, an ocean away from the US consumers who’ll feel the direct benefit.
The order aims to make it easier for US customers to access and share their banking data. In 2021, that’s a significant move.
Years ago, banks used to send that data to you on statements posted through your letterbox. There wasn’t much you could do with those pieces of paper, except file or shred them. Now the data is electronic, and the opportunities for consumers – and UK fintech businesses – are huge.
Plug your information into an AI-powered tool and you can immediately learn how you spend and how you can save, which utility firms would give you a better deal, and which scarcely used services you could cancel.
What’s more, that ability to share data makes moving between banks easier. It’s called open banking, and a new community of financial technology firms are making waves tapping into it in the UK already.
President Biden’s announcement was heralded as a win not just for US consumers, but US fintechs too. As more Americans embrace open banking, it will be easier for those firms to grow, win investment and go public. With scale comes opportunity for businesses like these.
Thriving American fintechs mean more competition for UK companies which will drive innovation here. The UK has every right to be confident. After all, we’ve been ahead of the game. The Competition and Markets Authority (CMA) published a report paving the way for open banking five years ago.
To stay ahead though, the UK will need to be more ambitious for its fintech firms.
Three million British consumers already benefit from open banking. That’s great, but not nearly enough. The figure should be nearer thirty million.
The obstacle in this case is simply consumer awareness. The concept of securely sharing your banking data with an app that is looking out for your interests – rather than your bank’s – remains unfamiliar to many.
How can the UK make sure more customers get the most from open banking, and help our fintech sector to compete?
The CMA could start by encouraging high street banks to carry clear and prominent explanations on their own websites setting out what open banking is, what it can achieve and why it’s as safe as using your regular banking app. The regulator should urge them to put an address for the main open banking website on their marketing. This should be backed up by the government, who should list the companies that have gone through the rigorous regulatory process to be approved on the trusted gov.uk website.
With the big banks’ visible and enthusiastic support open banking could become much more widely known. Tens of millions of consumers would benefit and UK fintechs would be well set to compete with their US rivals.
Consumers would win, but so too would the open banking firms that have sprung into life in the UK and – in turn – the British economy. Get the recipe right and we can nurture the next wave of businesses here that will end up providing fintech services around the globe.
President Biden’s executive order was far-sighted. We should make sure that as the US benefits from a rush to embrace open banking over there, the economy over here doesn’t miss out.