The UK's progress toward making banking more open has taken another step forward after 20 fintechs were chosen to test out a new way of sharing banking information for the benefit customers.
A call for startups was put out as part of the competition watchdog's ambitious plans to disrupt the big four banks' hold on the market.
Now twenty have been chosen to experiment with open banking APIs that can help small business thrive, following the Competition and Markets Authority's landmark retail banking report. APIs can be used to share banks' customer data – such as transaction information – securely but openly, with startups using them to create innovative new apps, platforms and services.
The chosen startups, which include digital challenger bank for small business Tide and company information platform Duedil, are the first group to get access to the newly created API which is set to become widely available at the start of next year.
"We now have twenty teams who we firmly believe can build next generation services that will transform small business banking," said Chris Gorst, the challenge prize lead at Nesta, the innovation group charged with supporting the hunt for startups that will share in a £5m prize.
"By supporting these teams with financial rewards, expert support and access to the Open Up Data Sandbox, we hope to play a part in revolutionising a sector that has been slow to exploit new technology and respond to customer needs.”
|The 20 startups getting their hands on banks' data|
Credit Data Research Ltd
Solo – Smarter Freelancing
Clock ticks on Open Banking deadline
The CMA's report was published last August and heralded as handing startups a "bazooka" with which to disrupt the big banks. It forced begrudging banks to share data, from product prices to individual transactions, and to take on the costs of making such a technical project reality.
That means for example, an app created by a startup could access the best priced mortgage from any of the nine banks, including Lloyds, HSBC, Barclays RBS and Santander, or an accountant could be granted access to transaction information.
The Open Banking steering group has since been set up to guide the implementation of its suggestions by January 2018. That includes agreeing on and creating the now-published technical standards which all banks need to use to make the data available.
The myriad group, which brings together the high street banks, startups and other in the payments, finance and technology space, as well as authorities such as the Treasury and Financial Conduct Authority, faces a tight deadline for putting the CMA's non-optional recommendations in place and getting banks across the finish line with just six months to go.
While it achieved the first phase of the project – making some of the least sensitive bank data available such as branch locations and Nesta's startup challenge – the group earlier this year said it needed a "reset". That will include a clearer strategy and vision for open banking, a clearer stance on policy – particularly with the EU which is due to bring in similar rules and standards under PSDII – and stronger governance.
Fears that the introduction of Open Banking in January are unlikely to come with the "revolutionary" impact expected when the ambitious and forward-thinking plans were originally announced have been all but confirmed. The Treasury's representative on the group acknowledged a "big bang" approach may be difficult, according to the minutes of its most recent meeting.
It's also understood there has also been some concerns over how the changes will be communicated to consumers, who are unlikely to understand APIs or open data, particularly with increasing concerns generally over the security of personal data.