Open Banking, seen as a potential game changing regulatory change, is set to launch in the next few days in the UK; Open Banking requires banks to allow fintechs and other third parties to have access to customer data if the consumer agrees to grant access; the new law will allow for a safer data exchange, in the past consumers shared their login details and third parties scraped the data, and standardize access across the UK and Europe; while banks have pushed back on the coming change this will allow customers to better control their information and tailor services to their lifestyles. Source.
Open source projects have started at Deutsche Bank and JPMorgan Chase in the past year, there is a thought that this is the start a new wave of open source banking; Accenture found that 99 out of 100 payments executives at banks said they plan to make big open banking investments by 2020; open source projects like Linux has help the tech industry develop into what it is today; banks like CBW Bank, who is run by former Google engineer Suresh Ramamurthi, already have a marketplace where developers can build banking apps using their APIs; open source banking can also help to keep banks more secure as the big tech giants have been helped a lot by using open source applications. Source.
As Europe moves to open banking the US begins testing principles of data sharing between banks and fintechs. Source
Open banking is around the corner in the UK and recently the CFPB released guidelines on data sharing that has banks concerned about cybersecurity; Kathryn Petralia, chief operating officer of the online lender Kabbage believes banks and Fintechs should be held to the same standard regarding data; concerns over data include responsibility on data breaches, encryption and entry points for hackers; as data sharing becomes the norm both banks and fintechs will need to protect themselves at many levels. Source.
As the date for open banking nears Banks and their digital only challengers are bracing for a new era of banking in Europe; writing an opinion piece in AltFi Lewis Hill of Instinctif Partners explains how digital only banks will need to explain their value proposition to the consumer to take advantage of the new rules; banks are still struggling with legacy technology and poor consumer ratings; the time is now for challengers to truly disrupt the incumbent players. Source.
WeChat recently started to offer users access to mutual funds, just another service they were able to add to the platform; the open platform based approach where you can plug in different services through an API is where financial services is headed; while those in Europe and the US might not be as advanced as China they know innovation like this is coming; “It really shows incumbents that they’ll need yet again to pivot to a new platform; that it’s not the bank that’s the platform anymore,” April Rudin, chief executive of wealth management marketing firm The Rudin Group, tells TearSheet; message based financial advice is the next natural step for clients who have transformed the way they interact in recent years from the phone call to the text message or chat service. Source.
With open banking set to go live in Europe next month US banks will be keeping a close eye on how the process works; US banks have started to share data with fintechs through different partnerships for different reasons; the time is coming where the industry will have to look at open banking as a regulatory standard and some think the banks should really be the ones to set the parameters; coming up with a potential global set of standards is something that could really benefit all parties involved; “You need to globalize that at consistency so you don’t have different standards for each country in Asia, for example,” said Cynthia Murray, a managing director at Bank of America, to TearSheet. Source.
According to Christopher Ward, head of product management for PNC’s treasury management division, “We’re ready, we’re in process of implementing APIs with customers. I would proffer most customers are not ready for it.”; Bank of America also stated they are ready for open banking; however many banks aren’t as prepared and being ‘ready’ for open banking is up to interpretation; the article from Tearsheet shares other perspectives on open banking and how some banks might be missing the point of open banking. Source
Open banking platform Deposit Solutions raised $20mn from existing shareholders e.ventures and Greycroft; they will use the funds to continue building the platform out and expand to more markets around the globe; “This investment round is a strong vote of confidence from our shareholders and allows us to further focus on our core mission, establishing Open Banking as the new industry standard for the deposit market,” Deposit Solutions founder and CEO Dr. Tim Sievers said to Bankless Times. Source.
Former FDIC Chair Sheila Bair writes in the FT that in light of the recent hack to Equifax should regulators be providing more entry points to customer data; she goes on to explain past bank hacks are typically done using a third party who has gained access to a customer’s data; other key points include can these service providers cover potential losses and are regulators forcing service providers into the most secure process. Source.