Five lessons on open banking from the UK
In recent years, the United Kingdom has become one of the strongest supporters of open banking worldwide. It all started when HM Treasury decided to create a working group on this matter in 2015; then, one and half years ago, an entity was created to handle the transition; and, in January 13, 2018 standards were implemented and the UK is now at the forefront of open banking.
The key difference is the involvement of the British government. The Cabinet started from two main elements: data belongs to the consumer and not the companies managing it; and building a dynamic digital economy means defining a robust platform of financial services.
Imran Gulamhuseinwala, Trustee for the Open Banking Implementation Entity (OBIE), explained the five lessons they learned from this process, during his presentation at the Open Banking Bilbao conferences.
1. Creating an independent entity
With banks albeit independent. This was the premise for creating the Open Banking Implementation Entity, under the UK's Competition and Markets Authority and involving the sector's largest banks to make sure "the needs of all stakeholders were taken into account," as explained by its Trustee.
2. A standard based on APIs
The United Kingdom set down this road five years ago and its momentum has been further reinforced by the implementation of the payments directive PSD2 and the General Data Protection Regulation (GDPR). This process included two key decisions: "the APIs are the way to go," as Gulamhuseinwala explained; and interoperability had to be promoted. "A standard was needed" for this purpose: this standard is in force since January 13.
From this date, any authorized fintech can use a single API standard to access, subject to customer consent, details about the transactions of checking accounts of both consumers and SMEs and to carry out immediate single payments.
3. Protecting the consumer
The UK was clear about the central role of consumers and that the need for their protection. To this end, it laid down that "the customer must never have to share their password with any entity other than their bank," stated the Trustee of OBIE. Also, consumers can easily check the list of third parties with authorized access to their data and "revoking this permission should be as easy as giving it in the first place," insisted Gulamhuseinwala.
4. A business directory
Only authorized entities may join the ecosystem. The OBIE created a directory that can only be joined by authorized fintechs, i.e. fintechs "with a license to make payments awarded by the competent authorities."
5. Dispute resolution
Gulamhuseinwala also stressed the importance of having a dispute resolution mechanism: "This way, if something fails, if we see that the customers' data has been used without permission, etc., the customers can get support. Consumers can contact the ecosystem's actors to submit their complaint and have it handled correctly." It is vital that everyone works within the ecosystem.
And this is just the beginning. The goal is that in March 2019, "any of the nine large banks in the UK that decides to implement all PSD2 solutions can do it using open banking standards," stated the Trustee of the OBIE. Additionally, the platform is just the beginning of a much wider universe that any type of non-financial business may join, from insurers to e-commerce to credit rating agencies and mobile operators that "wish to make their products better by connecting to electronic services."
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