UK Open Banking Will Completely Change Banks As We Know It

Everything that can be invented has been invented. This famous phrase is, in some circles, credited to Charles H. Duell. He reportedly uttered the words in 1899 when he was the Commissioner of the US Patent Office. There is some doubt, however, as to whether he did actually say this. It has also been attributed to a January 1899 edition of Punch Magazine.

Quite frankly, though, whether or not he said is quite irrelevant. More than a century later, we still wake up to a new invention almost every morning. Just take a moment to consider how the internet has come about and developed over the last 20 years. And, also think about everything we can now do from a computer or even a mobile phone. Without leaving home.

Just when we thought banking had completely evolved, along comes open banking. For the last few years, we’ve been able to do almost all of our banking online. The only hurdle we still faced was withdrawing hard currency. Very occasionally, we also had to go into the branch for certain specific interactions that required a physical presence. UK open banking is set to change all of that. It’s revolutionary, and it’s taking the United Kingdom by storm.

What is open banking?

It’s quite simple really. The term refers to the sharing of a banking customer’s data with third-party financial services providers. The data allows these providers to create more accurate and specific customer profiles and to personalize financial and banking products based on the customer’s savings and spending habits.

UK open banking is fully regulated to protect consumers. All participants are registered with the Financial Conduct Authority (FCA). Furthermore, data can only be shared if the customer has consented to it. UK open banking is also overseen by the Open Banking Implementation Entity (OBIE) which sets the software standards and operating guidelines for the industry. The is to level the playing field somewhat to enable smaller and newer financial services providers to compete with the older, established banks.

What is the technology behind it?

The core technology is an Application Programming Interface or API coupled with an app provided by a participating and registered service provider. There isn’t really much to an API. All it is really is a piece of software that allows two applications to talk to each other. It makes data intelligible across different platforms. Of course, when you are sending data all over the web between an assortment of applications, security becomes a major concern. UK open banking, along with the European Union’s Revised Payment Services Directive (PSD2) strives to make data accessible across all platforms while, at the same time, ensuring that the customer’s data is kept secure.

How is it implemented?

The United Kingdom has not taken open banking lightly. UK open banking is being implemented in a controlled manner. Firstly, in the UK, the term Open Banking is not just a phrase. It has been adopted formally and, hence, is written with capital initials. Aside from requiring all participants to be registered with the FCA, there is also the OBIE. The OBIE has a three-fold purpose. Firstly, as we have previously alluded to, it acts as a watchdog of sorts, supervising the implementation and setting the standards.

It also sets out to promote Open Banking and to encourage participation by service providers and consumers alike. Thirdly, it is providing the infrastructure and support services to all the participants in this new market.

How is UK open banking changing traditional banking?

UK open banking is going to completely change the face of banking as we know it. On the one hand, it’s providing a platform where the minnows can stand up to the giants. Where small, adept boutique financial service providers can hold their own against the giants that have century-long pedigrees. The big winner is going to be the consumer, though. By opening the market up, more competition is being introduced. The smaller players that are more easily able to adapt to market demands will now have the opportunity to offer niche products to the consumer base.

Whilst bespoke specialized finance products have always been available on a B2B basis, Joe Public will now be able to access them too. To put this into perspective, let’s examine some of the benefits that the average consumer will reap from UK open banking.

  • Better loan or credit card offers. By analyzing the customer’s financial position, a provider can search the market for loan products or credit cards that have more favorable interest rates and repayment terms than those the customer currently has.
  • Mortgage refinancing. This is not a new thing. Refinancing property has been around since the turn of the century. The key takeaway for consumers here, though, is that the smaller boutique finance houses are much more agile and able to source customized solutions that optimize the customer’s assets and financial profile.
  • Financial profiling. Most of us have relationships with two or more financial institutions. Giving a provider access to data across all provider platforms enable them to create a very accurate profile of what we do in our financial lives. It also gives them the information they need to be able to tailor vehicle finance, savings plans and investment portfolios.

Companies like Elly help U.K. retailers accept payments

When all is said and done, UK open banking comes through quite clearly as a new way to match the evolving needs of banking customers with the evolving capabilities of the service providers. Behind this, Elly is one of the foremost niche providers in the payments processing space.

With multiple payment methods on a single device, Elly provides ease of use and convenience to merchants across the globe. Reach beyond traditional currencies. Elly accommodates fiat currencies, cryptocurrencies and e-wallets.

Open Banking is here to stay. It’s opening up new ways to save and spend and to get the best out of your money. Embrace the future. With Elly, you never have to turn a customer away. Every current payment method is at your fingertips.