While the UK continues to lead the way in open banking, what should it be doing when it comes to open finance? According to the regulators, it should be acting now.
On the first day of the AltFi Festival of Finance, regulators and policy leads came together to talk about the future of open finance and the new generation of APIs being developed.
Moderated by Open Banking Excellence CEO and founder Helen Child, the panel discussed the UK’s position on open finance having “set the blueprint” for open banking, and the need for things to happen now.
Financial Conducts Authority payments policy manager Helen Oger-Zaher and Open Banking Implementation Entity head of policy Alan Ainsworth joined the stage to represent the regulators, while Plaid’s UK policy lead Kat Cloud and Stripe’s head of public policy for UK and Ireland Sam Hinton-Smith represented the fintechs.
The UK set the template for open banking, Child said, with a lot of lessons to share with colleagues around the world.
She noted that in Brazil, there will be a shift from ‘open banking’ to ‘open finance’ in the coming weeks, and asked where the UK stands in terms of pace around open finance.
“Are we moving too slowly? Are we moving at the right pace? What do we need to do to maintain our lead, or is maintaining our lead important?” she asked.
“I think what’s important is that consumers get a much better deal and a much better experience from their financial services providers and they can understand their finances better,” Ainsworth said.
“The idea that the customer can easily do pretty simple transactions is reasonable to look for.”
Speaking as a consumer, he discussed “pain points” he’s experienced, such as having to reinsure his car every year and recall information he doesn’t have, and that this is this point to start at.
“There’s no reason to wait until we can solve everything,” he continued.
“One of the big learnings from open banking is that you don’t need to solve everything in one go.”
Having started with big banks in the UK, making up about 90 per cent of current accounts, Ainsworth explained that there is no reason not to take those learnings and move forward with them now, even if things are not 100 per cent there yet.
“I’m confident that if we can reuse some of the capabilities and experiences from open banking, and some of these other vertices, that we can move a lot quicker,” he said.
“And we don’t need to reinvent the wheel. The wheel has already been invented, we just need to add a few spokes.”
Thinking of future fintech founders, Child asked if now is the time for them to build, and looked to Hinton-Smith to inspire everyone to build open finance use cases.
“Now is the time to build. The opportunity is massive,” he said.
Citing Y Combinator as one of the most successful start-up accelerators, with 24 per cent of startups in their latest start-class being fintechs, he explained that we are at the beginning of the next wave of innovation in fintech.
If you look at Y Combinator, which is probably the most succesful start-up accelerator in the world, in their latest start-class, 24 per cent of all of the startups are fintechs. What that says to me is that we are at the beginning of the next wave of innovation in fintech. And
“Many of those businesses will be building on open finance principles,” Hinton-Smith added.
“So, firstly, this is happening now. Secondly, where the opportunity lies for fintech is twofold. One is to be helping to build the underlying infrastrucutre. And the other is to be building on top of the open finance infrastructure to address those underserved segments in the economy.”
“How often do you get regulators on the stage telling us we need to do this now?” Plaid’s Cloud asked.
“That’s the biggest call to action I think I’ve ever heard.”
Cloud outlined a consumer survey the company did that found 53 per cent of consumers have now switched to online shopping, and the need for companies to adapt to this new to make the shopping experience seamless and enjoyable through open banking.
“The consumers want it, the fintechs want it, the regulator wants it. Everyone wants it to happen today, so we really need to focus on that and start delivering on that,” she said.
“How great is it to hear regulators saying they want to collaborate with the ecosystem, and listen and build it together. If that isn’t a sign of success, I don’t know what is,” Child said.