“No one wakes up and thinks ‘I want to do some open banking today’. This is an industry initiative that we should not be communicating to our customers. Because you don’t want this as a consumer.”
Julian Sawyer, former Chief Operating Officer and co-founder of Starling Bank UK, believes many financial institutions are missing the point of the shift to APIs and how it should be communicated to consumers.
He led Starling Payment Services, a division of the Bank offering real-time access to UK & European payments schemes such as Faster Payments, BACS and SEPA to Corporates, Banks and e-Money Institutions. Starling Payment Services also offers a Banking-As-A-Platform proposition enabling organisations to open FSCS Bank Accounts and manage payments all through a set of APIs.
“For years we’ve said never tell your pin to anyone, never give your CVV number on the back of your card, never write that down with your card number, etc. And now all of a sudden we’re saying ‘Oh, open banking, you need to give some credentials away. So I think there’s a dichotomy there in terms of how that works.
“You’ve got to get use cases, you’ve got to get examples where it makes a difference to a customer and they get something better, quicker, or cheaper.”
Sawyer cites an example of KLM airline who allows customers to purchase their ticket through Open Banking.
“If I buy [the ticket] on a credit card, I have a lot of protection in the UK if KLM goes bust, if there’s a strike, or if there’s bad weather. I get my money back. I go down the open banking route and I do not have that protection. So I could be getting the same product, have been persuaded by the airline to go down a different purchasing route, which okay, I’ll do that. Maybe there’s a slight price change of 50 pence, but did I realise I’d lost that protection I’d got by buying the item on a credit card?
“I think what we’ve got to find is some real solutions. Can I borrow money that I wouldn’t have got normally because of Open Banking? Because they’ve got better data and they can see their true net worth and they can borrow more- that is where people will move. It’s got to be something which helps me manage my money better, quicker, cheaper, that’s really what the market is going to look at. And that’s what we’ve got to do in the industry; find that solution and it’s not going to be called Open Banking but it’ll just be doing something better.”
Sawyer, however, argues account aggregation is missing the much larger opportunities Open Banking offers.
The UK averages 1.5 accounts per person, meaning the majority of the population have between one and two current accounts.
“If they’ve done that, they’re doing that to segregate their money for a particular reason. They have put one set of money in one account and one for another. Then they have a rental property, they may have a joint account with their partner, they may be just doing that to manage their lives better.
“Account aggregation is, wow, going to add two sets of numbers together which I already have separated in my mind and, yes, it’s kind of interesting to know what my total balance is in my savings account. Do I need to know my pension every day? No. Do I need to know my credit card bills? No, I certainly don’t want to know that every day.
“And so I think everyone’s gone down this account aggregation as though it’s the holy grail and I’m not sure that consumers are going, ‘Oh, what I’m really really missing in my life is that.’ So, I think it’s a very lazy response to what’s happened in the marketplace.”
The real opportunities, Sawyer says, lie in lending, identity and payments.
“Can I lend better? Therefore I can give my customer the better rate or quicker decision process. Lending becomes really interesting, particularly in the subprime and near-prime where people may be declined for the wrong reason. But it may also find you bad business that you don’t want to be writing and you wouldn’t have found otherwise.
“And then I think identities- people like to TrueLayer are doing some really interesting stuff. Where can I validate who this person is? And that can go from selling on eBay all the way through to account opening type of services. And there’s an awful lot of organisations that want to identify you. Whether it’s paying for tax or buying some insurance, which is not transactional but it is an identity and if I can prove categorically that my buyer or seller on a marketplace like an eBay is exactly who they say they are, then I am going to reduce my fraud, etc.”
Hear Julian Sawyer speak at the 2nd Open Banking Summit, running from 22 -24 October 2019 in Sydney, Taking you beyond compliance to unpack how you can harness the opportunities Open Banking presents, the 2nd Open Banking Summit will provide you with what you need to create cutting-edge customer experiences and be ready for February 2020.