If you have an account with one of the large retail banks in the UK, more than likely you would have received an email or letter recently informing you that the personal data they hold can now be shared (securely and only with your permission) with other banks and third parties.
Open banking has been launched by The Competition and Market Authority (CMA) who published a report in 2016 stating that the larger more established banks do not have to compete hard enough for customers’ business. In order to drive up competition, one of their many proposals was the implementation of Open Banking. The roll out of this was due for January 13th 2018, although some banks have been given more time to implement the changes.
In essence, customers’ personal data is not owned by the bank, but by the customer and as the customer you will now be able to give your bank permission to make your personal data available to third parties, who can then use you it to offer you more competitive prices on traditional retail banking products. Outside of banking, you can allow 3rd parties to see debit payment information such as to energy companies, gym memberships or online streaming services. This greater transparency could give smaller companies the chance to offer more competitive prices, again driving competition across other industries.
In time, expect to see online and mobile banking apps to change. All relevant personal data across different banks and businesses will be made accessible via a dashboard. Customers will be able to grant permissions to third parties (all of whom will need to be FCA regulated and compliant to standards set by the Open Banking Implementation Entity) to see what products they can offer, again all through the dashboard.
This has the potential to transform the way we bank. At present the lending market is dominated by the big four high-street retail banks, which between them control more than three quarters of current accounts and nine out of ten business loans. Open Banking in theory will provide greater transparency to customers which will enable them to shop around for the best deal. This increased competition should lead to challenger banks gaining in market share, increasing their revenues and thereby adding to their appetite and capacity for innovation and change. All this means greater hiring in the mid to long term, initially in innovation followed by project roles. In the short run we anticipate that open banking will create more opportunities, particularly in projects that will focus on digital transformation and big data implementations. These programmes will further impact infrastructure and security measures, so project experience in these areas will be highly sort after skill sets.
Please feel free to get in touch with the Projects and Change team here at Morgan McKinley if you want to know more about Open Banking and where you might find potential opportunities.