The UK’s largest account providers are making it possible for customers to make the most of their financial data and easily and securely access services from a wide range of companies that better meet their needs.

This is the first major milestone in a multi-year programme to open all payment products to a vibrant, innovative new market for financial services

Open Banking for current accounts begins on 13 January with a managed roll-out which will complete in March 2018

The Open Banking Implementation Entity (the ‘OBIE’), the body created by the UK’s largest personal and small business current account providers to create a better way to move, manage and make more of your money, has confirmed that the UK will be the first nation to launch Open Banking when its service goes live in early 2018.

Open Banking is a term that describes a secure set of technologies and standards that allow customers to give companies other than their bank or building society permission to securely access their accounts. This means customers can, if they choose, easily use services from a range of different types of regulated companies without the need to share credentials with any third parties. They may, for example, choose to aggregate a view of all of their accounts through one provider or allow a company to analyse their account data to offer automated budgeting advice or cheaper overdrafts.

Every company using Open Banking to deliver their services has to be authorised by the Financial Conduct Authority (FCA) or another European Regulator. Open Banking runs on a well-established communications technology called Application Programming Interfaces (APIs) and is designed with customer security foremost in mind.

The OBIE was created by the UK’s nine largest personal and small business current account providers (the ‘CMA9’) in 2016, after an inquiry by the Competition and Markets Authority (the ‘CMA’) determined that Open Banking could bring new competition and innovation to an industry it felt needed shaking up.

Imran Gulamhuseinwala OBE, Trustee of the OBIE, said:

“The goal of the UK’s Open Banking initiative is to allow consumers and small businesses the option to securely and safely make the most of their financial data. In time, Open Banking will give consumers and small businesses more choice, better services and cheaper products.

“The work we are doing here is genuinely world-leading. The UK is the first nation to implement a standardised Open Banking solution. In the UK we are creating a single technology standard enabling new services to be easily built and offered to consumers and small businesses. Open Banking will help make Britain one of the best places in the world to bank and will, in time, stimulate the digital economy.

“While the UK is leading the way, we are incredibly excited at the opportunities created by working with peers around the world, and in Europe in particular. We are in active discussions with several groups seeking to build standards and we look forward to that work bearing fruit in 2018.

“The first set of Open Banking APIs will go live to third party providers on 13 January. This is the culmination of a huge amount of collaborative work done by the UK’s largest banks and building societies, the OBIE, and companies from across the technology and financial services sectors. It’s an extraordinary achievement which, in time, could fundamentally change how we manage our money.”

In order to ensure that Open Banking is introduced to the market smoothly, the launch of Open Banking will be carefully managed. For the first six weeks, the companies offering Open Banking services will be asked to limit the number of instructions processed and only make it available to a small group of selected customers. This enables authorised third parties to be sure that their products and services are working as intended and for banks and building societies to be certain that they can manage volumes appropriately.

All of the CMA9 have different systems and ways of keeping information. While Open Banking will launch on the date specified by the CMA, some institutions will need more time in order to complete preparations for making Open Banking available to all of their personal and small business current account customers. The CMA has today issued directions to those of the CMA9 that need additional time. These directions will enable the banks to implement Open Banking for all their customers as soon as possible, bringing them into compliance with the Retail Banking Market Investigation Order, according to a plan approved by the CMA.

Open Banking will be available to the overwhelming majority of personal and small business current accounts covered by the Order in time for its release to the open market at the end of the managed roll out. The CMA directions can be viewed here

Danny Healy, Financial Technology Evangelist at MuleSoft, said:

“Now PSD2 has come into effect, banks across Europe must be ready to comply. However, for banks to take full advantage of PSD2, they need to create APIs that go beyond compliance and offer wider innovative capabilities. For example, rather than serving as a place to simply check financial balances, banks should create personalised services tailored to customers’ needs.

“The early innovators will have the best chances of emerging as market leaders in the open banking world, as basic financial services become commoditised. We’ve already seen a number of banks—such as Barclays, HSBC and RBS—drive innovation through APIs. Barclays, in fact, is using hackathons to experiment with APIs and build new financial services solutions. The key for banks to move at speed to match pace with fintech startups is ensuring the APIs they create are discoverable and reusable in their application network.”

Andrew Stevens, Global Banking Specialist at Quadient, said: 

“Looking at the open banking revolution in one way, it can represent a real threat. However, it shouldn’t be seen as a negative development. Banks should see this as an opportunity for change e.g. as the spur for providing great customer communication. Banks need to engage and have a conversation with customers on their terms; providing the right message, at the right time, over the right channel.

“There are three steps that banks should follow to set themselves up for successful conversation with customers: avoid reinventing the wheel by taking stock of the communication tools they already have in place, break down barriers between channels and departments, and finally make sure that there are no hitches when new communication methods are implemented.

“It would be easy to see the new measures as time of hardship. Instead, banks should it as a catalyst for greater customer experience.”

Gavin Littlejohn, Chair of the FinTech industry body The Financial Data and Technology Association (FDATA) and FinTech Representative to the OBIE, said:

“Our industry has offered services that let customers – around two million at the last count – give our member firms direct access to their accounts for several years. However, the method we have had to use, which literally ‘reads’ customers’ online banking screens, has never been what we would have chosen. We are enthusiastic about the potential of Open Banking, which provides a direct feed into and out of accounts using tried and tested and highly secure standardised communications technologies.

“There is a lot of work still to do to bring the full benefits of Open Banking to UK consumers and businesses, and we now need to work closely with colleagues in Europe to align this solution to the standards being worked on there, but this is a momentous milestone.”

Ian Major, Operations Director at Runpath and Third Party Representative at the OBIE, said:

“After this unprecedented collaboration between industry participants, we are on the cusp of implementing a truly ground-breaking ecosystem, one that will see myriad new business models coming to market in a fully regulated environment. The benefits that will arise for both retail and business consumers will be numerous, and it is the duty of all actors to ensure trust and security remain at the heart of both emerging and established services.

“Accordingly, members welcome the “managed start” approach and will concentrate in the formative weeks on supporting the phased and controlled release of the various banks’ APIs.  Adopting this method will ensure that the UK establishes a robust system for the rest of the world to learn from.”

Adam Land, Senior Director at the CMA, said:

“The UK is paving the way globally with Open Banking and it will be hugely rewarding to see the full benefits of this project unfold over the coming months. Open Banking will not only revitalise innovation and competition in this crucial sector, it will revolutionise banking for small businesses and retail customers – allowing them to more easily manage their money and find the best deal for their needs.”

While the initial launch of Open Banking in the UK covers personal and small business accounts – as mandated by the CMA in 2016 – the Chancellor of the Exchequer’s November Budget announced that the CMA9 have committed to extending the Open Banking standards to cover all products with payments capability such as credit cards and e-wallets throughout the course of 2018 and 2019 (in alignment with PSD2).