Open Banking Industry Innovation Guide - OpenBanking.services - Digital Scotland
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Open Banking
Industry Innovation Guide
OpenBanking.services
Open Banking – Scotland’s Global
Opportunity
As the Scotsman writes the race is on for Open Research from The Financial Brand shows just how
Banking, and there is a unique opportunity for important and impactful the trend will be for the
Scotland’s Fintech innovators to lead it, a viewpoint banking sector:
written by one of the local pioneers Money
Dashboard.
Innovation and Best
The country has a deep history and presence in
banking, and a highly innovative tech sector – The Practices
intersection of the two o ers a hyper-accelerating Scotland experiences the same issues locally that
opportunity for Scotland’s economy. de nes market needs globally, presenting the
opportunity for a powerful bootstrapping cycle of
What is Open Banking pioneering and proving them at home rst, then
exporting those solutions internationally.
The term refers as you might expect, to the use of
open standards within the banking sector, to For example half of Scotland’s smaller rms believe
encourage and enable better interoperability they get a raw deal from their banks, writes The
between the banks, to achieve more integrated Press and Journal. The ongoing closure of branches
consumer services. and ATMs impacts communities heavily especially
those that are remote.
Banking Technology explains What You Need to
Know, and Michael Gardner provides this excellent
overview, highlighting the challenges and
Featured Digital Scots
opportunities the trend will present, how banks will Renovite is an example of a Fintech building
need to master better UI strategies and the use of innovations for these types of challenges locally in
APIs. The Open Bank Project lists a plethora of Scotland. They’re moving ATMs into the Cloud,
exciting startups pioneering di erent niches it meaning entirely new ways of deploying them will
exposes. be made possible, creating the potential for
innovative solutions to those needs.
The enabling catalyst is open standards. The Open
Banking Implementation Entity was created by the Sharing of data between banks will encourage
UK’s Competition and Markets Authority to create smarter services, better informing consumers about
software standards and industry guidelines that more competitive o erings, and Edinburgh-based
drive competition and innovation in UK retail The ID Co. is another startup pioneering this type of
banking, and they released Version 3.1 of the Open integration-based service.
Banking Standard in Aug 2018.
Open Banking – Scotland’s Global OpportunityOpen Banking – Scotland’s Global
Opportunity
And not only are they bringing their own products
to market, they are actively cultivating an Open
Banking innovators forum for others to learn from
their experiences.
Open Standards
Importantly there is a wealth of resources to foster
this innovation around.
The Open Banking Initiative has begun the industry-
wide open standards work required to make this
capability scalable and of course, truly open, such as
publishing the rst versions of the payment
initiation specs and Open Data speci cations.
These standards enable banks to adopt more
exible API-based methods of systems integration,
highlighted by the perfect example of the point of
this article, a trend being pioneered by local Scottish
banks.
In this documentary experts including Kevin
Hanley of the RBS explain how they’ve shifted from
‘point to point’ integrations between business
systems, to APIs because these are more e cient
and critically, enable the open ecosystems that
stimulate creative innovations that power new
products that customers value.
Open Banking – Scotland’s Global OpportunityOpen Banking with Barclays
As ComputerWorld reports, one of the rst uses of
this interoperability is their own mobile app, which
now has the ability to aggregate views of multiple
bank accounts:
“As opposed to HSBC, which decided to launch a
new standalone app, rst as a Beta then as the
Connected Money app, Barclays has opted to
embrace open banking through its core mobile
banking app by releasing multiple account views as
a feature.
Barclays o er their
developer portal for Open The new feature is available immediately to
customers with the latest version of the mobile
Banking here. banking app installed. It allows customers to view
their balances and transactions for other personal
They describe the vision and opportunity for Open or business current accounts with Lloyds, Halifax,
Banking in this blog, where they describe how Bank of Scotland, RBS, NatWest, Nationwide or
customers will have the option to give their Santander once integrated through the new open
permission to share their account transaction data banking APIs.”
with, or make payments through, other companies.
As the sharing of information is encouraged, the
expectation is that banking data can be utilised by
Open Banking is a huge
FinTechs to create new nancial products – like
opportunity for all sorts of tech funding platforms, supplier payment services, credit
companies to introduce checks or insurance – that are more competitively
priced or better suited to customers’ needs.
previously unimagined products
and services. Access to a person’s or company’s nancial data
should also greatly reduce the time it takes for
nancial services to be set-up; for example,
Single app, multiple providers may be able to approve loans much more
accounts
quickly, as well as linking transactional information
to accounting software.
In this video Truelayer shows a walk through demo
of the Barclays Open Banking authentication ow:
Open Banking with Barclays - digitalscot.netStarling Bank – Pioneering the
Platformi cation of Banking
At 16m:40s Megan makes the seminal point, about
A Tech Start-up With a
the importance of their critical role of their
technology platform, and how this has enabled a
Banking Licence ‘Banking as a Service‘ paradigm that is driving the
‘Platformi cation’ of banking.
The headline video introduces how Starling Bank is
a pure Cloud-based, mobile only digital bank. They This is central to their competitive advantage, not
believe Open Banking will increase competition and only powering user-centric mobile only and Cloud-
innovation throughout the market and as a result based services, but enabling a very low cost basis
give customers more choice, more products and and high speed agility so they can outperform
better prices. traditional banks. Within their rst 475 days of
production they published 377 platform releases
Megan Caywood, previously Chief Platform O cer through Continuous Delivery practices.
for Starling now MD Global Head of Digital Strategy
for Barclays, describes them as “a tech startup with Speaking at AWS re:Invent 2018 Megan and
a banking licence.” Megan describes the Starling’s Head of Back O ce Engineering Martin
fundamental transformation being the shift of data Dow provide a detailed case study showcase of how
ownership, from the banks to the customers they have built an entirely Cloud-based digital bank.
themselves.
In the rst session Megan sets the scene, describing
This is the ‘Platformi cation’ of the banking sector – how Starling was founded around a goal of bringing
The same type of intuitiveness that consumer tech a technology-centric Platform model to the UK
companies like Facebook, Google and Apple have banking sector. Traditional banks had fallen behind
brought to market via API-driven software in terms of tech innovation and no longer compared
development, now being pushed forward into well to the real-time, intuitive apps consumers had
banking by these regulations. come to expect.
Starling’s technical prowess is exempli ed through It’s not just the use of the same technology
how they lead with features like Pulse Noti cations innovations but importantly also the same business
and splitting the bill. model. Inspired by Uber and Airbnb Starling is
seeking to replicate the same digital marketplace
approach, where outside of their core current
Platformi cation – account product other services like mortgages and
Banking as a Service
loans would be plugged in from partners from that
marketplace, via API integrations.
Real-Time Banking
Starling Bank – Pioneering the Platformi cation of BankingStarling Bank – Pioneering the
Platformi cation of Banking
A feature central to an improved user experience is Highlighting the nature of the opportunity a number
‘the Pulse’, a real-time feed of the customers of possible value add scenarios are suggested, from
account. Similarly seeking to eliminate other integrated direct payments, account aggregation,
common pain points opening a new account can be credit checks and loyalty card updates.
achieved in less than three minutes by downloading
from the app store, instant noti cations and rich This program exempli es the Platform marketplace
data analysis of their spending, and Card Control model applied to banking. Apps are interconnected
options to lock and unlock cards. via the OAuth protocol, making possible a plethora
of dynamic feature possibilities.
In contrast to their peers who also launched at
around the same time, Starling took on the full For example loan providers can pre-qualify what
technology estate. Others would opt for a lighter amounts you would be eligible for by reading your
tech approach and no banking licence, banking data, and partners like Raisin have
concentrating purely on the front-end app embedded the new account opening process into
experience and building on an o -the-shelf banking their online savings marketplace.
system such as Wirecard.
Cloud Native Banking
Instead Starling saw this backend system as another
opportunity for competitive advantage, gaining a full From 8m:15sec Martin Dow walks through the
banking licence and building out their own technology implementation that has made all this
capabilities so they could o er key features like possible, in essence describing a scenario of ‘Cloud
faster payments and location awareness; this Native’ banking, a term that has emerged from the
enables auto-detection of the customers location tech sector to describe an approach to software
and adapting the data feeds accordingly, such as development that is entirely built upon IaaS and
showing transactions in local and home currencies. PaaS capabilities o ered by providers like AWS.
App store partners Pioneered by digital natives like Net ix it re ects
Megan’s core thesis of bringing this type of tech-
From 40m:30s Megan walks through Starling’s powered business model innovation to the banking
developer portal, where partners can sign on and sector.
begin developing their own apps for inclusion in
Starling’s marketplace, following a process of due
diligence to ensure they implement the required For another degree of more technical detail this
compliance best practices such as encryption. presentation from Jason Maude, Senior Developer,
explores the details of the role of Java in this
scenario.
Starling Bank – Pioneering the Platformi cation of BankingStarling Bank – Pioneering the
Platformi cation of Banking
There’s certainly no doubting the powerful
Open Banking 2.0 -
paradigm they have de ned, what they describe as
‘Open Banking 2.0’ in this Rebank podcast, and the
Building the Bank of resulting progress they have consequently achieved.
the Future This includes expanding their white label o ering,
signing deals with Telleroo, PelicanPay and Vitesse,
Not all digital banking innovators see this approach with MoneyHub to integrate Starling into their
as the way forward. payments gateway, and working with Anorak to add
a life insurance product. Anorak analyses their bank
In this 2018 Hong Kong FinTech Week discussion transactions to o er advice on how much life cover
panel Megan and Chad from Revolut Bank share they need and from this matches the user with the
their di erent experiences and strategic best policy from the major insurers.
considerations for starting up challenger banks; for
example how Starling decided to acquire a full A particularly inspiring example is their integration
banking licence to launch versus their competitors with YoYo. This demo walks through a very
who opted instead to concentrate rst on customer compelling example of how it enables retailers to
acquisition through early digital products. build a highly integrated and personalized rewards
scheme.
From 8:00m Chad makes it very clear he doesn’t
believe in the marketplace approach, to the extent They said it couldn’t be done. But quite clearly it can,
he feels it is bullshit, and instead believes and it is driving the wholesale transformation of
consumers want the digital banks to proactively banking.
gure out these types of value add features and
directly build them into their apps, eliminating the
hassles for customers to sign up to additional third
party services.
However it’s quite likely both are right – There will
be a plenitude of di erent types of customers who
have di erent preferences that each is better suited
to.
Starling Bank – Pioneering the Platformi cation of BankingAPI Maturity Model for Open Banking
Open Banking API Platforms for
Platforms Enabling FinTech
Open Banking is a keynote trend that showcases the Innovation Ecosystems
potential for these exciting developments. FinTech
Futures describes how it will impact the banking In their Open Banking article Cap Gemini highlights
sector how an API platform will provide the foundation for
cultivating a developer innovation ecosystem:
“This development emerges out “This involves the creation of secure APIs by the
banks that will be able to perform these activities on
of a perfect storm of shifting your account. This will allow third-party providers,
customer behavior, regulatory such as FinTech companies, to be able to write
changes, the threat from digital applications that consume these APIs and perform
these nancial transactions on your account.”
ecosystems such as Google,
Apple, Facebook and Amazon In their article Data Sharing and Open Banking
(GAFA), and the quest for new McKinsey de ne three distinct types of API:
business models are driving
banks toward open banking.”
The Open Banking Initiative has begun the industry-
wide open standards work required to make this
scalable and of course, truly open, such as
publishing the rst versions of the payment
initiation specs and Open Data speci cations.
In this documentary experts including Kevin Hanley
of the RBS explain how they’ve shifted from ‘point to
point’ integrations between business systems, to
APIs because these are more e cient and critically,
enable the open ecosystems that stimulate creative
innovations that power new products that
customers value.
API Maturity Model for Open BankingAPI Maturity Model for Open Banking
Model type Attributes Explore data-sharing agreements with ntech
and non nancial services rms to stay ahead
of the curve.
Public / open Innovation through Develop a perspective on APIs and their
APIs used by external engaging developer bene t to the bank’s service model, both in
partners and developers who community
leveraging mandated third-party access and
build innovative apps and Extended market reach
products. potentially extending access beyond statutory
requirements.
Fully understand both existing data privacy
Partner / B2B Reduced partner costs
mandates and likely changes, and determine
APIs used by business API monetization their institution’s appetite for a less
partners, including suppliers, conventional approach. And examine how
providers, resellers, and
Enhanced security
customer messaging would best facilitate any
others for tighter partner such change.
integration.
Banks will need to address the potential loss of
revenue from existing payments revenue streams
Internal Cost reduction resulting from the lowered barriers to competition.
APIs are used by developers Operational e ciency Change is rarely comfortable, but as market
within enterprise. evolution in the United States and other countries
Enhanced security illustrates, the forces of change are inevitable.
Banks are better served getting ahead of and
de ning the trend rather than waging a futile
They conclude with this strategic recommendation:
“Regardless of location, over the next 18 to 24
months banks should capitalize on their incumbent
advantages by taking the following actions:
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