To misquote Robert Burns, the best-laid plans of mice, men and financial service providers often go awry.
I firmly believe that everyone in the sector puts the best intentions of their customers first in the vast majority of cases. Do we always get it right? No. Companies are made of people, and people don’t always make the correct choices. Decisions made around Open Banking are no exception.
It is human nature to put off the non-essential. We prioritise urgency at the expense of practicality, often for the best reasons. Meetings are held to decide what is ‘business critical’ and the agenda items that don’t make the cut are mothballed. Sometimes, as in the case of API implementation by CMA9 banks, that means the customer's best interests are unintentionally sidelined.
That’s not a dig at CMA9 generally. The FCA required certain banks to make data available to third-party providers (TPPs) via standardised Open Banking APIs by September 2019 at the latest. Among other requirements, the regulator insisted banks align their API offerings for TPPs with their own customer offerings. It was a big piece of work and, given the complexity, the FCA granted a selective six-month extension to the deadline of September 2019 to the 14th March 2020 (only for those that did not have APIs live at that stage). At a stroke, the implementation – already two years in the planning – was put aside by stretched teams with other urgent projects on the planning board.
As well as introducing a delay, moving the goalposts suggested the deadline was something of a moveable feast. In showing leniency, the FCA may have inadvertently given the impression that the legal requirement was more of a serving suggestion than a clear instruction. Naturally, some banks took a slacker approach to API than was in their customers’ best interests. Many still have open tickets to be resolved at the moment with fluid deadlines for correction.
Some of the banks, of which the CMA9 are included, are relying on MCI (screen scraping) technologies instead of APIs despite the deadline and an extension to the deadline having now passed. In addition, TPPs like Moneyhub are having to adapt their own data infrastructure to accommodate customers whose banks have not satisfied the FCA requirement
Why does having an API matter?
Those banks have run their projects too close to the line and failed to deliver products that are fit for purpose.
One of the very best measures of efficacy in data sharing is ‘Time to Consent’, the number of seconds it takes to return a request for secure customer data. The speeds are averaged over a three-month period and use standard statistical analysis to iron out irregularities.
And there is good news for CMA9, some of which – such as Nationwide Building Society (42 seconds) – beat challenger bank Monzo (47 seconds). That’s not as good as the frontrunner, mobile-only challenger Starling Bank (18 seconds), but to be applauded nonetheless.
But without the concerted effort of all the major players in Open Banking, customers are being left with a substandard offering. At Moneyhub, we believe that Open Banking presents opportunities for everyone in the financial services sector to benefit from increased transparency. While Open Banking is designed to level the playing field between CMA9 and emerging banks, it presents opportunities for all that operate in Financial Services inclusive of the large banks.
Are CMA9 banks deliberately resisting change?
Disruption has been good for big companies which embraced new technologies and devastating for those who failed to see the opportunities it presented. Open Banking is the sector’s opportunity to do what is best for its customers – increasing financial transparency, making it easier to switch when more appropriate products are available and ultimately enabling financial wellbeing.
Disruption has been good for big companies which embraced new technologies and devastating for those who failed to see the opportunities it presented. Open Banking is the sector’s opportunity to do what is best for its customers – increasing financial transparency, making it easier to switch when more appropriate products are available and ultimately enabling financial wellbeing.
It is possible to see how making customers’ data easily, quickly and securely available to other providers might not be in the best interests of established market leaders. Of course there are those suggesting CMA9 banks are deliberately dragging their heels to stymie competition from challenger banks. We feel, and indeed hope, that the reason for slow progress is more benign.
At Moneyhub, our view is that the legislative efforts of the regulator are not being taken seriously enough. Because the implementation of secure, fast APIs has been pushed down some banks’ list of priorities, customers are not being put first. HSBC (which services the popular John Lewis partnership card) will be using screen-scraping after missing the deadline, Lloyds similarly has not been able to meet the deadline when providing the St James’s Place cash account. This really isn’t good enough. Our industry is better than this.
Open Banking is the future of not just banking, but an array of financial services in a truly digital era. As I have said, it is human nature, and therefore business nature, to put non-urgent matters to one side. Yet, we live in a fast-moving world where putting customers first is paramount. Those who fail to get in line face a fate worse than the FCA’s anger; they will incur the wrath of their customers.
And we all know what happens then.
