UK banks offer glimpse into open banking with £5m fund
With open banking to be introduced in 2018, banks have provided a glimpse into what the practice will look like by contributing towards a £5 million prize fund for Nesta’s Open Up Challenge.
Lloyds, Barclays, Royal Bank of Scotland, and Santander are among the banks that have funded the competition, which offers fintech start-ups the opportunity to experiment with open banking.
Set to be introduced January 2018 and part of the second European Payment Services Directive, open banking will require the largest British banks to provide trusted third parties with access to their data. Small businesses will be able to share their data, and providers other than their bank will be able to make payments from their account.
Nesta’s Open Up Challenge focuses on the future of small business banking, giving fintechs access to SME banking transactions to enable them to experiment with open banking before the practice is introduced.
The 20 successful entrants to the competition have been announced, with challenger bank Tide, business loans firm Iwoca and due diligence tool DueDil being among the fintechs that are using their access to data to create apps and tools for small businesses.
Nesta Open Up Challenge Prize Lead Chris Gorst commented that the quality and quantity of the interest in the Challenge reveals how seriously fintechs are taking open banking.
He said financial services are intrinsically about data, but in the UK, large amounts of customer data sits within the handful of banks that provide the majority of consumer and small business current accounts.
He added this helps to explain the paradox that, while finance creates more customer data than perhaps any other industry, there is relatively little diversity in product offerings and the industry has little reputation for customer-focused innovation.