Money20/20 Europe: How open banking is paving the way for “limitless” data-led opportunities

Money20/20 Europe 2023 opened this year with a discussion titled ‘Open banking: The quest for harmony’, featuring representatives from Australia, the UK and Europe.

Money20/20 Europe 2023 is taking place in Amsterdam this week

The panellists considered the future of open banking and open finance, how regulators can provide clarity and get out of the way of progress, and the importance of making the system work for ordinary people.

Emily Martin, who leads consumer data rights policy and engagement at the Australian Treasury, says the government department’s approach to making the most of people’s data was “economy-wide”, bringing in the non-banking sector.

“We will look at other open finance sectors over the next 18 months to two years,” Martin says.

“From a commercial perspective, we hear data sharing is very useful but doesn’t actually represent a commercial opportunity.”

As a result, the treasury is looking at actions, such as payment initiation, that can be combined with the data sets that the department already has, such as consumer data. Martin says: “Whether that is opening and closing an account or updating a customer’s details, how can that be streamlined and simplified?”

The treasury is adopting a co-led approach from both industry and government. “It won’t be a successful programme without industry engagement. We’re told that our industry engagement is sometimes a little bit too intense because we’re often consulting and going to industry!”

Martin says the treasury’s role, the role of government and regulators, is to put the necessary framework in place. “And then it’s up to the industry to come up with the fantastic products and services for consumers,” she adds.

Making data equal

Chief innovation officer at the Dutch Central Bank (DNB), Patrick de Neef, says the DNB’s belief is that as we move to “a more open, innovative ecosystem”, data sharing within an ecosystem “must be equal”.

“It shouldn’t matter whether you are a bank or a payment institution, the same kind of rules should apply”, de Neef says, if the industry is to move to something more “game changing”.

Looking ahead, he says a number of new European regulations are in the pipeline with lots of requirements that need to be accommodated, which represent the “first hurdle which everybody needs to get through”.

Firms are looking to regulators, de Neef says, to interpret these regulations. “There’s always questions coming from industry.”

“We’ve also opened an Innovation Hub together with our other Dutch supervisors, the AFM, for example, to actually answer these questions,” de Neef says.

Firms are worried about being fined, penalised and even jailed if they do wrong, so providing clarity is key if open finance and open data is to succeed.

“I hope for the future we get more and more of this dialogue between industry, especially the new entrants, working together to share knowledge and getting everybody on the same level of understanding in terms of the regulations.”

Making data smart

Sheldon Mills, executive director of consumers and competition at the Financial Conduct Authority (FCA), and who co-leads the supervision, policy, and competition division at the FCA, says that in the UK there are “three levels” that go beyond what is outlined by the UK government when it comes to open banking.

“The UK government itself, the business department, is looking at what’s called smart data,” Mills says. “I think that’s an important place to start.”

Mills believes the open banking industry in the UK is heading towards the interaction of different data sets that have been consented for use across different purposes, such as healthcare data, financial data, and identity data. “And that goes way beyond finance,” he says.

Allowing for the blending and interaction of these different data sets, it’s hoped, will lead to “frictionless movement” of either payments or contracts, for example. “It’s limitless,” Mills adds. “The UK is on that mission.”

Incoming smart data legislation will empower different government departments to make use of open data-type opportunities within their respective fields, and open banking is ahead of the curve.

The FCA’s strategic working group and consultation has identified several frictions within the existing ecosystem. “Those are around levelling up availability and performance of the existing APIs which are already in place, particularly around fraud within the system, and how you manage that and build trust, both for people and businesses within the system.”

The system, whatever form it takes, must be conducive to use by individuals, Mills adds. “Our view is that this needs to be something where everyone’s a participant and pays for entry and access in order to provide products and services.”

Lastly, in open banking, you need commercial solutions, the “Holy Grail”, Mills says. Whether these are premium APIs or variable recurring payments, these commercial models will actually offer value to people and provide a profit motivation within the system.

“We have working groups with lots of different actors, and we are hoping to design the future or the next phase of open banking and beyond that we want to move to open finance, beyond deposits, beyond current accounts, into insurance, investments, and pensions,” Mills concludes.