• Department of Finance have placed Open Banking consultationon hold ostensibly to minimise COVID spread
• Bullet points are trotted out as facts but unfortunately with insufficient context
• “Opinion” – there is insufficient definition of a compelling reason for Open Banking

#openbanking
Starting with my opinion on Open Banking, it has centred over last 5 years on Open Data and API’s. Mention those to the average banking consumer and eyes will glaze over.

Free my Data – what does this mean, and how does it square with data protection. I submit people are much more concerned with misuse of their data and the resulting phone scams.

I can in my armchair survey of one predict that if I respond to any email from DHL or UPS I will get spam calls, texts and emails.

Much more work is needed to build data use relevance, control and borderline criminal activity.

Open Banking Origins

Much discussion occurred following the 2008 banking crisis and particularly US and UK took action to stabilise Banks. The crisis had its origins in US $640 billion derivative market. Derivatives accounted for 10 times World GDP back then.

In short banks were creating products out of thin air based on spreadsheets. (Side note – check out Blockchain in this context)

Mortgages were bundled with a mix of high, medium and poor credit risk. This bundled product was sold as a fake average low risk.

The crisis first appeared when a European FI tried to cash in some of a derivative and the offerror was unable; this created a Bank run and the rest is history including Wells Fargo and Mortgage Brokers colluding to cover up fake or non existent supporting mortgage borrower information, such as pay stubs, credit history and Asset Declarations.

The solutions inter alia were contained in Glass Steagall, and British regulation including Ring Fencing, which precluded investment bankers using retail bank funds for such derivatives.

This kept your savings account safe and by and large the results were successful. NB Just this week the Sunak government announced they will reduce ring fencing for smaller FI’s to support post Brexit growth.

Department of Finance hesitance

There is little in it for the government, and we cannot expect them to define consumer needs beyond risk reduction.

Why do consumers need Opening Banking

Why and who needs it. The Incessant discussion about API connections amazes me I have been engaged with too many API developments for customer authentication and identification and the risks are many:

• mis-use of data
• inappropriate interpretation of the results
• incorrect assumptions on the accuracy and precision of the data

To be specific let’s say your data is accessible via API … then what? How will it be used- how will those risks be mitigated?

So what is the compelling need for Open Banking. Apart from the “Free is good” argument this needs disciplined definition.

Open Banking – the compelling need

It is a safe assumption that Fintech’s want Open Banking because it could improve their access to large bank customers and improve their customer acquisition. But their future potential and viability is tied to consumers needs.

Large Banks will resist annoying outside their span of control which is tight (payments, interchange, SWIFT, Clearing)

Lost in all this is the compelling advantage for consumers, and tie between that advantage and the stability and risks associated with the solution.

Ok, this can of worms is opened. More to come from me to parse out some of these thoughts. I am certain I have offended some, so comments, thoughts and ideas are welcome.