CMA Head of Open Banking Talks Fintech Growth And Innovation

In an interview with Canadian law firm BLG, Bill Roberts, the Head of Open Banking at UK’s Competition and Markets Authority (CMA), recalled that in July 2018, the requests for third-party APIs were about two million a month. By April 2019, that number had increased to a dramatic 50 million.

Dr. Roberts says, “the scale of entry by new digital providers is unprecedented. And the pace of adoption by all the stakeholder groups required to make the new system work – banks, third-party providers, customers – is accelerating.”

We’ve pieced together Dr. Roberts’ take on the state of fintech and open banking from a 2020 BLG interview, and a Q&A at the Open Banking Expo to bring you practical insights on fintech growth and innovation. 

Open banking solutions most in demand

Dr. Roberts points out that while there’s no dearth of innovation in open banking, the types of open banking solution providers that are currently in demand are:

Digital Aggregators

Digital aggregators make it easy for customers to switch between banks and different accounts within a single app. They act as the primary interface between the customer and their money. 

“If you're measuring success in terms of adoption,” Dr. Roberts says, “I think it's pretty clear that the people who are producing aggregating products at the moment are doing quite well."

Platforms

Major banks are fostering and hosting third-party services so as to gain more leverage in a multi-sided marketplace. In the BLG interview, Dr. Roberts predicted that, in addition to developing their own fintech solutions, banks will continue to buy or partner with inventive fintechs and startups.

Sweeper services

Sweeper services allow users to reduce the cost of bank overdrafts by staying informed of their current balance and upcoming transactions. These apps will either move money from a savings account or automatically lend from a line of credit to prevent the account from going into overdraft. If they do charge overdraft fees, it’s guaranteed to be less than the traditional bank’s charges.

Earning interest with idle cash

These open banking solutions rely on the age-old ebb and flow of cash in a user’s account. If the user’s bank pays little interest, these apps take the extra cash out and put it in an interest-earning account. When the user’s cash starts to go down, they automatically put the money back in the account with higher-than-standard interest.  

Everyday transactions to build better credit scores

Traditional credit scores are dependent on borrowing history, especially mortgages. But, as Dr. Roberts points out, Millennials in London usually rent because of high housing prices. New solutions are now emerging that leverage a user’s transaction history to show good money management. And that record, obtained by open banking protocols, is used as a proxy for more conventional credit scoring algorithms. This allows users to get loans when they couldn’t or get them at a lower rate than they would have before.

SMEs and large corporations are interested in using third-party services for payments, expense management and B2B services. Others are interested in joining open banking ecosystem platforms with banks. Either way, the opportunities for open banking solution providers are incredible.