2018 has been the year of the Open Banking revolution, and it’s been hard to miss the press coverage. In summary, historically, banks have withheld banking data and information about income, transactions and spending. The recent change in law means that banks and building societies now must authorize regulated businesses, such as ‘Am I Paid?’ to access data following an explicit opt-in from the user.
The new rules are devised to promote the development and increased use of new online and mobile services via open banking, and make payment services across the world safer. The new rules also mean that legally, banks only have the right to block data access if it detects fraud or insufficient opt-in permission.
Data transfer and sharing is often enabled by an application programming interface (API), it is a set of clearly defined methods of communication between various software components. APIs have been leveraged in non-banking (an somewhat banking) settings for years, for example Facebook, Google Maps, LinkedIn, Twitter and Amazon all offer APIs to leverage their data and add allow developers to build functionality surrounding their services. Techcrunch, in 2016, reported that Salesforce generates 50% of its revenues through APIs, eBay up to 60%, and Expedia 90% – many business’ whole business model is based on API’s such as Twilio and Zapier to name but a few.
Open Banking has unlocked banking data, therefore creating a whole range of potential new business models and in which not only the banks can compete, where previously with their locked down infrastructure meant there was less incentive for them to innovate.
Payment Collection Services
Bill collection services and collection systems have been given the opportunity to flourish with Open Banking. With the new wave of AI based learning software, standard collection agency fees should reduce as work is automated.
Open Banking has also made it easier for businesses to sell unpaid invoices as transaction history can be verified without the need for potentially doctored copies of bank statements. There is a huge market for collection agency services where debt collections can be automated, reducing the need for manual labour and reducing potential for human error. A good example of this is within ‘Am I Paid?’ anyone can can automate collection letters, emails, SMS and automated phone calls to clients. Collection agency rates are typically 10 to 20%, by automating collections follow ups, it is possible to train clients to pay on-time, knowing that their service will be terminated quickly through non-payment.
Automation makes chasing outstanding invoices and past due invoices much easier as credit controllers and business owners can control the level of automation that suits them, for example whilst learning the system, all unpaid invoice debt collection communications can be approved before going to the client, once confident that the system is prompting as expected, debts and past due invoices can be set to be chased fully automatically.
With advanced collections services such as ‘Am I Paid?’ you can relax knowing that you will be notified if and when money due is paid to you, and additionally can often remove the need to hire a debt collector as the majority of the work is automated for you.
Open Banking increases the breadth of financial services accessible by permitting services other than your bank or building society primarily safely and securely to access your account data. Allowing you to decide which, if any services can access your account data and for how long.
The shift in people’s perception about allowing access to their bank account data is inevitably going to be a slow process, however as it becomes the norm, and people realise the benefits in allowing known reputable brands. Time will tell how quickly this happens. As expected, the first 3 months have been quiet given banks going live at different times, and all initial participants on limited testing basis.
The next phase of adoption is the interesting bit and there is much more to come, as per the Open Banking Roadmap. The UK’s November Budget statement committed to broadening the Open Banking standards to cover other products such as credit cards and e-wallets into 2018 and 19 and beyond that potentially including all financial products from pensions, to mortgages.