The business world moves fast, fintech possibly even faster, and every year there’s a raft of new technological developments and a whole new vocabulary to describe them. In 2016 we downloaded the Uber app, and we possibly dropped the term “unicorn” into conversation when we were talking about Uber, Snapchat and other hugely successful billion-dollar tech start-ups.
Biometrics became even more mainstream, with iris recognition at airports, fingerprint access for offices and schools becoming more common and voice recognition being used right across the fields of IT security, bluetooth entertainment and support for people with visual or mobility impairment. The technology had been advancing over the years, but last year the terms became common currency.
And the word blockchain crept into our vocabulary too, the term for the technology behind digital currencies like bitcoin, which provides an incorruptible digital ledger – a secure way of making and recording transactions, agreements and contracts – anything that needs to be recorded and authenticated as having taken place among participants.
The next big thing
In fact, as you might have seen in one of our recent tweets, blockchain got so big in 2016 that it had its own blockchain week, with a launch in London, conferences and workshops.
However, its my guess that blockchain’s ranking as a new common usage word is going to be overtaken in 2017 by its big brother – open banking. In the next twelve months blockchain is going to power open banking – the biggest revolution in banking in a generation. And that’s not a clever prediction – it has to happen because the government has set a deadline for the end of 2017. There will inevitably be conferences on open banking but its also going to be the stuff of Costa conversations, pub nights and Mumsnet.
This is just an opener for a Castlight series on open banking, where I’ll look at how it works, why it matters, how it will be used and what the benefits and risks might be. However, for starters, let’s be clear about what it actually is.
Open banking allows bank customers, both individuals or businesses to share financial information securely with other financial institutions, without having to reveal your password, using an Application Programming Interface (API). This is the same technology that tells an Uber driver who and where you are and lets you sign into other accounts using Facebook.
Open banking allows customers to access their bank data in real-time and provides them with accurate and up to date information on their finances. And when they want to shop around to find the account or loan that suits them best, the API platform means that other banks have immediate access to their transactional history, allowing them to quickly determine a borrower’s risk and make quick and informed decisions.
What does it mean?
So – open banking empowers the consumer. It gives them a whole new freedom to manage their wealth, compare and save and shop around. And by opening up the banking space and facilitating the secure sharing of transactional information it will allow third party developers to create tools, apps and services to give customers even greater control of their finances.
The government is keen to see this new world of open banking come in to force, freeing up customers to be more proactive to manage and move their money. It’s Competition and Markets Authority (CMA) report, published last year, stipulates that it wants UK banks to adopt open banking by the end of the year. 11 more months to make this happen.
Does all this sound familiar to those of you who know us? Of course it does. We already have the technology in place. We already have the Affordability PassportTM out there, which will allow the banks to switch seamlessly into open banking. And we’re pleased to say that the smart ones, with their eye on the 11 months left of 2017, are already doing exactly that.
So, yes I agree that blockchain is important enough to have its own Blockchain Week. But if that’s the case, open banking deserves a bank holiday Monday. And one day maybe there will be the Affordability PassportTM long weekend!