Open Banking strides forward but full potential for consumers still to be realised

HSBC, Nationwide, Allied Irish experts on the progress of open banking collaborations into niche services

by | June 14, 2022 | bobsguide

As part of its digital agenda, the European Commission is promoting Open Banking, for which it laid down the foundations in 2016 with the second payments directive – PSD2.

The UK adopted PSD2 with Open Banking in 2018, requiring the UK’s nine biggest financial institutions – HSBC, Barclays, RBS, Santander, Bank of Ireland, Allied Irish Bank, Danske, Lloyds and Nationwide – to release their data in a secure, standardised form so that it can be easily shared between authorised organisations online.

Today, many of these leading financial institutions are actively selecting third parties to work to offer a range of Open Banking services to their customers.

At HSBC Group, a proactive supporter of Open Banking since 2016, Hetal Popat, director of Open Banking, points out that when selecting a provider, the bank first defines what issues it is trying to address and then does a thorough assessment of suitable best of breed third parties.

“We also look at what we want to achieve in terms of the technology deployed – how it is delivered to our customers and performance,” he says, adding that the bank also looks at the quality of the management team at the third party, and the security put in place for customers.

“Security has to be at the heart of any assessment of a provider.”

“As a global bank, we look at the footprint of third party providers and the prospect of working with them in other markets, but we do also work with some domestic third parties in the UK and other jurisdictions,” he says, pointing out that one of the bank’s main criteria is to ensure the best possible outcome.

Meanwhile, at Nationwide, the UK’s largest building society, Matt Cox, head of Open Banking, stresses that the society is not pursuing Open Banking for commercial purposes but to provide its members (customers) with a better service.

“We always work with best of breed providers with the know-how to solve real problems for our members,” he says, noting that there is a thriving ecosystem of tech companies in the UK that has given rise to a wide choice of specialists to work with.

“We also consider the ethics of third-party providers to ensure they are aligned with our own.”

Specific services selected

In terms of the types of providers sought, most financial institutions agree that working with third parties in credit assessment and payments will add huge value for their customers.

“We believe that the credit decisions that we undertake every day would benefit significantly from the integration of Open Banking account data into our processes,” says Niall Buckley, head of digital ecosystems at Allied Irish Bank.

“This would have a very positive impact on our customers’ experiences across mortgage applications, personal loans and to our business lending so we feel this is a good place to start.

“We also see great potential for Open Banking-based payments so we are ideally looking at partners who can help us accelerate our capability on both fronts.”

Nationwide too has already recognised the important role Open Banking data can play in simplifying credit assessments, thereby helping customers in the onboarding process, particularly with complex products like mortgages.

It is also working with third parties to improve customers’ ability to manage their money and has a strategic investment in Moneyhub, a financial management platform, which it uses to offer services including payments.

“At its simplest level, Open Banking is helping our customers to manage their current accounts and their payments and move their money around easily,” says Cox.

“One of the most useful things is the opportunity offered to aggregate all their accounts together from different providers in one place so that they can manage their finances better and sweep money between accounts held with various providers.”

HSBC’s Popat adds: “In the UK, we have worked with third parties to deliver an Open Banking payments solution for our commercial customers which enables them to request payments from their customers’ banks. Looking forward, we want to increase what we are doing in the payments space and start making collections in Open Banking as well as look at more user cases such as settling variable recurring payments.”

HSBC is also exploiting Open Banking opportunities in overseas markets.

“We have also launched services relevant to other jurisdictions. In Singapore, for example, we have worked with third parties to roll out HSBC FinConnect – a wealth management mobile app which gives our customers a full view of their money and financial investments, including those with other banks, which enables them to make better long-term plans and decisions.”

“By partnering with third parties to offer Open Banking services we have been able to move very quickly in the modern technology world and cut costs for our customers through greater automation,” he continues. “We have also been able to offer customers more choice and competition, and when they open their data to us it provides more opportunity to deliver tailored, more bespoke services.

“Open banking also helps in risk management by offering safe and secure technology to share data, thereby allowing the exchange of data to prevent fraud.”

UK digital challenger bank Starling Bank, which claims to be a frontrunner in Open Banking, started creating Application Programme Interfaces (APIs) in 2017, and is now developing them further to achieve enhanced features.

Its Marketplace enables business and personal customers to link a variety third-party products and services to their bank accounts.

William Boocock, head of Marketplace and banking support, explains that the bank is always on the lookout for best in class third party providers, which are technically savvy, and align with its own principles in terms of financial inclusion and fairness.

“One of the key benefits for us has been the opportunity to work with third party providers to offer services over and above what we already make available such as pensions, insurance and mortgages,” he says.

He explains that the bank has also taken the novel approach of working with third-party accountancy services providers such as Xero, QuickBooks and FreeAgent to offer SME customers Open Banking services which eliminate manual processes in accounting such as invoice management.

It is also keen to work with third parties to offer niche products and has, for example, linked up with CreditLadder to enable customers who rent accommodation to report on their rent payments to credit reference agencies and improve their credit scores.

Measuring project success

“We measure the success of a service by customer uptake,” says Boocock.

“We also use metrics such as customer feedback, take this on board, and make changes to our partner base as required.”

“A project’s success criteria vary depending on the service. In areas like credit assessment, we relied initially on customer and colleague feedback on how easy the service is to use,” adds HSBC’s Popat. “Generally, we assess success by looking at adoption rates of the service, conversion rates and visual engagement.

“The real success of our Open Banking propositions will be measured by the positive impacts for our customers,” continues Allied Irish Bank’s Buckley.

“We have mature customer testing and customer feedback models in place.”


Many of the top financial institutions believe that the regulation and standardisation Open Banking brings have made it easier to work with third-party providers.

“Open banking makes it quicker and easier to integrate third parties and to exchange data with one or more organisations to provide services,” says Cox.

“It has enabled us to partner with a wide range of other providers more easily because it is standardised across all organisations.”

Institutions have a range of options for assessing potential partners – from conducting due diligence in-house, to relying on an external provider or consultant.

“The movement to Open Banking is not the first time we have partnered with other parties, and we have a way of assessing potential partners to make sure they will integrate well with our own architecture,” adds Popat.

“We also rely on our potential partners to assist in the integration process.”

“Open Banking has been live for over four years now, so there is a lot of maturity in the market with a range of providers who are experts in accessing Open Banking APIs,” concludes Buckley.

Read more: Open Banking and the future of finance

Open Banking progress so far

Despite this, there is a common consensus that Open Banking still has some way to go to achieve its full potential.

“In the UK we are now reaching the end of Chapter 1 in Open Banking and we are at the point where customers are adopting it and it is proving of value. Other markets are also now rolling it out and learning from what we have done, and in some instances, they have come up with even better ideas for deployment of Open Banking services. In the UK and Europe, we too now need to look at what is happening in other markets to generate new ideas,” says Popat.

“There is still some way to go with customer adoption of Open Banking as today about 10 o%f consumers are using it for personal finance services, and 20% of SMEs, although offering a service that represents a particularly compelling proposition can quickly push this up to 70% adoption.”

“While we believe in the potential of Open Banking, it is still quite emergent and the market needs to mature a bit more before it offers value,” adds Cox. “In many respects Open Banking regulation has achieved very much so far in enabling this innovation and over the next five years I expect that we will see many times over what we have seen in the last five years.”

According to recent research by Nuapay (EML Payments) among payment decision-makers in industries from financial services to travel and retailing, 25% believe that Open Banking will become the most popular payment method amongst customers in the next five years.

When asked which payment method would present the most opportunities for their organisation over the next three years, Open Banking was their top choice (36%), followed by digital wallets (35%) and Buy Now Pay Later (26%).

“On the consumer side, Open Banking will just happen as there is growing recognition of the convenience this brings, says Brian Hanrahan, CEO of Nuapay, noting that it will also bring major benefits in lending through the use of third parties for credit assessments.

“For merchants, it offers the opportunity to be paid much more quickly and directly while for customers it provides a modern experience which is designed to be used over the internet and mobile phones.”





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