As market participants, lawyers and industry bodies continue to raise questions over Open Banking use cases, Nationwide has embarked on an alternative approach to target 13m underbanked consumers.
“We’re not doing this for PR reasons but because we genuinely want to shift the dials in some of these social issues,” says Phil Gosset, senior innovation manager at Nationwide, commenting on the institution’s £3m Open Banking for Good fund which will support seven fintech startups create products with charities that promote and support financial wellbeing. Through Open Banking, the startups will have access to Nationwide data.
“If you’re going to deal with the technology of Open Banking, then the most appropriate segment to focus on is the financially squeezed,” he says, describing this portion of the population as good budgeters but one or two financial knocks away from trouble.
According to the Financial Inclusion Commission, there are some 13m UK consumers who do not have enough savings to support them through a month if their incomes are reduced by 25%.
5.8m thin credit profile consumers are considered high risk by lenders and one million are living with depleting incomes according to Experian.
“They are invisible to the mainstream credit economy,” wrote Jonathan Westley, Experian’s chief data officer of EMEA in a report released last year. “More than a million thin-file customers live in households where total incomes are expected to decrease, making them particularly vulnerable to higher borrowing costs when they may need credit the most.”
The same report acknowledges that while awareness and understanding remains low, Open Banking has the potential to be “excellent as a source of improved data accessibility”, adding that some 60% of consumers would share data should the value of doing so be clear.
Commenting on the challenge, CEO of Nationwide, Joe Garner said: “While others may be looking at Open Banking through a commercial lens, Open Banking for Good is driven by our social purpose.
“Our seven chosen Fintech applicants will have access to vital insights, funding, and data to help them really make a difference. This is a great example of working across businesses, charities and government to make a positive difference in society,” he said.
The seven successful applicants are Openwrks and Ducit.ai, in the income and expenditure category; Trezeo and Flow in income smoothing and; Toucan, Squad and Tully in money management and help.
The challenge will comprise of three parts: a three month explore and development phase to test ideas, a six month accelerate phase to work on scaling the prototype with Accenture, followed by Nationwide’s commitment to rollout the solutions to their membership.
The fintechs will work with charities including Money Advice Trust, Citizens Advice, The Money Charity, Money and Mental Health Policy Institute, Accenture, Doteveryone and Nesta.