Open Banking Activity of Note in UK, 2021

Observation:

Open Banking and Behavioural Finance are country cousins. The insights that one seeks to acquire from the former are clues to how an individual thinks about and executes their money lives. The clues, when analyzed correctly can reveal as much about one’s current choice architecture between savings, wealth, and spending, as it can about some future intentions. Surprisingly perhaps, not all of these are well known, but represent subconscious actions in process.

From a consumer’s perspective, providing consent is mostly framed in a positive way because most parties using open banking are seeking to deliver a “better” service and experience to both their business and consumer customers, but insights that speak toward “bad” behaviours, ie. overspending, and the “wrong” type of spending can be just as present in one’s everyday money lives. (hence some of the reason why e-money thrives)

The main drawback I am discovering with the way that Open Banking (I am actively testing different providers) has so far evolved, despite the 3ml+ users, and the enthusiasm that has expressed by the under 34’s in relation to money management outcomes relate to:

1)????A consent management and authentication model that is less than ideal. I know that devising a user experience that needs to navigate data privacy, cybersecurity, and TCF isn’t ever going to be easy, but the current journey map approved by the OBIE needs improvement, particularly as it relates to the interface possible between tokenization, identity management, consent and the blockchain. I can certainly in my mind see a solution design that should provide consumer with the same type of seamless experience for all of their financial counterparties that is being developed for merchants to support instant payments.

2)????A data accessibility landscape that is evolving without the level of consistency necessary to support the way that next generation decision engines for underwriting (for example) would ideally like to operate. When one looks at what should be available from ASPSP, what is being delivered by TPPs, and how data management is being handled, anyone trying to pull and analyze data, is in my view, being short changed. The infrastructure to access isn’t bad, and the data extraction and transformation being delivered by the leading TPPs is improving all the time (thanks in part to users!), but if one is trying to build deep insights off of the current pool, as opposed to just trying to trigger very simple actions, i.e. move money, sweep, cancel and manage (for example), the amount of data, the quality of the classification, and the delivery process are all challenging. If the OBIE wants to make a difference, while they are still around, besides getting VRP legislation in place, they really need to look toward introducing new requirements about the size of the data pool, making 3yrs minimum, and 5yrs ideally, the data pull available in relation to any type of account.

3)????A classification system that is overly focused on delivering accurate data on micro spending as opposed to applying a broader taxonomy that can make a more lasting contribution toward both personal financial management as well as goal-based planning. Within the overall classification process, there is a lot of very valuable information that is being created by users who have to manage financing a number of long-term projects, as well as future objectives, but the current approach necessitates AISP developing their own knowledge graphs and categorization techniques. ?The banking industry already knows a great deal about many types of businesses that they have chosen not to share, except to facilitate payment processing, so there is certainly more could be done by ASPSP than merely through interfaces to pure transactional systems.

Given this I am somewhat surprised to read that many financial institutions are already starting to think about the potential of Open Banking as a “passing” opportunity and are already looking toward technologies based around machine learning and deep learning, as well as new use cases for RPA, as the most important evolutions yet to come.

In my view this only reinforces the feeling that I have always had that though large financial institutions may have created the organizational design to support a data “czar” and may talk about the tremendous opportunities that can come from big data, beyond applying such ideas to ready made areas such as cybersecurity, and authentication, when it comes to really looking for ways to creating and use infrastructure and services aimed at deriving really meaningful insights that build pathways to better outcomes for consumers and SME, it is going to be left to new entrants to execute this despite the shortfalls in solution design already noted.

In regards to this, I have taken a look at some of the FCA registry data as well as that coming from the early stage funding community, and can highlight a number of segments and firms that have caught my attention so far this year.??Many new entrants remain intent on building solutions that try to bring the best features of e-money alongside PISP and AISP capabilities, and while I can see some rationale in this based on the business models it can support, I also believe this particular mechanism to exploit open banking, even in areas that involve ESG and Crypto themes has nearly run its course.

Area 1: ?Lending & Credit

One of the primary use case areas for open banking is in the areas of credit worthiness, and alternative lending innovation.?The theory is that via a borrower’s transactional data it is possible to identify behavioral insights around money management that are not presently included in any aspect of the algorithms used in credit scoring systems. This encompasses not only how clients show they can manage purchases that require regular payments (i.e. subscriptions), but also how clients manage their mandatory spends. It should also include how clients are managing the transition of income to savings and wealth, although the positive aspects of the balance sheet seem to be utilized less, even though from a loan default perspective, they may mean more.?One of the best examples of the positive impact this can have has been shown via Experian’s boost app, which extends their credit scoring system by monitoring other types of “regular payments”, looking for good behavioral attributes via this lens.

Companies of Note: Wollit, Ducit.ai, Nestegg.ai, Fintern, Juice Ventures

Consumer Facing

Wollit - Wollit is a technology company that builds financial services for people living a new kind of work life. Shift workers, freelancers and gig workers use our products to stabilise their income, build their credit and keep on top of their finances - so they can enjoy a smoother life.

Fintern - Fintern is a UK consumer lender which aims to expand access to low cost personal credit by using the UK’s new Open Banking standard to analyse consumers’ historical bank statement data. Open Banking data allows us to build a granular view of customers’ financial circumstances, properly understand their affordability, and place less reliance on credit reference agency scores.

Business Facing

Ducit.ai (Cerebreon) - Ducit.ai is the artificial intelligence Open Banking platform that enables banks and lenders to make better, more relevant credit risk and fraud detection decisions and empowers consumers to get access to suitable financial products and services.

Nestegg.ai - We're on a mission to equip a growing network of responsible lenders with the cutting-edge tools they need to acquire & serve more customers. Automate your loan assessments: Our Decision Engine automates 'accept' , 'decline' & 'refer' recommendations. Customize best -practice policy rules for more accurate loan, identity and affordability decisions. Hook-up to your own website & your back-office of choice.

Juice Ventures - Juice Ventures helps digital businesses turbo-charge their growth. We work with ambitious businesses by providing non-dilutive financing for user acquisition and our team of in-house marketing experts will be there to assist you to ensure your budget is optimised. Juice Ventures offers long term financing, giving businesses peace of mind that they will have continual funds available whilst only paying for funds used.

Area 2: ESG Themes

Open Banking, as both a solution that facilitates greater accessibility and transparency into the financial marketplace, I would argue sits in the ESG friendly space.??Most providers however are more interested in using transactional data and payment processing that springs from Open Banking connections to redirect some portion of capital to good causes, as well as to supporting carbon neutral programs. ?They are also building specific types of cashback programs for the right sort of brands around ESG, both for profit and non-profit outcomes. ?Transactional data cannot, in my view, without a significant amount of further classification and associated research be used for this purpose, so a lot of the initiatives that are leveraging open banking are also building platforms around the data to capture, classify, calculate, and allocate. The approaches I am seeing developed aren’t as transparent in how this is executed as some of the principles they align to would ideally want.

Companies of Note: Tred Earth, The Big Exchange, Tickr, Consequence.World, Novus World. Claro Wealth

Consumer Facing

Tred Earth - Help in the fight against climate change. Tred uses your spending to track, reduce and offset your environmental impact.?Sign up on our website to get early access to our debit card

The Big Exchange - The Big Exchange is a movement that aims to transform the lives of millions of people by building a fairer financial system that works for everyone. We're starting with the way we all invest so it includes the lives of other people and the planet as well as you. Together, we can create a fairer financial system and make money count for more.

Tickr - We are tickr. We are an impact investing app that allows you to invest in the causes you believe in. Our aim is to prove that you can make money and have a positive impact on at the same time.?We're on a mission to make Impact Investing the default option for investors.

Novus World - The intelligent banking app that generates positive impact from your everyday life & rewards conscious choices. Novus will guide and help you to achieve financial wellness, inspire and reward you to live a more sustainable lifestyle, all while creating positive social and environmental impact with every time you use your Novus card.

Claro Wealth - Bringing clarity to your finances and empowering you to learn, plan, save & invest your money. We are a start-up wealth management platform dedicated to creating a new generation of investors who are both ethically and financially informed. ?We want to empower our community of tomorrow’s investors to take action today. ?

Business Facing

Consequence - Consequence prices the environmental impacts of financial transactions, allowing organizations and government to understand and eliminate them. Combining innovative AI and machine learning with go-to-market expertise, we are building the simplest, fastest and most affordable way for any organization to understand their impact on the environment, reduce it and offset through globally recognized projects.

Area 3: Personal Finance & Financial Wellbeing

This has long been one of the most popular use case areas to apply Open Banking, often in association with organizations seeking to deliver “bank like” services via the use of the electronic money payment and IBAN account rails. A number of the initiatives that sit in this category see themselves increasingly operating as money coaches, i.e. as digital guidance counselors that help their users make sense of more complex financial products, and undertake behaviours that will have a positive impact on both their credit worthiness, as well as the balance sheet. This is a very crowded area with a number of very mature players in it such as Plum, Emma, and Chip, so one would think there isn’t that much to be gained through yet more of the “same” theme emerging with a new wrapper, but when one thinks that even the most established is not serving above 2ml people yet, and that there are roughly 20ml individuals in the UK sitting between 18-35, it isn’t too hard to see why there remains room for clients and innovation to attract capital.?Increasingly the success or failure of these sorts of applications is going to be driven by how well they can tailor their proposition to match the consumer with the right deal – some like Myahmed are looking toward a specific subset of customers to make delivering “values” alongside solutions as a key aspect of their proposition.

Companies of Note: Zafit, Lean App, Sync., Ooki, Upside Money, Finndon, Myahmed

Consumer Facing

Zavfit - ZavFit is a HealthTech startup. Founded by Anna Freeman in 2017 and based in Edinburgh, the ZavFit team brings together some of the brightest minds in HealthTech, FinTech, Neuroscience and Cognitive Behavioural Therapy. ZavFit’s corporate MoneyFitness programme directly addresses the habits, mindset and emotions that give rise to money stress, helping people feel happier, less stressed, and more focused.

Lean App - At Lean, we want to help people in the UK track their online subscriptions and services. Lean is a service that simplifies the process of finding subscriptions, managing and cancelling them.

Sync. sync. is looking to lead the way in Open Banking as a Smart-Bank. We allow users to instantly open a current GBP &/or EUR account in minutes and we provide them with the ability to open up to 30+ other currency accounts. ?sync’s USP is to allow users to synchronise all of their financial accounts (bank, credit, loan and mortgage accounts) in one app, as one experience by utilising Open Banking.

Ooki (Score Genius) - Here at Ooki we’re revitalising personal finance management to make it more convenient and accessible. Easy money management and greater financial freedom are principles that reign supreme at Ooki. Everyone deserves full control of their money, with all their accounts in one place, regular access to their credit data, great deals, helpful spending notifications and recommendations.

Upside Money - In exchange for Open Banking data, we reward your users when they spend with participating retailers. When your users earn cashback, you earn revenue. Users’ cashback rolls into a wallet that’s embedded within your website or app. No referral links, no cookies, no voucher codes. You can make this cashback redeemable against goods or services within your website or app, or allow users to withdrawal the cash.

Finndon - Finndon is so much more than just a financial institution, we are a community of like?minded people with a shared goal, helping you achieve a sense of financial security and freedom. It’s a place for all. A place to grow, learn and invest in your financial future. We are on a mission to help you break down these barriers. With our smart tools to spend, save & invest, your future is in your hands.

Myahmed - Manage your income, bills and Zakat on your phone, for free. Get a Visa debit card with a UK or Euro halal account from MyAhmed.

Area 4: Tax Management

SMEs are a significant target for solutions that seek to transform the financial management, via integrated accounting, expense management, and financial reporting. With the introduction of the Making tax Digital initiative (MTD for short) that everyone will need to be part in the UK by April 2023 (which isn’t so far away!), another new use case area is being introduced that will make use of Open Banking.??As with others that I have witnessed in the instant payments arena, a lot of the attention of cloud SAAS vendors is on micro businesses, with the latest ventures, being further examples of solutions targeting this sector of the market. ?Micro businesses often have, outside of those with a financial services itself, rudimentary skills when it comes to compiling and presenting the data for proper tax calculations so the HMRC is very keen to see new vendors enter this space, and close some of the ￡8.5bl tax collection gap.?On the one hand, the business models and integration data capture model that these firms are pursuing is attractive to sole traders, freelancers, and creative self-employed will be attractive, but some will also recognize the further tax liabilities that are possible if these types of solutions do not also try to make sure that all forms of relief and expense allocations are used as effectively as possible.

Companies of Note: Earnr, Taxpilot

Consumer Facing

Earnr - One in four people in the UK operate a side hustle, and over 8 million people in the UK need to submit a tax return to HMRC because of their supplemental earnings. Managing your finances for your side hustle while also preparing for your annual tax submission is difficult. Earnr helps you get a grip on your finances and tax so you can focus on the things that matter.

Taxpilot - The ultimate tax app for performers, creatives and other freelancers in the entertainment industry. Bringing simplicity to keeping records and providing easy-to-understand knowledge so that you can stay on top of tax and focus on building a successful career.