Conference Presentation, Panel, Fireside Chat
New Rules: Open Banking, FinTech, and Big Tech
Milken InstituteJames Mackintosh, Louise Beaumont, Elena Lieskovska, Gavin Littlejohn, Ajay Vij, Eric Kilsterman
- The regulatory framework is expected to shift services from B2B/B2C models to hyper-personalized, predictive, and pre-emptive "B to me" models by reuniting data generators with their data, with full coverage of all individuals accessing financial services in the UK and beyond anticipated.
- Over the next few years, open finance is projected to expand beyond banking to encompass open pensions, investments, mortgages, and loans, driven by a transition from credential sharing and screen scraping to API consumption, though legacy technology will remain necessary for current accounts.
- Market adoption metrics indicate that while approximately 7,500 customers currently sign up for open banking, only an estimated 5% to 10% actively consume APIs, with the balance of customer usage expected to swing toward API consumption by this time next year to create a technically rich market.
- Future service delivery will evolve from basic account visibility and payments to include loans, savings, insurance, pensions, energy, and telco data, with data petals such as health and insurance becoming pluggable to wrap around an individual's life over decades.
- Predictive services are anticipated to address the gap in professional financial advice, which currently covers only about 4% of the UK adult population, by enabling apps with full financial data access to make correct decisions and fulfill a duty of care in an increasingly complex market.
- Divergence in market development is expected, with emerging markets like India poised to leapfrog legacy systems using digital identity and mobile infrastructure, while mature markets face inhibition from core banking systems built decades ago.
- Regulatory approaches vary by region, with the UK implementing a flat £50,000 capital requirement for fintechs, the US facing "regulatory spaghetti" and liability challenges where banks retain payment risk, and countries like Australia showing phenomenal adoption through wider scope regulations.
- Standardization of APIs remains a critical factor, with the UK experiencing non-conformance among its nine largest banks requiring significant integration time, while developed countries aim to break product hegemony and developing countries may leverage open banking to increase tax visibility.
- Innovation is forecast to originate primarily from outside the banking industry, including tech giants and telcos, with large fintechs seeking standardization to avoid bespoke software and smaller players potentially partnering with banks offering richer, non-standard APIs.
- Successful organizations in the open future will require brand elasticity to deliver continuous rich services, while the future market structure is expected to be a blend of complementary products from various players including challenger banks like Starling, Revolut, and N26.
- Sector-wide systemic stability is projected to improve as provider failures are absorbed by other financial services providers, supported by a level playing field where the identity of the winner—whether big banks, fintechs, or tech companies—is secondary to customer outcomes.