Rise of Open Banking

In 2016 the CMA (Competitions and Market Authority) published a report on UK’s retail banking market which found that older and larger banks do not have to compete hard enough for customers businesses and newer banks find it difficult to grow and access the market.

To tackle this, they proposed several remedies including Open Banking which enables customers of medium and small sized businesses to share their current account information securely with the Third-Party Providers from January 2018.

To implement Open Banking an entity was formed by CMA in 2016 to deliver Open Banking.

This entity was called Open Banking Implementation Entity. Open Banking Entity is governed by CMA and is funded by UK’s 9 largest bank and building societies.

Open Banking Implementation Entity works with UK’s 9 largest banks and building societies as well as Challenger Banks, fintech companies, Third Party Providers and Consumer Groups.

Open Banking Implementation Entity role is to

1.Design the specification for APIs that banks and building societies use to securely provide Open Banking.

2. Support regulated Third Party Providers, banks. and building societies to use the Open Banking standards.

3. Create security and messaging standards.

4. Manage the Open Banking Directory which allows regulated participants like banks, building societies and Third-Party Providers.

5. Produce guidelines for participants in the Open Banking ecosystem.

6. Set out the process for managing disputes and complaints.

So, what does this this Open Banking Standard look like?

Open Banking standards are implemented as a set of Open APIs, In most Open Banking implementations, there are two main types of APIs:

1. To get information about you or your banking activity

2. To move money around using payments.

There is a particularly apparent trend in today’s economy: we are moving away from large centralized systems towards collaborative access based one. It’s changed the way we shop with websites like ebay, the way we travel with apps like uber and the way we get good night’s rest with portals like Airbnb.

One industry that’s been slow to this change in this global movement is banking, where it’s all the more critical. However, its somewhat of a double edged-sword with banking: we want the trustworthiness and reliability of a big bank but with the agility and innovativeness of a startup.The answer is Open Banking.

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