OPEN BANKING AND THE API ECONOMY
(author: Daryl Wilkinson, DWC)
What is Open Banking?
In the UK, people have been used to the traditional offering of the “big four” high street banks – HSBC, Barclays, Lloyds and RBS – for many years. Between them, these four banks hold 77% of personal accounts and 85% of business accounts. Until recently their dominance has led to a certain level of apathy among many bank customers, who believed that there was no attractive alternative, or any real incentive to go through the time and effort of switching banks. According to research the average UK customer keeps the same bank account for 17 years. 57% of consumers in the UK have been with their account provider for more than 10 years, and 37% for more than 20 years. Without any active engagement with or call for innovation from the customer, there has been little demand for change. Without this demand, banks have been reluctant to take the risk and make the investment to make radical
changes to their products or services. How will there be a transformation, then, in the UK retail banking sector? Surprisingly, the answer is not through customer demand or banks’ evolution but through regulation. This has come first from Europe, and then from within
the UK itself. European regulators recognised that the dominance of a few large banks, and their limited technological development in the payments sector across Europe, had led to stagnation in innovation and had stifled competition amongst the few big players. It has been nearly impossible for any new financial organisation to break into this sector under the
current regulations and thus change has now been initiated in a “top-down” way to give customers a more valuable banking experience and range of services.
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