FinTech week 2016: UK primed to be world leader in open banking
UK FinTech is thriving, but to remain competitive it must build on recent progress made in setting the Open Banking Standard, investigate blockchain technology, and strengthen the data infrastructure that underpins open innovation
By Anna Scott and Peter Wells
The UK FinTech market generated over £6.5bn in 2015. CC BY 2.0, uploaded by [Håkan Dahlström](https://www.flickr.com/photos/dahlstroms/20389123388/in/photolist-7RWorD-7RWR6g-7RWB6a-7RZd9G-7RWtSX-7RZFcu-7RZKYo-7RZcpj-7S14tb-x8u7QX-xkxa4Q-x8nWnf-sqcQh3-a2qJ1r-x4HA39-xmjZuR-x8nFPh-6b6ku9-x8nEHY-6ZqYyS-7RWqFz-7RWjF8-7RWmZn-7S11dN-7S13Th-7RZCSE-7RWsev-7RZwPE-7RWpWK-7RW4tk-7RWSuX-7RZiNL-7S16xY-7RZhh5-7RZe1G-7RZeQL-7S11Xm-7RZBoj-7RWTeZ-7RWMNH-7RWiVt-7RWNpz-7RW7JZ-7RZrLu-7RWfzV-6xD977-6xyYqV-6xyN8a-6xD8qL-6xyZ62 “Håkan Dahlström").
Last week, politicians, finance industry groups and tech professionals gathered for a series of events, talks and online commentary in celebration of FinTech week 2016.
In a speech given at the Association of British Insurers, Economic Secretary Harriett Baldwin hailed the week as a prime opportunity to celebrate the UK’s status as a leading global FinTech hub, and work out how to become and remain ‘the’ global leader in the area.
In her speech, Baldwin mentioned exciting developments in the insurance tech industry that are largely made possible by a growing commitment within the sector to using and producing open data. Emphasising how the government's open data initiative was helping to transform how underwriters price risk, Baldwin gave the example of how motor insurance products were being designed using publicly available DVLA data.
Another opportunity raised was around blockchain technology and its revolutionary potential for the insurance industry in helping to reduce fraud. This comes after the Government Office for Science released a Blackett Review on distributed ledger technology, which called for government leadership and investment in how it could be used to enhance government services.
As the ODI and the Digital Catapult highlighted in their joint response to the Blackett Review, these are important focal points for government in helping to build and maintain a robust data infrastructure and ensure efficiency in the ways data can be accessed and used across sectors. But alongside enthusiasm for open approaches and new technologies, standards must be set to guide how they can be designed and used to best effect. These standards are best developed by solving common challenges for a sector. Blockchain technology will be useful, but not for everything.
Setting an Open Banking Standard
Set up at the request of HM Treasury in September 2015, the Open Banking Working Group convened a wide range of people from across the banking sector and recently set out an Open Banking Standard framework.
Making better use of data will improve people’s banking experience. When securely shared or published openly using open APIs, the data can be used to build useful applications and resources to help people find what they need. Banks can find customers matched to a new product, businesses can share data with their accountants and customers can find services that suit their needs and save money.
For example, switching overdraft facilities could save people an average of £140 a year, according to a market investigation by the Competition and Markets Authority. If customers could securely share their transaction data with third parties through an open API, potential credit providers could use it to better target their loans.
In helping to create services that make life better for customers the Open Banking Standard will improve efficiency, stimulate innovation and bolster the UK’s already thriving FinTech market. A market that, as Baldwin emphasised in her speech, generated over £6.5bn last year just in the UK. We expect that the global FinTech revenues received by UK companies will be significantly larger.
Critical issues: privacy and openness
Two critical aspects of the Open Banking Standard concern privacy and openness.
The standard framework calls on industry, government and consumers to improve data literacy and address security concerns so that data shared by customers is done so with informed consent.
In promoting an open approach, the framework calls for tools, techniques and processes that are openly accessible, such as open APIs. In the weeks since the Open Banking Standard framework’s release, former ODI Startup Open Banking Project has already begun to mock up an open banking API that respects the need for consent demonstrating the power and agility of open innovation.
Paving the way for a world-leading UK FinTech hub
To become and remain the leading global FinTech hub that Harriett Baldwin advocates the UK must remain focused on strengthening its data infrastructure, and promoting open standards, open APIs and open innovation. Collaboration across government and the finance and tech sectors will be key to doing so effectively and ensuring the services work for everyone.