Beyond Open Banking What people want and how the industry is going to provide it - HubSpot
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Beyond Open Banking What people want and how the industry is going to provide it
Introduction and methodology
This report is designed to build an to curate a sample of 50 leading UK fintechs.
understanding around a single key question - We then interviewed tech leaders at each with
what happens next after Open Banking? a set of questions around their API capabilities
and strategy, the importance of third party
In order to answer that question we needed distributors in their economic models and their
to understand two key areas. Firstly, where expectations of industry progress.
is there demand now, what do people want
from open banking and how can we infer from The consumer survey data shows that
that demand where future demand will fall. responding to problems raised people’s
Secondly, we needed to understand what the natural inertia will require fintech APIs that can
industry viewpoint is - how are companies meet the minimum requirements necessary
gearing up to fulfil that demand? to deliver a connected experience. In order to
assess readiness for this we broke down the
Our response to this challenge was to APIs into one of five categories
commission two independent pieces of
research. We worked with YouGov to develop 1. Read - API enables people view data held
a consumer barometer, testing demand for 21 on them in a third party application
use-cases - hypothetical banking features. 2. Read + write - as above + the ability to edit
We asked users if they would use a feature or that data
not and, as a proxy for their level of intent we 3. Read + write + create: As above + the
asked them if they would: ability to create new customer accounts
4. Read + write + create + fulfil: As above +
• Use the feature if their bank provided it the ability to acquire financial products
• Download a standalone app to use the 5. Read + write + create + fulfil + transact:
feature As above + the ability to initiate transactions
• Switch banks to a bank that offered it if
theirs didn’t APIs in stages 4 or 5 are considered
marketplace ready
In order to provide a more granular level of
insight, responders provided data on, amongst The results of both of these surveys were
other things, their income bracket, age, analysed by Bud’s data and commercial teams
gender, parental status, primary bank account alongside independent banking industry
provider, and any fintech products they had experts. The analysis forms the basis for the
adopted. rest of this report.
In assessing the state of the industry response
we worked with a number of fintech journalists
Executive Summary Contents
The data from the consumer survey clearly
shows that there is a real opportunity for banks
and fintechs to work together in a model that 6 Section 1 - Marketplace banking:
aligns their interests with their customers’.
It shows that people are apathetic about the What can we expect in the short term
many small changes that come together to
improve their financial situations but they are
open to new solutions if delivered in the right
8 The beginnings of marketplace: The next 2.3 years
context and that some demographics have 12 A closer look at switching
a particularly acute need. It shows that
14 Challenger perspectives – Will Sorby of N26 and
concerns around privacy and security are
real but that people balance those concerns Anna Mitchell of Starling
against the perceived value that services 18 Friction in financial services: Loyalty and switching
offer. Finally, it shows that banks are uniquely
positioned as a trusted partner in minimising 22 Profile: Tom Reay, CTO of Flux
the risks of security and privacy breaches.
This picture is mirrored in our survey of fintech
leaders. The demand is there, the fintechs
are working on new distribution models and
26 Section 2 - What a mature marketplace model means in the
recognise the opportunity that marketplace medium term, both for people and the industry
banks offer. The current state of readiness
is enabling early use cases and the next 6-12
months will see big steps forward in the 28 The medium term and beyond
industry’s capacity to meet the latent demand. 32 Helping people build for the future
There are challenges around regulation
and partnership but this too is an area where 36 A closer look: Parents of younger children
significant progress is being made. 38 A closer look: Income and its effect on uptake and trust
Marketplace banks are coming and mass
40 Profile: Toby Triebel, European CEO, Wealthsimple
adoption is probably around 2 years away. 44 Profile: Ashleigh Petrie, Product Lead, Moneybox
The question is, how will you prepare for it?
Section 1 Short term developments for people and the industry
Section 1 Section 1
The beginnings
of marketplace:
The next 2 years
The first steps towards a mature model
O
pen Banking, in the first 18 months Who could be some of the earliest
since its January 2018 launch beneficiaries from the mass adoption
initially provided plenty of column of marketplace banking?
inches for pessimists supposedly
expecting some sort of digital Rome, built in In putting this report together, Bud collected
a day. That obviously didn’t happen. There data from 50 CEOs, CTOs and other senior
was a slow start in encouraging financial fintech leaders about their plans and
institutions, particularly the nine largest strategies to use APIs and marketplace
banks that the new regime was designed to banks to grow their businesses.
shake-up, to get going.
Nearly all said they had ambitions to develop
Recent signs suggest momentum is now their APIs further and 75 per cent said that
gathering a quicker pace in the sector. they expected developing their API further
Friction is being removed, data portability will become a more important project over
is becoming easier and more and more the next 12 months. In total 70 per cent said
firms are seeing the value that robust APIs, they had read APIs.
strong fintech partnerships and a mindset to
improve outcomes for consumers brings. We also asked them what could likely be
early ‘wins’. While many expect the medium
By requiring banks to make customers’ data term to bring about big things, there are
available to third parties, at their request, still likely services that can kick start mass
a new era of fintech disruption has begun. adoption in the shorter term.
Firms, whether they be banking challengers
or providers of other services, could One of the most common answers was
now help banks build some really useful bringing cash savings products into the
things. In fact, they stand poised to totally banking marketplace, which was mentioned
transform the UK banking industry and the by two thirds of responders.
way we use and manage our money every
day through competitive and fully integrated While cash has become arguably less
marketplaces. attractive in recent years as an asset class
owing to historically low interest rates, and
So what could the next few years bring? ahead of potential further cuts in the event
8 Bud | Beyond Open Banking Bud | Beyond Open Banking 9
Section 1 Section 1
of Brexit-induced cataclysm, cash has been ISAs offering vastly different rates and yet
a fertile ground for digital banks looking to it doesn’t really matter where your cash is
add attractive features. parked. What matters is the interest paid on
it and the speed at which you access it.
Investment bank Investec and challenger
bank OakNorth have both been prominent With just 9 per cent of savers having
third party providers of cash savings switched their easy-access account to
accounts for customers for the likes another provider in three years, according
of Monzo, Starling Bank and Moneybox. to research from the Financial Conduct
Goldman Sachs meanwhile has attracted Authority, the market needs improving
more than £6.5bn with its cash savings and only two simple variables determine
platform Marcus in a short space of consumer competition.
time. So why could cash fit easily into
marketplace integrations? In our own research of attitudes among
2000 UK consumers, we found that only
Cash savings is a staggeringly big market 6 per cent of customers would switch banks
with approximately £270bn sitting in cash to a provider that had a feature to move
ISAs alone, according to the latest figures spare money automatically at the end of
for the 2017/18 tax year from HMRC. There the month into a savings or investment
are also over 1000 UK providers of cash account, but an average 40% would use
Early steps could include any simple, transactional products
Investments vs Baseline fintech API readiness where customers are used to making snap decisions.
“anything where the alternative is going to a comparison site”
100
this if the feature was available within an regulatory hurdles. The more complex
90
existing account. This figure also rises when the financial product, the more complex the
personal income rises, to near to 50 per regulations that surround it. Easier ‘wins’
80 cent for all income brackets over £30k per could include rent recognition for borrowing,
year. utilities switching – something CYBG is
70 already doing, and comparisons across
The numbers are also highly correlated with other products such as mobile phone
60 age, with 58 per cent of those aged 25- costs or internet providers. In all these
34 saying they would use this feature if it product verticals data plus API connectivity
50 existed in their main banking app compared can offer consumers upfront ways to save
90%
to just 28 per cent of those responders aged money and plan for a better future through
40 over 55. more targeted financial products.
76% 74%
68% 68%
30 As well as savings, other simple transactional But what about incumbents, how should
54%
48% 46% products could be early beneficiaries they respond to the coming shift? People
20 40% of marketplace banks, a number of fintech want these services but want them in
30% leaders said. They have “fewer sandbags an environment that they’re familiar with
10 around them,” according to Rob Fairfield, and feel secure in, as our research shows.
VP Platform at Trussle. The desire for it is there, disruptive firms
0 want to provide it and the infrastructure
Baseline (all fintechs) Investments and ISAs
“These could be overdrafts, small loans, is beginning to support it.
credit cards perhaps even car finance.
Read Anything where the alternative is going to For banking giants and challengers alike
% of Total weighted number of responses for each
Read + Write comparison sites today and customers are the battle for the most viable future business
functional area of the features in the survey. Colour shows
Read + Write + Create
detail about response. The marks are labelled by the % of used to making snap decisions,” he said. model is a quickly moving target but there
Read + Write + Create + Fulfill Fintechs from our sample reporting functionality available are ways for both poacher and gamekeeper
Read + Write + Create + Fulfill + Transact through external APIs ‘Sandbags’ in this instance refers to to benefit now.
10 Bud | Beyond Open Banking Bud | Beyond Open Banking 11
Section 1 Section 1
A closer look: The number of people predicted to switch energy provider
in 2019 exactly matched the number of people in our survey
Switching
who said they’d switch banks or download an app that
helped them to switch energy providers. If we project the
same level of accuracy to the people who would be open to
an in-app switching service but wouldn’t actively seek one,
Our data suggests that we get a figure of 9m households in the UK.
9m households would be
open to switching energy
provider if their bank
provided the service. 40%
30%
20%
10%
O
0%
pen Banking, whilst a powerful Capitalising on this is an opportunity available
tool for the industry, is exclusively to the provider that customers turn Households switched 2018 Households predicted to Households predicted to Households that would
according to energy watch switch 2019* according to switch 2019* according to switch if their bank offered
meaningless to customers unless to most often when it comes to managing their energy watch our model it according to our model
it actually affects their lives day to day finances, normally holders of the
– and energy switching is a prime primary current account.
example of this.
This new market can only be delivered in an
According to Energy UK1, 5.8m of the 27.2m environment where increased trust reduces
How we can help
UK households (21.3%) changed provider the barriers to switching, where access to unique
Bud’s intelligent marketplace
in 2018, whilst in our survey 24% of people datasets increases the capacity to create
provides all the third parties and APIs
suggested that they would either download relevant triggers (e.g. detecting a higher than
necessary to perform end-to-end
a standalone app or switch banks to access usual bill payment,) and where portable KYC
utility switching journeys in-app, with
easier switching services. If we account information allows for a dramatic reduction in
mobile and broadband coming soon.
for the 14%2 increase in switching reported friction through-out the process. Together,
Contact insight@thisisbud.com for
by Energy Watch in the first six months of banks working with fintechs possess all of
more information
2019, the projected number would be 6.12m the necessary capacity to deliver this now.
– an identical 24%.
12 Bud | Beyond Open Banking Bud | Beyond Open Banking 13
Section 1 Section 1
Where the Pictured: Anna
Mitchell, right; and Will
Sorby, below
banks are now:
Challenger
perspectives
An interview with Anna Mitchell, Head of
Marketplace of Starling, UK and Will Sorby,
“We’ve proven the initial concept, now it’s
General Manager of N26, UK
time for us to evolve the next iteration and bring
in a smarter marketplace”
— Anna Mitchell
T
he utopian promise of open Anna Mitchell, head of marketplace at of integrations as more firms look to build everything in one place in the most simple
banking, it is fair to say, is yet to Starling Bank, says we are currently seeing out externally accessible APIs. way possible.”
materialise fully formed but more the rise and rise of the API economy and that
recently things have started to marketplace banking is one likely beneficiary. “We are starting to see clusters of early Sorby says, to this end, that the firm, is less
shift quickly. Many digital banks and other movers. It needs to be a much more focused on pure customer number growth as
fintech firms are investing substantial “We focus on our core banking proposition connected industry, where you have a metric at present and more on engagement
resources in building out the early versions and ensure we have the best business and an increasing number of integrated with the N26 banking app for customers on a
of marketplace banking platforms and customer accounts and then partner with partnerships and data.” day to day basis.
integrations. best in class providers [for the Starling
Marketplace],” she said. It is not the only emerging model, however, For us, it is about helping customers
That is particularly true for Starling Bank, as N26’s UK general manager Will Sorby understand their finances better and then
who built out one of the first marketplaces, “As the API economy sees more and more points out. guiding them to the products that are the
populated with a number of third-party entities catch up to where we are, you are most suitable and add the most value for
integrations, for its customers nearly two going to unlock further opportunities and “There will be a space somewhere in the them in their daily lives.” he said.
years ago at the end of 2017. deeper integrations,” she added. market for a marketplace model. I don’t
believe that will be the mass market Since launching in the UK in just under
Now, with the spectre of growing momentum Mitchell, who joined Starling at the start of solution that takes off and really transforms one year ago, N26 now has approximately
among fintech firms prioritising API 2019 from OVO Energy, says PSD2 and other banking,” he said. 200,00 UK customers, with 3.5 million across
development and incumbents apparently regulation is pushing incumbents too in the Europe.
looking to build their own marketplaces, general direction of marketplaces but adds N26, he adds, is not planning on becoming
banking challenger models are both evolving “it might take a bit of time”. She says that a marketplace bank any time soon. Starling, which has about 820,00 accounts
and diverging as the space becomes more crowded. there is an overt improvement in the quality “Our vision is very much about having with a goal of 1 million by the end of 2019,
14 Bud | Beyond Open Banking Bud | Beyond Open Banking 15
“
Section 1 Section 1
which it says will now easily reach, now likely be space for several different models
has a total of 16 marketplace integrations over the medium term.
including Pensionbee and Habito. These
are exclusively for its retail customers while Both Starling Bank and N26 focus on
the likes of Xero and Growth Street serve its harnessing the potential power of technology
business customers. and delivering improved products and
ultimately value to their respective
Starling’s plan over the medium term, and rapidly growing customer base as well
Mitchell says is to build out its market pace as growing revenues over time to match their
further with a goal of having 48 partner rapid growth in users.
integrations by 2023.
Their respective models, however, are
“We have now proven the initial concept, now increasingly different with Starling pursuing
it’s time for us to evolve the next iteration a next generation marketplace approach
and bring in a smarter marketplace. with an expanding number of partner
integrations. N26 aiming for loyal customers
The efforts to evolve the marketplace doing everything within the bank’s app that
are nested in the £100m award from the is as simple and straight forward to use.
Banking Competition Remedies (BCR) fund Both could be successful but which model
in February following which Starling made a will larger incumbents follow suit?
commitment to help SME customers.
“It’s a high priority and a cornerstone No doubt there will be examples of both
of Starling. We want to add value to our but incumbents do have a potentially good
customers and the marketplace is the means reason to follow a marketplace model.
to an ends,” she said.
Bud’s insights, explored in the first section
As the API economy sees
For some of the firms launching of the report generated by a recent survey
marketplaces, Sorby says, the strategy is of 2000 adults showed that many customers
being drive as a way to build revenue first. do want marketplace features but apathy is
more and more entities
not on the challengers’ side.
“What you are seeing is banking products
being built in a compare the market setup. Only a small percentage of the 2000
If it is done really well then it will be of great
catch up to where we are,
people taking part in our survey said they
interest to customers because you’re saving would switch banks for open banking-style
them money,” he said. functionality, typically between 3 and 7
per cent, (and that group - the pro-switchers
you are going to unlock
“What we are trying to build for our correlated highly with people who were
customers is not about saving them money already challenger bank customers,) but at
on a commodity insurance product. It is least five times more said they would use the
further opportunities and
about giving them something that helps functionality it if it existed in their existing
them with their daily financial lives.” banking app. The innovation being driven
by challengers is impressive but customer
deeper integrations
“It is thinking of the customer first rather apathy is still on the incumbents’ side.
than the business first.” The retention challenge for banks will be
to move before the challengers can establish
Sorby adds that the big risk to marketplace new norms - something that is already
banking is whether it delivers something that happening with services like categorisation
Anna Mitchell customers want to use but that there will of transactions.
16 Bud | Beyond Open Banking Bud | Beyond Open Banking 17
Section 1 Section 1
With divorce more common than a change Switching and loyalty use cases
of bank, how can banks and fintechs work
together to address the loyalty penalty?
Question Text % of Total Weighted number of responses
A feature to alert me to relevant dis-
counts and loyalty schemes run by com-
panies I frequently spend money with 6% 18% 35% 15% 27%
(e.g. supermarkets, online retailers etc...)
A feature to help make sure I’m on the best
mortgage rate possible. (E.g by letting me
know if my fixed rate deal is going to end 6% 10% 22% 14% 49%
soon and help me to re-mortgage easily)
A feature to let me know if I’m over
Friction in
paying on an electricity bill and help me
switch provider easily 6% 17% 33% 16% 27%
financial services:
A feature to let me know if I’m over pay-
ing on my mobile phone / broadband bill
and help me switch provider easily 6% 17% 32% 16% 29%
Loyalty and Switching
A feature to link my loyalty cards to my
bank account so I can collect points
6% 15% 39% 13% 26%
without having to scan my card (e.g.
Nectar, Starbucks)
Y
ou would think that top of any good Not applicable – I would not use or consider using this feature therefore that profound customer apathy for
businesses’ priorities is to reward Don’t Know switching was one of the findings of Bud’s
long term customers’ loyalty, but Would use if available on my bank’s online/mobile app consumer survey. Despite this, the UK’s
what if they don’t really need to Would consider if using a standalone app for this retail banking market, still concentrated
worry too much in order to hang onto them? Would consider switching banks to use this feature among just a handful of firms, is becoming
Across huge chunks of the retail economy, an intensely disrupted industry.
customers consistently lose out by staying
% of Total weighted number of responses for each
with the same provider for many years - to Technology can already help fix this
functional area of the features in the survey. Colour shows
the extent that a new term has entered the detail about response. The marks are labelled by the % of problem on both sides of the issue - both by
lexicon to expose the irony of this apathy: total weighted number of responses. rewarding loyalty and by making switching
The loyalty penalty. easier and less time-consuming.
Last year, the Competition and Markets Following the launch of Open Banking and
Authority received a complaint from the the emergence of a burgeoning marketplace
charity Citizens Advice which said that ecosystem in the past 18 months, banks
customers in five markets — including keen to innovative before the competition,
telecoms, mortgages and savings — were are increasingly embracing integrations
losing out to the tune of £4bn a year owing from third parties and working with fintechs
to the loyalty penalty. In short, the system There are two ways to tackle that can do this but more should follow suit.
was broken, but could a digital fix be around the loyalty penalty, making
the corner? In Bud’s customer survey between 5 and 7%
loyalty more attractive and of responders said they would switch banks
The depressing truth is that divorce is more making switching easier. in order to get helpful new marketplace
common than current account switching. features such as being shown greater
You are more likely to stay with your bank
Open Banking creates new visibility on bills or how to get better interest
than with your spouse. It is no surprise possibilities for both. rates when taking out credit. However, up to
18 Bud | Beyond Open Banking Bud | Beyond Open Banking 19Section 1 Section 1
40% said they would use these services if When it comes to the other side of the
they were offered within their existing coin, making loyalty more attractive, Flux
banks’ online service or mobile app is a great example of a fintech company
suggesting an inherent existing apathy that that is using data to attack the problem.
may prove an advantage to banks moving Its initial task is ” liberating” a data set
to a marketplace model. that has not been available before: paper
receipts. Through partnerships with the
Going a level deeper, the data in our survey likes of Barclays, Monzo and Starling Bank,
show these features are more popular it has created over 500,000 digital receipts
with younger people. We found that 57% of since launching two years ago. This is not
total responders would use a feature that simply a more efficient way and to save
would “let me know if I was overpaying on on paper. Being digital allows the data to
an energy bill and help me switch provider be interrogated that otherwise would not
easily”. This rises to 68% in total for younger have been used and removes the need for
people; those aged between 18 and 34 of physical loyalty cards.
whom more than half would only use the
feature if it was available in their bank’s app. The standard ‘stamp’ card - where you buy
Younger savvy customers may not be too nine coffees and get the tenth free - is easy
keen to find the best deals, but they’re open to digitise and currently represents about
“The partnerships and
to it if it comes to them. half of what flux does in the space. In the collaboration that marketplace
banking fosters is the key to
the future success of so many
fintechs, including Flux,”
Switching and Rewards vs Baseline fintech API readiness
100
longer-term, the firm is looking to provide including Flux, ” says Roisin Levine, head of
90 more convenience to customers by digitising banks at Flux.
‘points’ based loyalty rewards schemes.
80 Think Tesco club card. The loyalty penalty exists in greater force
where there is a lack of competition,
70 We tend to forget our loyalty cards or not something that has been improving in
wish to carry around a dozen or so at one banking in recent years but still has a huge
60 time and therefore not use them as much as way to go. The technology that can help
we should. with this is already here, especially in lighter
50 touch markets.
100% Integrations like Flux help by saving
40 customers money and making things easier: Offering their customers more choice and
76% 83%
67% 33% a double win for those looking to take charge better value by harnessing both loyalty
30
of their finances with ease. and switching using this technology will
48% 46% therefore likely be a winning strategy for
20 40%
API marketplaces are key to powering large banks when it comes maximising
30%
10 both sides of the industry’s response customer satisfaction in the first few years
to the problem posed by the loyalty of adoption of marketplace banking.
0%
0 penalty, helping to fundamentally evolve
Baseline (all fintechs) Switching and reward providers the portability of personal data. It’s this Firms ignoring the new world of connectivity
portability that underpins both CYBG’s in- and transparency will be hit hard, and where
Read app switching and Flux’s loyalty solution. it hurts the most.
Read + Write
% of Fintechs from our sample reporting functionality
Read + Write + Create “The partnerships and collaboration that
available through external APIs. Colour shows detail about
Read + Write + Create + Fulfill response. The marks are labelled by the % of total weighted marketplace banking fosters is the key to
Read + Write + Create + Fulfill + Transact number of responses. the future success of so many fintechs,
20 Bud | Beyond Open Banking Bud | Beyond Open Banking 21Section 1 Section 1
Liberating data from
11bn receipts
An interview with Flux CTO Tom Reay
“W
ould you like your receipt?” Reay was an early employee at Revolut,
We all get asked this question joining in 2014, where he was VP Development
hundreds, if not thousands of but left after two years to join Experian. After
times a year and give it little just nine months he joined ex-colleague,
thought apart from whether we might need and former chief marketing officer at
to return the item or are concerned about the Revolut, Matty Cusden-Ross and Veronique
shop’s security guard loitering over by the exit. Merriam Barbosa, who was Revolut’s head of
partnerships, at the newly launched Flux.
Data, as you know, underpins the disruptive
potential of fintech. A huge data set, one of The firm is part of an emerging banking
the most valuable from a consumer ecosystem that is uninterested in standalone
perspective has however remained in the apps and more focused to plugging into
analogue world. That’s the belief of Flux, fast growing challenger banks as well as
a recently launched fintech firm, which is well-known big banks that recognise the
trying to digitise the UK’s 11.2bn annual receipts importance of embracing a marketplace style
and bring the data into the marketplace in order to serve customers more.
banking ecosystem.
The UK banking market, whilst undergoing
“We’re trying to liberate the world’s receipt huge disruption, is still incredibly concentrated
data,” said its chief technology officer (CTO) with the vast majority of customers still
Tom Reay. banking with traditional providers. A 2016
investigation by the Competition and Markets
“The crazy thing is that you have all this Authority found that since 2005 Lloyds,
valuable data and then it just doesn’t go Barclays, HSBC and RBS - the ‘Big Four’ had
anywhere. It’s not available to you as a seen their market share fall by just 5% to 70%
customer or your bank,” he added. of the market. Of course, this has changed
22 Bud | Beyond Open Banking Bud | Beyond Open Banking 23Section 1 Section 1
then provide offers that are far more relevant to innovation that no-one could conceive of
that customer. having existed in the first place.
“When we see that you have scanned the “That’s why having APIs that are open and
loyalty card at KFC you can link that to Flux and restricted to a specific use case and making
then every time you spend money at KFC we’ll the data available to developers who want
automatically swipe that card for you and you to build stuff is important. That’s really exciting
don’t have to remember your card. Brands want for us.
to own their loyalty schemes, what we can do is
provide a much better service to the customer,” “When the iPhone launched you could never
Reay said. have considered Uber. Once all of the key
parts were in place that’s when Uber came
By fostering competition, and providing an along,” he said.
extra layer of information on purchase data,
flux is becoming more and more part of the Having an open API is central to the firm’s
marketplace banking ecosystem. This in turn operations Reay says and that developing the
is reshaping the notion of customer loyalty firms API has become more important
and lowering the friction involved in changing in the last 12 months and that he intends for
suppliers of a host of services. its development to become more important
still in the next 12 months.
“If it becomes trivial to switch why would you
be loyal? Every time you make the thing that “Without it, we can’t do anything.”
you should be doing easier, the more likely you
are to do it,” Reay said. The humble receipt may yet prove win over
in three years but still means for fintechs a new generation of fans as it helps to save
leveraging open banking there are huge “Switching is the same thing. If you’re money and reward customer loyalty, as well
benefits to working with traditional players presented with the option to press one button as cut down on all those annoying cards.
as well as the newer digital banks. to switch then you’re much more likely to do After all, the API economy has already
it than if it takes 10 minutes. It’s what the big convinced us that strangers’ cars are
Flux users activate their wallet by going into banks are most scared of,” he added. a preferable option to get from A to B.
their Barclays, Starling Bank or Monzo apps But, companies like Flux also offer way
(Flux has partnerships with all three) and These earlier wins for marketplace banking are more still as this data flows back into
requesting that their data is shared with Flux. clearly positive and beneficial for customers customers hands and out of the waste
Their transactions are connected to Flux’s but, Reay says after this is likely to come paper basket.
systems and monitored in real time. So far the
firm has created over 500,000 digital receipts
since launching its services in April 2017,
growth becomes exponential as each new
merchant or bank is on-boarded.
Currently, the firm has merchant partnerships
with EAT, KFC, Itsu, Pod and Pure as well as
a specific loyalty partnership with KFC.
“Switching is the same thing.
Receipts are just the first part of the company’s
plans, however. The idea, Reay explains, If you’re presented with the option
around Flux is by unlocking that data and, to press one button to switch then
through open APIs, giving people access to it
you open up a new world of banking potential you’re much more likely to do
through the marketplace. When you know what it than if it takes 10 minutes.
someone is buying at a product level you can
attribute loyalty points or rewards where you
It’s what the big banks are most
otherwise might have missed them. You can scared of”
24 Bud | Beyond Open Banking Bud | Beyond Open Banking 25Section 2
What a mature marketplace
model means both for
people and for the industry
Bud | Futureproof 27Section 2 Section 2
To what extent are fintechs prioritising API development?
80
70
60
How important is
your API vs other
projects in the 3.8 50
business right
now?
40 79%
71%
How important is 30
API distribution
to your future 4.1
commercial 20
model?
10
0
API development API development will
became more of become more of a
1 2 3 4 5 a priority this year priority next year
The medium term “We tend to overestimate the effect of a technology in the
and beyond short run and underestimate the effect in the long run.”
— Roy Amara
A
On average, CTOs we decade can be a long time in banking. This new connectivity both empowers customers per cent would use a service in this way that
Just look at the last one. The creative and raises standards but equally importantly, told users if they were overpaying for a mobile
talked to said marketplace destruction wrought by the Global it is prompting the emergence of a marketplace phone or broadband bill and could a cheaper
banking would be a reality Financial Crisis coupled with the birth banking ecosystem with hundreds of fintechs offer elsewhere vs 17% that would download
of the smartphone conspired to create an almost lined up to provide innovative functions and a standalone app.
of every day life with 2.3 unimaginable revolution on the retail banking and competitive prices.
years. What does it look personal finance landscape. It has improved user The regulator is clearly on board also.
experience, lowered costs and even made people In Bud’s survey of 2000 people across the UK, The Financial Conduct Authority (FCA) recently
like after that?
choose to wear a t-shirt with their favourite while only a small number of people set up its Advisory Group on Open Finance
bank’s logo around London. – between 3 and 7 per cent - would consider to discuss the potential of extending Open
switching banks to benefit from an array of Banking-like data-sharing to a wider range
Similarly today another rewiring is happening marketplace banking features, consistently of financial products.
that looks set to be even more revolutionary respondents were happy to use this type of
although most people could be forgiven for not functionality if it was available in their own For example, it might help to improve
being aware it exists. Open Banking and PSD2 banking apps. the financial health of consumers and
allow customers to grant third parties access to businesses by enabling them to see all
their payment account information or to make For example, 35% per cent would use a feature of their accounts from different suppliers
payments on their behalf. Both are important to alert them to relevant loyalty schemes within (banks and non-banks) in one place and
milestones but just a first step in what may be their bank app but only 18% would download helping them to manage savings, loans,
around the corner. a separate app to do the same. Similarly, 32 investments and pensions.
28 Bud | Beyond Open Banking Bud | Beyond Open Banking 29Section 2 Section 2
Breakdown of appetite for all 21 use-cases in the survey “I can’t see in 10 years marketplace banking
not being a stalwart for most UK consumers”
Question Text % of Total Weighted number of responses
A feature to alert me to relevant discounts and loyalty schemes
— Rob Fairfield, Trussle
run by companies I frequently spend money with (e.g. supermar- 6% 18% 35% 15% 27%
kets, online retailers etc...)
A feature to help make sure I’m on the best mortgage rate possi-
ble. (E.g by letting me know if my fixed rate deal is going to end 5% 10% 22% 14% 49%
soon and help me to re-mortgage easily)
Whilst we’ve already covered some of the short are less regulated or have less advice around
A feature to help me save time by using my bank account as a term changes that we can expect to see, it’s in them such as energy switching. These could
digital ID when applying for financial products (e.g. credit cards / 4% 8% 25% 21% 42%
investment accounts) the medium to long term that we can expect also include access to overdrafts, small
A feature to help me take out travel insurance easily if the data
to see most of the more far-reaching changes. loans and credit cards. Essentially, where the
in my bank account suggest I’m abroad without adequate 3% 9% 20% 18% 50% When we talked to a sample of 50 tech alternative is going to comparison sites.
insurance
leaders at fintechs 76% of them thought that
A feature to help me understand my spending by categorising
my transactions (e.g health, groceries, entertainment etc...) 5% 13% 31% 14% 38%
marketplace banking would be a commercially Longer term, things like larger investments
important distribution channel for them - on above £10k where consumers need financial
A feature to help me understand my spending by sorting my average they expected the process of reaching advice, complex life insurance and mortgages
transactions into buckets (e.g. bills, non-essential spending, 5% 12% 32% 15% 37%
savings etc...) mass adoption to take 2.3 years. are still likely to come on stream, according to
our survey of ecosystem players.
A feature to help me understand the ethical and environmental
impact of my spending by showing me sustainability information 6% 12% 23% 18% 41% So what can we expect once that countdown
about the companies I spend money with
has run out? “I can’t see in 10 years marketplace banking
A feature to help speed up applying for a mortgage by sharing not being a stalwart for most UK consumers,”
data from my bank account with the mortgage provider (at my 3% 8% 19% 17% 53%
request) Marketplace banking, or API distribution is said Trussle’s Rob Fairfield.
A feature to let me know if I’m over paying on an electricity bill a huge priority among fintech leaders. Of
and help me switch provider easily 7% 17% 33% 16% 27% the fintechs we spoke to, 79% said that they Longer term, the retail banking and financial
planned to further develop their externally services landscape is certain to look vastly
A feature to let me know if I’m over paying on my mobile phone /
broadband bill and help me switch provider easily 5% 17% 32% 16% 29% accessible APIs and almost four out of five different to how it looks today. But how and
(3.8) said that it was a “High Priority” to do so. in what way is much harder to ascertain and
A feature to let me know when I’m incurring fees by spending will likely depend not just on what interesting
money abroad and help me find cheaper ways of accessing 5% 13% 37% 14% 31%
foreign currency It won’t happen immediately though. and useful products fintech firms can build
A feature to let me know when insurance policies are up for
Despite more than three quarters saying using transaction data - the essence of the
renewal and help me find a better deal 5% 17% 35% 15% 28% that marketplace banks will be important technology. It will also depend on what larger
distributors for their products in the future. banks do to respond to successful digital
A feature to link my loyalty cards to my bank account so I can
collect points without having to scan my card (e.g. Nectar, 7% 15% 39% 13% 26%
Just one in five said that this was likely to be challengers that have got a headstart in
Starbucks) in the next year while three quarters said this building marketplaces.
A feature to make it easier to view recurring subscriptions (e.g. would be between two and three years away.
Netflix, Gym membership) that I pay for 4% 13% 40% 12% 29%
Customer desire is there for better options
So, what types of products could fit into a when it comes to managing money. Third
A feature to make use of my history of regular payments (e.g.
rent) to help get a better interest rate if / when I apply for credit 5% 10% 26% 20% 39% longer-term view of marketplace banking? parties want to build products to satisfy this
growing demand. The rest depends on the first
A feature to move spare money automatically at the end of the As we covered in an earlier article, simple movers to build a next-generation marketplace
month into a savings or investment account (regardless of the 6% 11% 35% 15% 35%
savings or investment provider) transactional products are likely to be early from a large bank that can bring these two
A feature to move spare money automatically at the end of the beneficiaries such savings, and ones that powerful forces together.
month to pay down a loan / credit card / mortgage 4% 10% 22% 14% 49%
A feature to show me all of my bank accounts in one place
regardless of which bank they’re with 5% 15% 30% 14% 36%
A feature to show me all of my investments and pensions in one
place regardless of where they may be held 4% 13% 28% 17% 38%
Would not use
A feature to show me how much money I have left to sepnd
(e.g. money in my account minus regular / upcoming payments 6% 15% 39% 13% 32% Don’t know
between now and payday) % of Total weighted number of responses for each use case
Would use if available on my bank’s online/mobile app
in our survey. Colour shows detail about response.
A feature to transfer money easily between any of my bank Would consider using a standalone app for this
accounts (regardless of the provider) without having to leave my 6% 12% 40% 14% 28%
The marks are labelled by the % of total weighted number
main banking app Would consider switching banks to use this feature of responses.
30 Bud | Beyond Open Banking Bud | Beyond Open Banking 31Section 2 Section 2
H
elping customers make good to access customer pools large enough to
long term financial choices is one power the next stage of growth.
of banks and other financial firms
most important jobs. The internet, It makes sense. Large banks have tens of
Longer term, more complicated since its early days, recognised this and millions of customers but desperately need
has worked wonders over the years to to increase the level of service to customers
financial products are harder to bring more information to customers and lower costs. Digital banks too, growing
distribute via third parties, but is but the results have so far been limited at breakneck speeds, are starting to offer
to price comparisons. larger pools of digitally engaged customers.
the gain worth the investment?
More recently, however, progress has been Take one good example: financial advice
accelerating, particularly in the UK, thanks and investments. A mere 10% of people
in large part to developments in fintech. seek out professional financial advice,
Most of the early wins have so far been according to a study by Aegon, most are put
in helping people with issues around off by the cost of advice. Some hundreds
traditionally short-term problems (e.g. utility of thousands of retail investors now use
switching but this is changing) digital only platforms to invest their money
via automated or hybrid low cost financial
A huge swathe of start-up financial firms advice and/or investment solutions, such
Helping people
are now helping users with their mortgages, as Moneybox, WealthSimple and Scalable
savings, investments and pensions and life Capital. All three firms have either been
assurance. In short, all the long term things utilising open APIs to plug into banks or
you really want to get right. It is a sequence have plans to.
build for the future
of innovation driven by the complexity of
these types of products. Regulations are Simon Miller, UK CEO of Scalable Capital,
more intricate and closely guarded, for good says financial product verticals where
reason. This means digital integration and there are only a few metrics by which you
automation is more challenging but also can compare them are easy wins for the
potentially more rewarding. marketplace banking model but that larger
investment portfolios are more complex.
So far, few firms offering more complex long “In our world, there are lots of different
term ‘future building’ fintech products have metrics and you don’t find out for 10 years or
yet reached anything like near the scale they so whether it was a good decision. The less
need to sustainably up-end the system. transactional, and more service orientated
Many firms, therefore, are now looking to [products] require more trust in the brand,”
API distribution through marketplace banks he said.
32 Bud | Beyond Open Banking Bud | Beyond Open Banking 33Section 2 Section 2
A younger demographic eager for help and advice
Household income banded Age Group % of Total Weighted number of responses
Under £25,000 18–24 70% 11% 19%
25–24 63% 12% 25%
35–44 50% 19% 31%
45–54 32% 24% 44%
55+ 28% 12% 60%
£25–50,000 18–24 79% 7% 14%
25–24 65% 13% 23%
35–44 57% 12% 31%
Ashleigh Petrie, Senior Product Manager to marketplace banking, we found an
45–54 53% 15% 32% at Moneybox, says offering longer-term encouraging degree of resonance for these
financial products is something the firm types of services among a number
55+ 32% 8% 59%
wants to do to have long term customer of demographic groups, particularly younger,
relationships. more affluent professionals - for whom
£50–100,000 18–24 67% 9% 24%
longer term financial planning is starting to
25–24 76% 7% 17% “It is important for us as a brand and come into sharper focus.
a company, especially with the launch of
35–44 65% 9% 25%
pensions. Making sure that they are the The figures rise further still for those who
45–54 52% 12% 37% kind of products that have a longer term are parents, particularly those with young
55+ 33% 11% 57% benefit for the customer. We want to be children. More than two-thirds (68 per cent)
the place that people come to, to help grow said that they would use digital banking
£100,000 and over 18–24 62% 38%
their money for the future,” she said. features that help them have greater control
and transparency in their finances, the figure
25–24 73% 27%
Moneybox has attracted over 200,000 users was 17 per cent higher than for those that do
35–44 44% 16% 40% who all use its round-ups features to build not have children.
savings and/or investment pots. The firms
45–54 56% 44%
offer ISAs, general investment accounts, Financial tools that help with future-building,
55+ 42% 6% 52% the Lifetime ISA and currently has a pensions well-being and prosperity have never been
offering in beta. more seamless and integrated with personal
Don’t know 18–24 44% 34% 22% circumstances than they are now. At the
25–24 26% 49% 25%
Pension Bee meanwhile has spear-headed same time, it seems clear that despite
the push into disrupting the gargantuan the direction of travel, for the majority
35–44 35% 29% 36%
pensions industry. It has more than 46,000 of potential users, the potential remains
45–54 26% 42% 32% active customers as well as having a total of unfulfilled. Evidence from the consumer
181,000 registered users signed up to its survey suggests that for the sector to deliver
55+ 14% 12% 74%
app since it was launched two years ago against its promise there needs to be a
in 2017. It was a relatively early adopter of further reduction in friction before people are
Prefer not to answer 18–24 51% 29% 20%
Starling Bank’s marketplace. willing to take the all important first steps.
25–24 48% 27% 24%
Trussel, one of the first online mortgage A decisive 79 per cent of the fintechs’
35–44 36% 25% 39%
brokers, is now arranging £1bn of home questioned in our survey suggested that
45–54 35% 22% 43% loans a year and is focused also on continued focus on delivering flexible APIs
55+ 23% 11% 67% marketplace banking and externally will deliver the necessary infrastructure
available APIs to boost growth and to support this final reduction and will be
customer numbers. available within the next 6 - 12 months. It is
Would use the feature % of Total weighted number of responses for investment-
then that we’ll see the real potential start to
related use-cases in the survey. Colour shows detail about
Don’t know In Bud’s recent survey looking into attitudes be realised.
response. The marks are labelled by the % of total weighted
Would not use the feature number of responses.
34 Bud | Beyond Open Banking Bud | Beyond Open Banking 35Section 2 Section 2
A closer look:
Across the board, parents of young children over-indexed on
their enthusiasm for the kind of features we described. Their
Parents of younger children
overall levels of concern re: privacy and security showed very
little variance from the average, so it is a logical conclusion that
the group has a more acute need.
Open Banking use case % of Total Weighted number of responses
Aggregation 9% 15% 43% 15% 19%
Digital ID 9% 11% 40% 18% 22%
Insight / PFM 10% 15% 45% 13% 17%
Loyalty / Rewards 11% 17% 46% 12% 14%
Across all groups, concerns
about privacy or security
Movng / Transferring money 10% 11% 50% 15% 14%
were more or less the same
(C65% have some level Rent recognition 14% 12% 40% 19% 16%
of concern). Parents of
young children’s increased
openness to adoption can Sweeping 11% 12% 42% 14% 22%
only be interpreted as driven
by an increased need.
Switching 12% 17% 40% 12% 18%
Travel 8% 15% 37% 14% 26%
Traditional financial products, designed for from 25-34 year olds with children under
the ‘nuclear family’, are less relevant to people 4 indicated that they would use the kind of
% of Total weighted number of responses
with young children. They face a different features discussed. This vs 67% for 25-34 year
for each functional area of the features
set of challenges to those before them and, old parents of older children and 62% for those in the survey. Colour shows detail about
in looking to tackle them head on, there is an in the same age group who were not parents. response. The marks are labelled by the
openness for new solutions. Across all demographics, the level of concern % of total weighted number of responses.
around issues like security and privacy is
More than two-thirds (68%) would use the kind almost identical. Roughly 65% of people have
of digital banking features mentioned in the some level of concern around the security
survey to help them manage their finances or privacy implications of the use-cases
– 17% more than those without children, and discussed. Of those, roughly 60% would
25% more than those with children aged five use the services anyway if they save the
and above. respondents either money or time.
How we can help
Young families over-indexed on
This trend isn’t just led by age, either. This group’s adoption curve is driven by an Would not use
a desire for insight into their family
Despite the fact that parents of younger acuteness of need. When we compare this
Don’t know finances. Bud’s double-layered
children are more likely to fall under certain cohort with others, they show more desire
categorisation model offers industry
age brackets, the data remain consistent. for services despite a consistent level of
Would use if available on my bank’s online/mobile app leading levels of accuracy and flexibility.
Compare the results of parents with children concern – a factor that further highlights the
Contact insight@thisisbud.com for
under 4 to those in the same age bracket opportunity for the industry to support this Would consider using a standalone app for this
more information
without children, and the impact of being a demographic as they seek to establish a sense
Would consider switching banks to use this feature
parent remains consistent: 73% of responses of financial security.
36 Bud | Beyond Open Banking Bud | Beyond Open Banking 37Section 2 Section 2
A closer look: Users with a household income of between £50,000 and £100,000
displayed significantly higher levels of trust in financial institutions.
Income and its effect
This leads to an increased open-ness to new solutions and and
opportunity for institutions who can offer features that help them
on uptake and trust
establish a financial future.
Open Banking use case % of Total Weighted number of responses
Aggregation 6% 22% 38% 10% 24%
‘High earners, but not rich yet’ (aka HENRYs)
are people that have significant disposable
Digital ID 4% 12% 31% 17% 36%
income, and whose salaries – defined by Bud
as having a household income of between £50-
100k a year, and who make up roughly 16% of Insight / PFM 5% 14% 41% 11% 31%
the UK population – indicate that they are on
the path towards the accumulation of wealth. Loyalty / Rewards 6% 21% 42% 11% 26%
These are individuals that represent a key
Moving / Transferring money 6% 18% 47% 10% 28%
area of potential growth for financial service
providers. With the beginnings of wealth, a
desire to build a solid financial base for the Rent recognition 4% 14% 31% 18% 39%
future drives their decision-making process
– despite the possibility that many may not Sweeping 5% 15% 36% 10% 42%
possess the knowledge or know-how required
to do so in the most effective manner.
Switching 5% 19% 35% 13% 28%
This sentiment is reflected in their openness
to using services that would help them Travel 5% 14% 37% 13% 40%
make progress against these goals (for the
majority of the features we put in front of
Key take-out % of Total weighted number of responses
our respondents, this group were the most
for each functional area of the features
69%
enthusiastic overall). in the survey. Colour shows detail about
response. The marks are labelled by the
Almost two-thirds (64%) said they would use a % of total weighted number of responses.
function within their banking app that enabled
Open to loyalty use cases them to switch energy tariffs if they were
found to be overpaying; three-quarters (74%)
wanted an ability to link their loyalty cards and
68% access reward schemes; 68% wanted to be
able to manage insurance policies, pensions,
investments, subscription services and more
Open to aggregation within one place.
Would not use How we can help
This is a group that wants to start making
As part of the survey we tested
64%
plans for a financial future and features that Don’t know
wealth propositions against this
help them save time or effort as they do so,
Would use if available on my bank’s online/mobile app group. For the detailed breakdown
provide a valuable service. They also serve to
of wealth use-cases get in touch by
Open to switching use cases connect the provider with a group of people Would consider using a standalone app for this
emailing insight@thisisbud.com
who are at the beginning of a valuable stage
Would consider switching banks to use this feature
in the customer lifecycle.
38 Bud | Beyond Open Banking Bud | Beyond Open Banking 39Section 2 Section 2
Pictured, Toby Triebel,
European CEO
of Wealthsimple.
Photography: Crusoe
Weston
Differentiating
investments through
data portability
An interview with Toby Triebel,
European CEO of Wealthsimple
S
eismic changes have happened in for the past five years. Triebel, after studying
the world of investing and wealth at the London School of Economics and
management in the past 10 years Cambridge University, started at Goldman
but most firms offering pensions Sachs before moving to the hedge fund
and long term investment portfolios still world. After this, as one of the founders and
have the stereotypical pinstriped Mayfair CEO of a fintech firm - still going strong -
stockbroker or overworked analyst hunched the SME lending platform Spotcap, Triebel
around eight screens of flashing data look already has form in financial services
and feel. disruption. Wealthsimple too is already a
pretty big deal in the world of digital wealth
Toby Triebel, Wealthsimple’s Europe CEO, management, also formerly known as ‘robo
however, looks more like an architect and is advice’.
on a mission to rebuild the industry further
as the landscape quickly shifts. He thinks The firm, originally from Canada is now
digital wealth managers can encourage a live in three markets (Canada, the US and
new generation of investors by integrating UK) and recently raised £60m led by the
with other large financial services firms, investment arm of insurance and asset
whether they are large banks or digital management giant Allianz to fund growth.
challengers, though open APIs.
The task to build the scale-up fintech firm
He has been at the centre of the fintech into a profitable player is no easy one. While
startup scene, both in London and Berlin, the robo advice industry has been around
40 Bud | Beyond Open Banking Bud | Beyond Open Banking 41You can also read
