It could be easier for Facebook and Google to get into UK banking thanks to new rules starting today



Facebook Founder and CEO Mark Zuckerberg speaks on stage during the annual Facebook F8 developers conference in San Jose, California, U.S., April 18, 2017.
Facebook
Founder and CEO Mark Zuckerberg.


REUTERS/Stephen
Lam




  • Open Banking rules come into force in the UK on
    Saturday, January 13.
  • The rules force banks and payment companies to share
    data with third parties if customers agree.
  • The changes are meant to encourage comparison and bank
    account switching but some think an unintended consequence
    could be opening up banking to tech giants like Facebook and
    Google.

LONDON — New rules come into force in Britain today that force
banks to open up their data to outsiders.

“Open Banking” begins on January 13. The new rules force
Britain’s nine biggest banks to share customer data with third
parties if a customer agrees. The changes are meant to improve
price comparison and boost account switching. (You
can read a full guide here.
)

But many market watchers speculate that an unintended consequence
of the new rules could be to lure tech giants like Facebook,
Google, and Amazon into mainstream finance in the UK.

David Birch, a digital financial consultant and speaker, wrote in
Wired UK recently
: “In 2018 the banks will concede customer
mindshare to the GAFAMs (Google, Apple, Facebook, Amazon,
Microsoft) and the BATs (Baidu, Alipay, Tencent).”

Facebook and Google have long tried to break into financial
services, with
products such as Pay by Messenger
and
Google Wallet.
But these efforts have struggled to gain much
headway in the UK.

Birch pegged Open Banking, which also lets the likes of Facebook
carry out payments on your behalf, as the main reason he thinks
this could change.

He wrote: “Next time you need to send your friend a tenner,
you’ll instant-message them the money, rather than opening up
your boring bank app, fiddling about finding their bank details,
authenticating yourself again and finally firing off the cash.
You’ll just type “+£10″ in your WhatsApp chat.”

‘Big tech companies are looking at how they could play in the
market’

Caroline Plumb OBE, the CEO of cash management startup Fluidly,
told Business Insider: “I think you’ll see a lot of new entrants.

“They might not see it as a wholesale competitive entry into
finance — I doubt that’s how Facebook or someone like that would
frame it — but there are always parts of the experience that are
going to make sense for their customers, like sending money
between friends on WhatsApp.”

Fluidly is one of a number of businesses primed to take advantage
of open banking and Plumb has been monitoring the area closely.

“What you’ll see in the longer term is use cases and business
models emerge that hadn’t really been thought about before, just
like you saw in the telco industry,” she said. “All the
innovation has been in what’s called the “over the top” layer —
people like Netflix and WhatsApp who have invented new business
models.”

Ed Maslaveckas, CEO of banking platform Bud, told BI: “There are
100% big technology companies looking at how they could play in
the market, that’s for sure. And there are very big financial
brands that are not part of the Big 9 that are looking at the
European market very seriously.”

Bud is working with HSBC to develop an Open Banking-inspired app
that will help customers compare energy tariffs. The company is
also in conversation with multiple banks and fintech companies
about similar projects.

Maslaveckas said his comments were drawn from direct
conversations with tech companies and financial brands but
declined to name any specific businesses.

‘They’ve been doing lots of ‘war games’ with the banks’

Maslaveckas said that new products from big tech companies could
look very different to the traditional banking services we are
used to in Britain.


Caroline Plumb, Fluid.ly
Caroline Plumb, CEO of
Fluidly.

Fluid.ly

“Look at Alipay and the experiences you have over there [in
China],” he said. “You walk into a restaurant, you scan a QR
code, you have the menu on your phone, you order through your
phone, it’s paid for, and the food comes to you.

“That might not be the experience that everyone wants at a
high-end restaurant, that’s the kind of thing that can happen
with open banking on the five-year scale.”

What does this mean for banks? “They need to react,” he said.

Fluidly’s Plumb said: “I think the banks are very cognizant of
that threat. I know some people at McKinsey and I know they’ve
been doing lots of ‘war games’ with the banks, effectively
role-playing different strategy scenarios that see them take on
different roles.”

Richard Morgans, head of digital and fintech at TSB, is
optimistic about Open Banking. He told BI: “Open Banking also
provides opportunities for challengers like TSB to offer new
services beyond financial products by integrating services from
3rd parties to offer a more integrated lifestyle experience
– for example, the process to find a new car and get a loan
approval through a single interface.”

Plumb said: “There are strategies, I’m sure, that will see banks
win. But there are also strategies that will see banks fall by
the wayside.”

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