In light of the long-awaited final recommendations from the Competition and Markets Authority (CMA) regarding its drive to promote better competition in the UK’s retail banking sector, Lu Zurawski, Solutions Practice Lead, Consumer Payments EMEA at ACI Worldwide comments on how this will help banks and fintechs develop innovative banking services and how these reforms will draw attention to the ageing IT infrastructure of banks.
The CMA’s report will stimulate competition by forcing banks to create new access technology, known as Open APIs (Application Programming Interfaces). These APIs, commonly used in high-tech industries, will make it easier for new bank service providers, both banks and emerging fintech companies, to develop innovative banking services. An Open API can be seen like a new portal to the bank, one which can be easily discovered and navigated by creators and developers of new services.
By allowing innovative service providers unfettered access to existing banks’ IT systems, customers – if they so desire – can access their existing bank accounts using apps provided by this new class of service provider.
Although a few banks might be slow to provide this new connectivity, some will welcome it as an opportunity to experiment with innovative new services themselves. We are likely to see both existing banks and new players embracing the new Open API technology in banking applications. These may include Personal Finance Management apps, which would provide a single and consistent environment from which a consumer can manage all of their financial affairs.
The need to offer real-time, on-demand access however will focus attention on ageing IT infrastructures at existing banks. The 2018 timescales for the CMA remedies leave precious little time for banks to make necessary changes. Banks need to be rolling up their sleeves and getting their hands dirty with this new open access technology, collaborating in the creation of practical working standards and getting used to a profound new world of connectivity.