By Brendan Jones, Chief Commercial Officer of Konsentus
This article is in response to one from Matt Cockayne of Envestnet Yodlee published 5th October 2018 that stated the biggest threat to open banking was the lack of the FCA in the UK to extend the definition of an AISP to include non-consumer facing data aggregators.
And thus, by implication state that Yodlee and similar data aggregators that do not deal directly with Payment Service Users can not be regulated by them as AISPs.
I would push back on this premise in two areas, firstly to some of the arguments he states and then more importantly by highlighting what is a far bigger threat to open banking.
The Role of UK OBIE
Matt states that the Open Banking Implementation Entity (OBIE) only allows companies registered with the relevant regulatory authority (the FCA in the UK), to directly access Open Banking APIs in the long-term. Without this direct access, third party providers must register such companies as their ‘outsource provider’ so they can gain access to the Open Banking APIs indirectly.”
I would contend that there is significant misunderstanding of the role of UK OBIE here. UK OBIE was created and mandated by the UK Competition and Markets Authority (CAM) for the 9 largest banks in the UK, commonly referred to as the CMA9, to be a member of and implement Open Banking standards under their instructions and directions. There is however NO mandate for any Third Party Provider (TPP) to register with UK OBIE to gain access to any Financial Institution (FI) the UK – FI’s of course as term also cover Electronic Money, Payment Institution, Building Society and Credit Card accounts, under the European Payment Services Directive 2 (PSD2) open banking. For the UK market OBIE is purely a voluntary registration, despite what some banks or others would state.
The European Banking Authority RTS of Strong Customer Authentication and Common Secure Communications is very clear in that once a TPP has been approved/registered with their local National Competent Authority (NCA) and passported to the relevant NCA in the country of operation of the FI, then the FI cannot refuse access to the TPP unless they believe there to be fraudulent activity. If Envestnet Yodlee was registered with another countries NCA and then passported into the UK no UK FI can refuse it access.
Payment Service User Confidence
Matt states in the article that the current position of the FCA in not allowing aggregators to be AISPs will undermine confidence in open banking as “in the event of a data breach with an aggregator – consumers would not be able to hold that company liable.” This is wrong, Payment Service Users (consumers, small and medium enterprises etc.) would never have a relationship with an aggregator service. Their contractual relationship will be with the TPP, for whom they have given their “explicit consent” to access their account(s) and who is providing the service. It is thus the TPP who as the direct contractual relationship that would be held liable by the Payment Service User (PSU) in the event of any data breach either at the TPP or any of their suppliers. It is a bit like a retailer and a wholesaler, the PSU has a relationship to the retailer, in the event that there is a problem they go back to the retailer not the wholesaler. It is up to the retailer then to take the dispute up to the wholesaler. Further the aggregator is likely to be also affected by GDPR legislation around the data breach and face regulatory oversight from this perspective also.
I can fully understand why Envestnet Yodlee would like to be regulated as it would make their business model easier to run in the UK, but to state it is the biggest threat undermining open banking implies that the majority of TPPs will use aggregators such as Envestnet Yodlee to access FI data and not just integrate directly with them – something that I believe a great many TPPs will do. Thus, the impact of any non regulation of aggregators will be limited both by the number of TPPs using such services in the first place and the fact that they are covered by GDPR requirements already around protection of data.
The Real Big Threat to Open Banking
There are 9,000 plus FIs in Europe that need to be ready by March 14th 2019 for open market testing under mandatory PSD2 timescales. The biggest single threat to PSD2 open banking is simply the market will not be live and ready in time.
- To date there are still a number of countries that have not transposed PSD2 requirements into national law including Romania, Sain and Ideland.
- To date there are a number of NCAs who have not yet announced how they will register or approve TPPs, how they will hold the data and how they will communicate revocation.
Checking of TPPs identity and regulatory status is at the heart of PSD2 open banking.
When a PSU signs up to use a open banking service, they do not need to check that the service provider that they have provided “explicit consent” too, is regulated/approved, or indeed maybe a fraudulent, TPP; this is the job of the FI.
It is the job of the FI to check on the identity of the TPP and check their regulatory status, this is crucial to establishing the trust factor as part of the PSD2 open banking. As Matt stated “The data sharing aspect of Open Banking is already a primary concern for consumers – recent research by Accenture found that 85% of those asked said the fear of fraud would put them off sharing data, and 69% said they would not share financial data with businesses that were not banks.” This means that all FIs need to ensure that they only ever supply PSU data to approved/regulated TPPs. If they supply data to a TPP who is not, then they are in breach of PSD2.
With Konsentus providing the only real time, online, machine readable database currently for the market covering both TPP regulatory status and eIDAS identity checking, we believe the biggest threat to PSD2 open banking is ensuring the NCA databases are ready and that FIs understand the importance of checking on TPPs.
Study of 50,000+ UK banking app reviews reveals customer ‘frictions’ among prominent retail banks
o Login and user authentication: Nearly a third (30%) of digital banking app customers had issues with logging into the app through their devices, and 1 in 5 (20%) cited problems with username and password or passcode authentication
o Customer service:
§ Nearly a quarter (24%) of customers felt like they were waiting too long for customer support
§ Over 1 in 5 (22%) were unhappy with the customer resolution
§ Over 1 in 10 (16%) customers cited that the support over chat was unavailable or not useful
o Notifications: Almost a quarter (24%) cited that the wrong operation – or none at all – was performed when they clicked on the notification icon. 23% didn’t receive notifications for payments while 1 in 5 (20%) received too many notifications
Today Mobiquity, a full-service digital transformation enabler, launches a ‘Friction Report to benchmark UK & NL mobile banking apps,’ identifying ‘frictions’ within the UK digital banking app customer experience.
The study of 50,000+ UK customer banking app reviews within the Google Play Store and the App store shows the main ‘frictions’ across prominent UK retail banks.
One of the key issues was with login and password authentication. Nearly a third (30%) of digital banking app customers had issues logging into the app through their devices and 1 in 5 (20%) cited problems with username and password or password authentication.
Another ‘friction’ was customer service; nearly a quarter (24%) of users felt like they were waiting too long for customer support.
Almost a quarter (24%) cited problems with notifications. Either the wrong operation was performed, or no operation was performed at all when they clicked on the notification icon. 23% didn’t receive notifications for payments while 1 in 5 (20%) received too many notifications.
Meanwhile, over 1 in 5 (22%) were unhappy with the customer resolution, and over 1 in 10 (16%) customers cited that the support over chat was unavailable or not useful.
Commenting on the report, Matthew Williamson, Vice President of Global Financial Services, Mobiquity said: “As the use of digital payments increases during the pandemic, so has mobile banking usage. The launch of Mobiquity’s Banking Friction Report helps banks to identify the ‘business frictions’ in their mobile banking experience to help align with evolving customer expectations.”
“An interesting observation that can be made is that most of the banking apps in the Google Play and App store score highly, but when you only account for reviews where people actually leave comments regarding an app feature, i.e. feature ratings, scores are quite low. This can be attributed to users no longer having to proactively go to the Google Play or App store to rate an app, but now are prompted to review an app while they are using it.”
“Nowadays, banks cannot risk treating their customers as passive observers, building products and features that do not take their feedback into consideration. Looping customer feedback into the decision-making process is key as banks get real-time information regarding which aspect of the app customers value the most, and where they find the most friction while interacting with the app.”
The future of offshore banking
By Granville Turner, Director at Turner Little.
Despite its misconceptions, the popularity of offshore banking is growing. Not only is it a perfectly legal way of holding your money, but with the right professional advice, it is also reassuringly simple to open an account.
This ease-of-use is prompting many offshore banks to change their offering to compete and make overseas banking even more accessible. No longer is it limited to just the super-rich.
So, what does the future look like for offshore banks? We’ve compiled a list of the top fundamental changes happening in the realm of offshore banking.
Catering to niche markets is the future
Rather than managing account holder’s money in general, offshore banks are tapping into how they can best serve different demographics. Essentially, it is about taking a more bespoke approach to managing money at various stages of life.
But catering to a variety of markets doesn’t just stop there. Many overseas banks are now accepting crypto as a form of currency to appeal to digital, tech-savvy generations.
Cryptocurrency is also attractive for those who see the security benefits it can offer.
Paper chains are fast becoming a thing of the past
As banks move away from paper in favour of digital, security is on everyone’s minds. This is because information is an important asset to many businesses, so protecting it is vital. As such, banks are securing data with the most vigorous encryption security standards.
For account holders, this means digital bank transfers and communication become less of a risk and the smarter thing to do. Paper chains are fast becoming a thing of the past.
Instant access, day or night
In today’s digital world, you don’t need to travel overseas to open an offshore bank account; everything can be done online or over the phone. And like most UK standard current accounts, many offshore accounts now offer online and mobile banking features. So account holders can manage their offshore finances and investments while transferring funds with ease.
Offshore banks are following the same route of challenging onshore banks by going branchless. This offers substantial benefits for account holders, as branchless offshore banks don’t pass on as much overhead costs to the customer. Ultimately, this means customers can earn better interest rates and other returns on their investments.
Happy to help
At Turner Little, we work closely with offshore banks to provide you with quality service tailored to your needs. With over 20 years of international banking experience and specialist expert knowledge, we will assist you with your enquiries, no matter how complex. And every account we arrange comes with internet banking, card facilities and the ability to transact internationally.
Hong Kong’s First Multi-Cloud Challenger Bank Goes Live with Temenos
- WeLab Bank designed, built and launched using cloud-native Temenos Transact in less than 10 months
- WeLab offers next generational digital services for the 7.5m people in Hong Kong to access from their mobile phones
- Customers can open accounts remotely in just 5 minutes with bank reporting 10,000 account openings within 10 days of launch
Temenos (SIX: TEMN), the banking software company, today announced that WeLab Bank, Hong Kong’s first homegrown virtual bank, has publicly launched using cloud-native Temenos Transact to provide a range of next generation digital services for customers to enjoy 24/7 from their mobile phones. Designed, built and launched in less than 10 months, the fully digital bank has seen rapid take up with a reported 10,000 account openings within the first 10 days of launch.
WeLab Bank is powered by cloud agnostic Temenos Transact for core banking along with Temenos Analytics and Financial Crime Mitigation. Implemented on Amazon Web Services and Google Cloud, WeLab is the first multi cloud digital bank in Hong Kong. Operating on multiple clouds at the same time gives WeLab increased operational resilience and disaster recovery capability and is a regulatory requirement of the Hong Kong Monetary Authority for new digital banks. According to the Economist Intelligence Unit 2020 report for Temenos, 81% of global banking executives surveyed believe a multi-cloud strategy will become a regulatory prerequisite.
Developing a cost-effective and scalable core banking solution was paramount for WeLab. Temenos cloud native software is built for the digital age using API-first and DevOps principles and engineered to deploy in containers and microservices. This makes it easy for WeLab to scale for future business growth efficiently and eliminates the need to provision for peak processing volumes so that the bank only pays for its actual usage, yielding significant cost savings.
Critically, with NuoDB the solution delivers a cloud-agnostic, distributed relational database that enables WeLab to deploy an active-active on-demand database across multiple cloud providers with near zero downtime failover.
Temenos Transact is a preconfigured system and so requires very little coding and with Temenos model bank to address local practices and regulations, WeLab was able to bring its service to market faster and extend its innovation with more than 400 out-of-the-box APIs.
With Temenos, WeLab bank is set to transform banking in Hong Kong. In as fast as 5 minutes, customers can remotely open a WeLab Bank account with $0 monthly fees and start enjoying differentiated services such as time deposits with competitive rates, an interest-bearing deposit account with an instant virtual Debit Card, and real-time payments powered by Faster Payment System (FPS). Everything can be done on a mobile phone, simply and effortlessly.
Adrian Tse, CEO at WeLab Bank, commented: “WeLab Bank was born from an initiative to reimagine the banking experience for the 7.5 million people of Hong Kong. From the start, we knew this vision needed the most advanced cloud native technology and a partner that shared our vision for digital transformation. With Temenos we have efficiently built WeLab Bank from scratch, free from any legacies, with innovative features that proactively help customers to take control of their money and their financial journey.”
Max Chuard, Chief Executive Officer, Temenos, said: “Congratulations to WeLab Bank on the launch of their trailblazing new digital bank. Building and launching a licensed bank in such a rapid timeframe is a fantastic achievement and we are proud to have supported them in becoming the first multi-cloud digital bank in Hong Kong. Temenos cloud-native, cloud-agnostic strategy means we can satisfy the needs of the most innovative and ambitious neobanks like WeLab Bank to run on multiple cloud providers. We know this is just the beginning for WeLab and we are excited to be part of their story as they revolutionize banking for people in Hong Kong.”
Bob Walmsley, CEO of NuoDB said: “We are excited to be partnering with Temenos to help WeLab Bank achieve their aggressive launch timelines and deliver innovative banking services to its customers. We were inspired by the technical vision of WeLab and knew that executing an on-demand, multi-cloud strategy was a perfect fit for NuoDB. Our enterprise-class, distributed SQL database combined with Temenos’ cloud-native technology helps banks of all sizes around the globe migrate to the cloud to improve agility and reduce costs.”
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