To fully embrace open banking means to share both customers and data. For Jamie Broadbent, Head of Digital and Innovation at RBS International, that’s no bad thing.
Given that he is employed as head of digital and innovation at RBS International, part of UK high street giant RBS Group, that may seem odd. But he argues that RBS, like every other legacy institution, must look beyond its traditional business model to offer a suite of services to customers that will be nothing like how we perceive them today. And that, essentially, means letting go… becoming ‘open’.
“For the longest time, customers have felt almost prisoner to their banks because of this perceived difficulty of moving and being able to port financial data,” says Broadbent.
“So, open banking really is a game-changer for the financial services industry, in that it embraces the fact that we now have technology and application programming interfaces (APIs) that enable people to port data quite easily and regulation around that.
“The theory is that it’s going to drive greater consumer choice and, hopefully, more competition in the marketplace.”
While that hasn’t yet materialised in the UK – the first country to introduce open banking in 2018 – to quite the extent predicted, digital challengers such as Monzo, Starling and Revolut have quickly taken advantage of the footholds created by open banking and been followed by others, including RBS itself, which launched its mobile-only, standalone neobank Bó with a suite of personal financial management tools in November.
The increased innovation within the marketplace, driven by open banking, is something that everybody benefits from, says Broadbent.
“It gives us is an opportunity to deliver new and exciting customer propositions. While, historically, the bank had a very siloed approach to its data, we saw we could use what we had access to, to deliver a service offering for those customers,” says Broadbent. “Open banking allows us now to port different aspects of data, from all angles of a customer’s life and, by overlaying different data, we can start to deliver really value-added, hyper-personalisation for our customers. That’s really exciting.”
One considerable but wholly understandable factor holding back the pace of change so far is banking customers themselves, Broadbent says.
“We’ve probably spent the last decade telling customers that they need to protect their data, to not share their data and keep it safe. And now we’re saying ‘actually, there is an opportunity for you to move your data more freely’, obviously within a secured and regulated environment, but customers are rightly apprehensive about who they share their data with, and what authorisations they allow.
“So, it will be kind of a gently, gently approach. But, over time, as customers start to gain faith and trust in the different market participants, that ability to move freely will ultimately deliver great value for all our customers.
“The hope is also that it will drive greater collaboration, because different market participants will realise the benefits others bring, and through partnerships we’ll see some really exciting propositions. I guess, ultimately, it will be the consumer who decides, and that’s where we really need customers to be more active.”
That greater industry collaboration has already seen RBS strike a partnership with Mastercard, Motive Partners and EFM Asset Management to form Pollinate, a global merchant services company. Using a platform called Tyl, jointly developed with NatWest, Pollinate will work with banks around the world to provide retailers with services including payments, business management and marketing connectivity, with the aim of becoming a major player in the international payments space.
RBS has partnered, too, with Gemalto to develop the UK’s first fingerprint biometric contactless payment card, which removes the need for a transaction limit by providing an extra layer of security.
But Broadbent believes that’s just the start. The convergence of artificial intelligence (AI), big data, distributed ledger technologies (DLT) and quantum computing will leverage much more.
“Historically, banks have sat on literally mountains of data, and not really had the means to unlock the value that existed there, just because there is so much. With the advent of AI, we’re now getting to the point where we can start to harness the value of that data and use it to interpret for our customer the next actions they should take, predict things that may happen and alert a customer to them before they arise.
“The great thing about AI is it never sleeps, gets tired or has an off day, and it doesn’t miss things. So, in a 24/7 world, the ability to have AI constantly running, scanning and checking what the horizon looks like on behalf of that customer, is invaluable, and far superior to what a human would ever be able to do.”
Where does he see that AI driving us?
“Look at what’s happened over the last 10 years,” he says. “Effectively, we’ve gone from primarily physical banking, where people go into a branch for their banking, to predominantly digital banking. But, ultimately, it’s still something that customers have to do; they have to take positive action and log in. The truth is, nobody wants to do that. We’ve all got busy lives, we all want to focus on the things that really matter the most to us and moving money is not really one of those human-centric, value-added activities. So, I think, in the next 10 years, AI will give us the ability to move to invisible banking, where you say ‘look, you’re constantly checking the horizon for me. I trust you to go and make those decisions. Just go do it’.
“In the future banking will migrate to the background, enable people to live the lives they want to and not have to worry about money, because that’s all being taken care of.”
That paradigm shift in bank/customer relationships will be supported by advances in DLT and quantum computing, says Broadbent. Using unhackable DLT will allow individuals to have one transferable digital identity, removing the ‘constant pain’ of proving who they are to different organisations, while quantum computing ‘allows us to do an infinite amount of processing in a split second’.
“That brings great opportunities and incredible risks, because things like traditional encryption of PINs and passwords will almost become redundant when you’ve got a supercomputer that can hack them in a split second,” says Broadbent. “This will lead to greater reliance on other security measures, like biometrics including voice.
“This is still the earliest of stages for some of these technologies,” he adds.“But you know, we really can’t wait to see where the future goes.”