What’s holding open banking back?

https://sifted.eu/articles/open-banking-back-nordigen-api/

by JJKK1998 • 5 years ago

40 64 5 years ago

sifted.eu

jake_the_human3• 5 years ago

No killer use case

Yah this

mrsawyerpt• 5 years ago

The right mind needs to come up with the right use case application. After that... Boom!

ensignavenger• 5 years ago

I have lots of ideas... but no one has an open API I can use.

tata71• 5 years ago

Loopring

or, just Ethereum, depending on what your concept is.

dbbk5• 5 years ago

This is an article about Open Banking. It's all about APIs.

TuringNYC• 5 years ago

This article seems to miss the main reason - because data sharing would be a threat to incumbents' market share, and so they obviously do not wish to partake.

Further, the incumbents are few in number, and have reg-capture via revolving doors.

wsc981• 5 years ago

Banks also don't want to make it any easier for customers to switch to other banks.

AndrewDucker2• 5 years ago

Works fine in the UK, where all banks have to support open standards and you can use a third party app too analyse your transactions.

https://www.moneydashboard.com/ is the one I use, but there are others.

Vespasian• 5 years ago

Taking off in Germany as well. Slowly because the law does mandate an API but doesn't specify any technical details

Also because of a complicated authentication and registration system (with the regulator)

But the banks finally did something after they were ordered to do so. They were quite hesitant before because it weakens their control over the customers finances.

bennyp101• 5 years ago

I've noticed that a lot of the actual Bank apps now let you connect to other banks - so you can see everything in one app (I guess to try and make you stay in HSBC app for instance, rather than going and opening Halifax and Monzo - although if they all offer it I don't see the need...)

Nextgrid2• 5 years ago

The data quality you get is absolutely terrible. For accounting/budgeting solutions where you have to map a single entity on your side with the transaction on the bank's side there's a ton of work that needs to be done in the background to fuzzy-match bank TXs (which can change retroactively, invalidating any unique match per descriptor or ID) to your own entity.

I guess I should be grateful that I got a year's worth of consulting $$$ thanks to the banks' incompetence but this should really be a solved problem especially in 2021. The regulator should mandate a spec and do frequent audits for compliance with said spec, and IDs (or other data) changing retroactively should be an immediate fail. The other problem is that there is no way that I know of to get test accounts, you have to use real accounts (with each bank) if you want to make sure.

pjc50• 5 years ago

This article is about the UK. It seems to be .. not as good as it could be.

tikkabhuna• 5 years ago

My experience has greatly improved over the past few years. I use Monzo. I used to use Yolt to aggregate a couple of bank accounts and credit cards but Monzo offers that as part of their Monzo Plus accounts. It gives me a consolidated view of my spending.

I'm not really sure what else I'd want from Open Banking.

AndrewDucker2• 5 years ago

Money Dashboard (and Yolt) allow you to categorise your spending. My own bank's app doesn't do that. So until it does...

banannaise3• 5 years ago

"No killer use case"

No, it's that the killer use case doesn't generate revenue for banks. Efficient transfer of money reduces a bunch of revenue streams (wire transfers, overdraft, late fees, check cashing...) without creating a new one. Banks would save costs, but it hurts their bottom line more.

We are unlikely to implement anything that helps poor people and reduces revenue for megacorps.

Nextgrid2• 5 years ago

Not convinced all about control. In the UK bank transfers are already free and easy to do through the online banking UI so the bank doesn't lose anything. I think it's more that the banks have no incentive to participate in this system and do the bare minimum they can get away with, but I doubt there is some "anti-open-banking" sentiment as opposed to just apathy.

The whole payments aspect of Open Banking seems like an attempt by VC-backed companies to become gatekeepers of bank transfers for no good reason nor benefit to the end customer. They are trying to solve a problem that's inherently not there (in the UK bank transfers are already super easy to do and settle immediately) but they pretend like there is one.

pavlov• 5 years ago

The EU example has shown that you can simply require banks to adopt customer-friendly interoperability and low fees.

If it’s possible in a union of 27 nations with originally very disparate banking systems, it’s certainly possible in America. There’s just no political will.

banannaise3• 5 years ago

There's no political will because it helps poor people and reduces revenue for megacorps. Guess who "political will" comes from?

mbesto• 5 years ago

The EU example has shown that you can simply require banks

Through regulation sure, but that wasn't the parent's point. Without regulation there is virtually no incentive for banks to play ball.

RandomLensman• 5 years ago

Certainly in the EU so far the "killer use case" for PSD2 things hasn't happened/it has not lived up to its hype. So beyond needing regulation to make things happen, there might also be a lack of use cases for most people.

jeroenhd• 5 years ago

Honestly, I like my current bank's app so much that I don't even really need or want some kind of quick money VC to get between me and my bank. Money transfers are done in seconds, almost every place allows me to use contactless payment from my bank app and there's no data being fed to Google or Apple. I wish I could use my checking account app to manage my savings account (on another bank) but I can live with the inconvenience of having a second, slightly inferior app thst I barely use anyway.

I think the answer to "what's holding banking back" is often "whatever the EU is doing with banking". The question often gets asked by people in countries where the biggest banks are terrible.

The problem is not the concept of banking, the centralization or overly broad government regulations. The problem is that some (big) banks don't give a fuck about their users' experience, especially when transferring money between different banks.

This is how PayPal got off the ground. Any of these billion dollar institutions could've built PayPal, or competed it to death when it started to become popular, but they chose not to.

agumonkey• 5 years ago

It's a strange era where people can communicate and have access to immense amount of means (dev/machines) yet nothing has emerged yet.

Maybe there's some hidden complexity that banks solve and small open banking is not capable of yet. Maybe people just want to trust big corps and even if you provide similar services they won't flock to you as much ?

lcall• 5 years ago

Agreed. I'm guessing is the "we can be trusted" service that comes only with longevity and size, and a track record that shows ability to protect data and manage things in the customer's interest, which not many organizations have been able to maintain. Trust is earned by behavior over time, and easily lost.

More rambling: I am far from an expert on the current details, but I think that when it comes to taking care of one's savings, and the data closely tied to it, that can be used for identity theft, where we might perceive a worsening track record in institutions in general), trust is a big deal. Trust is given subconsciously sometimes, and ideally earned by things like: behavior over time (not promotions), and institutional size and inertia (why Wells Fargo still has customers, I guess), and/or observed behavior patterns relative to current events, proper staffing (competence, honesty, Golden Rule), and other indicators that suggest it is likely to remain so, to the extent of being a mental shorthand for "It's probably stupid (or not) to put my money there and let them take care of things that are really important to me".

Will Rogers I think said, and to varying degrees many have thought similarly, something like: "I'm more interested in the return of my money, than the return on my money." And data, now?

maybe there have always been more of people willing to manage others' money, than there is of confidence in trying someone new like a revolving door of trust without track record. And data closely tied to money -- same thing?

(various clarifying/fixing edits)

browningstreet• 5 years ago

Most banks are running on older core banking technologies that are overwhelmingly batch driven. Moving to real time transactions isn’t a minor shift for enterprises that have hundreds or thousands of applications, which would be a mix of in-house, COTS and SaaS solutions.

dbbk5• 5 years ago

I mean, I feel like even the most basic execution of Open Banking (aggregated view of your money across all accounts) is a killer use case. People like to know how much money they have.

egamirorrim• 5 years ago

also a user of moneyhub and loving it

as a developer I feel like it's stifled by the entry requirements to let your app connect to a bank. You have to sign-up for weeks of paperwork shite to be allowed to open banking connect to one measly bank, or use an expensive intermediary. Make it easy to connect and watch the apps surge to fill the space.

Having to reconnect all my accounts every 90 days as some kind of safety-measure-by-committee is frustrating as hell, every time I have to do it I want to cry. At least make it a year or let me manage my own connected accounts like a grown up.

that_guy_iain• 5 years ago

One simple thing, there is no reason for banks to remove their vendor lock-in.

propter_hoc• 5 years ago

Also, committee paralysis and scope creep. In Canada, they've been debating for ages about extending the scope, like whether they should mandate an API for creating bank instructions rather than just reading bank data. Evidently, the complexity of that is a lot harder than just a data read api.

davidhyde• 5 years ago

“ Mesters says it’s good for people to be cautious, but open banking is really just a new way to share data. He adds open banking can only work with consent and APIs are safer than sharing banking passwords. ”

This is such a weak reason because it’s completely ridiculous to share your banking password with anyone in the first place.

You only need to look at mobile app stores to see that it is very common for apps to ask for more privileges than they actually need. Sometimes this is even justified to “improve” the customer experience. Why would open banking be any different? Imagine you had to grant access to your entire banking statement history in order to purchase a flight. That’s just forced “consent” and we do it every time we visit a web page.

Nobody in open banking appears to be able to adequately answer the following question: “What is preventing you from taking a copy of my data and storing it for later use?”

No, in the golden age of mass automated surveillance advertising, open banking is for trusting suckers I’m afraid.

jake_the_human3• 5 years ago

In the EU you don't need to share your password

t-3• 5 years ago

Does anywhere require you to share your password? That just seems... idiotic and contrary to all sense. I've certainly never had to, in fact my bank (like every other password-protected site) warns not to share passwords with anyone.

JohnFen• 5 years ago

I'm in the US and have never needed to share a password.

konschubert• 5 years ago

It seems you are not yet familiar with the insanity of "Sofortüberweisung"...

johanneskanybal• 5 years ago

banks of course. It's in their interest to provide the minimum required by law. Limited access to the interesting bits, worst-in-class api's, inability to allow someone else access to your data that would be required for most use cases etc.

sergiomattei3• 5 years ago

This is what cryptocurrency is: an IP layer for a new digital economy, with open banking by default.

I felt the pain of the banking industry’s stagnation recently. My grandparents asked me to take a check for them to the local bank branch to do an intra-bank account transfer. I thought to myself: “bank branch? no way, I’ll just log into the bank website and transfer between accounts”. To my dismay and surprise, I couldn’t even do that.

In the 21st century... Where supercomputers are in our pockets... I couldn’t transfer a couple thousand bucks between accounts without going to a bank branch. For the market dominant bank in PR. Had they had Bitcoin, I could’ve done this in seconds, without them leaving the house.

Oh, and don’t get me started on the embarrassment that is ACH. In 2021 I can’t send money without it taking days to settle.

The banking industry needs to step up with open protocols, interoperability and digital money. Hopefully DeFi lights this fire.

sildur3• 5 years ago

In Europe, we can transfer money between any two bank accounts on any European country, and the transfer must complete in less than 90 seconds (from an account in bank A, in Spain to another account in bank B, in Italy, for example). And frequently those transfers are also free.

It's not a banking industry problem. It's an obsolete American banking industry problem.

sergiomattei3• 5 years ago

It’s a banking industry problem. The government shouldn’t have to step in: the "free market" should be able to innovate, just like DeFi is doing now out of necessity.

Semaphor• 5 years ago

and the transfer must complete in less than 90 seconds […a]nd frequently those transfers are also free.

From what I hear in Germany, instant transfers always cost extra unless your bank account has a high fee. But that might just be us.

randsp• 5 years ago

Can we? My experience is the opposite, I live in Spain and fast transfers are definitely not free and not generally available in all banks. The regular case is transfers take about 24-48 hours to be settled between banks

agentdrtran• 5 years ago

I can't wait to get all my money stolen with this new and exciting world.

trollied• 5 years ago

Works really well in the UK. Using my Monzo (current account) app, I have added my building society account & credit card accounts & can view the balances and transactions of the various accounts all in the same app.

iudqnolq2• 5 years ago

For context this means essentially anytime you're shown what looks like an oauth login screen with your bank's logo, and your bank is in the US. (There are a few competitors to plaid, but they use essentially the same methods)

Edit: s/play it/plaid

dbbk5• 5 years ago

I don't understand what you're saying?

2Gkashmiri• 5 years ago

can you tell me what is the delta of lending to deposits interest rates in banks in your country? in india, banks lend to businesses at around 12-17% interest rate while at the same time, "fixed time deposits" are given 3-5% interest rate. Savings get 2-3% interest rate.

gerjomarty• 5 years ago

I use open banking regularly, the real killer feature I've found is the ability to view all of my accounts together in one place, and very easily move money between them. (Yolt did this for free, but it's shutting down. Other apps also have this feature.)

Yes, you could absolutely do this with each individual bank's app, but there's a little more friction there when you have to manually add the account number and sort code of your other account as a payee, etc. These payment apps made the process very simple without any extra cost.

One thing that I think will really turn people off open banking came up in a questionnaire one of my account's providers sent out. They wanted my opinion on using open banking as another set of data points for them to decide whether or not to approve applications for new accounts.

If it'll stop me needing to print out a years worth of bank statements to apply for a mortgage, great, but I don't think it's very far from a consumer thinking "open banking is the reason I was rejected for this account, why should I ever give anyone access to this."

slowmovintarget• 5 years ago

I would think universal identity management (yikes) would hold back "open banking" given the article's definition of open banking to mean standardized financial data exchange.

What’s holding open banking back?

Related Stories