Have incumbents and challengers embraced aggregation since PSD2?
At first glance, not much has changed in the world of digital banking in the month following the implementation of PSD2. However, on closer inspection, there have been many significant, small steps indicating the changes to come.
Updates to aggregators, incumbent developments and the opening of APIs have been slow to roll out. This is not wholly unexpected as Open Banking was never going to happen overnight. Banks providing access to their APIs is, arguably, the biggest implication of Open Banking and we have begun to see banks providing access to developer portals, APIs and integrating their own aggregation features.
Extended deadlines and customer communications
Post PSD2, the focus of aggregator platforms is on the opening of APIs. Nine of the UK’s biggest banks are now required to provide AISPs (Account Information Service Providers) with access to their APIs. It is notable that incumbents have been particularly slow to embrace the Open Banking changes.
Five of the major incumbents have missed the January 13 deadline with Barclays, Bank of Ireland, RBS and HSBC having their deadlines extended six extra weeks and Santander’s Cater Allen being given a full extra year. Incumbents have also been slow to educate customers about Open Banking, this is evidenced by the very low public awareness surrounding the changes.
Challenger banks and aggregation platforms, on the other hand, have understandably taken a very different approach to educating customers through blogs and social media. The UK’s main banks are clearly not ready to launch their own aggregation products and so will not want to advertise platforms that will discourage customers from using their main banking apps.
Incumbents explore account aggregation
Open Banking is sure to have a huge impact on aggregators in 2018. The roll-out will take time, however, and it is still difficult to say which platforms will be embraced by consumers and how Open Banking will affect the development of current and new platforms. Indeed, many incumbents are planning on integrating their own aggregation platforms into the current apps or through new ones.
HSBC has become one of the first incumbents to officially announce its plans to move into the aggregation space through its ‘Joined-up banking’ app that is currently in its beta stage. However, we can expect many more similar announcements over the coming months (such as First Direct’s ‘Artha’ platform).
Several incumbents such as Barclays and Lloyds have introduced developer portals to their public sites that provide access to a limited range of APIs. While the APIs are currently restricted to branch locators and product catalogues, this clearly signals that the incumbents are putting the structure in place to allow AISPs access to a much wider range of APIs.
Challenger banks open their APIs
Challenger banks, on the other hand, have welcomed the changes and have been leading the way in terms of education and developments over the past month. This is likely to do with the opportunities that Open Banking provides for digital platforms that have already set up the infrastructure and technology to embrace the integration of third-parties’ applications and data.
Digital bank Monzo, for example, is well aware of the potential of Open Banking and so has released an interim API that provides AISPs with access to its customers’ account information, balances and transactions. New aggregator platform, Emma, became the first third-party provider to integrate the API having received its FCA banking license in early January.
While Monzo’s API is still limited, the digital bank is planning on launching an Open Banking hub with a full range of APIs available later this year. This is an important move for the challenger as rival digital banks Starling and Revolut already have extensive APIs available to developers.
It is important that digital-first platforms embrace the open nature of Open Banking if they want to stay relevant to their tech-savvy customers.
Different types of aggregation platforms
Over the next year, there will be a significant movement towards aggregation from both incumbents and challengers. There are three main ways that Mapa sees aggregation becoming part of consumers’ everyday lives.
Firstly, existing or upcoming independent platforms such as Yolt may become popular and implement PFM, savings tools and account management successfully enough to inspire users to use an aggregator as a replacement for their main banking app.
Secondly, these apps may integrate with incumbents through partnerships. Currently, Bud has partnered with First Direct to create an aggregation platform powered by First Direct, but not restricted to First Direct customers. Partnerships may also take the form of incumbent and challenger banks creating ‘marketplace’ type apps, seen in the likes of Starling Bank’s marketplace. Becoming available through app’s marketplaces will likely be the goal for apps such as Chip or Cleo that offer additional functionalities but not full aggregation.
Finally, incumbents may create their own apps or integrate aggregation functionalities within their current banking apps. HSBC has already signalled its intention to create its own aggregation platform ‘HSBC beta,’ and if successful, many incumbents may choose to simply update their existing apps to allow for additional account management and aggregation tools.
It is still too early to determine the form that the developments will take, but aggregation will almost certainly be one of the most significant developments in digital banking over the coming year. Incumbents opening their APIs will have a huge impact once consumers become aware of the changes and once there is significant trust in the security of the applications.
It is essential that providers work towards including aggregation into their banking apps or through creating partnerships if they want to keep their user base engaged and using their apps. It would be easy to say that PSD2 has had little impact so far, however, the updates that have happened over the past month are small yet significant, signalling a move to a more open, integrated and democratised banking landscape.
Mapa Research tracks the evolution of account aggregation propositions in our Monitor. For more information on how the user experience is changing as providers integrate APIs into their digital platforms, download a sample here or get in contact with us.