Over the past months, C Minds has enabled many conversations for the Latin American ecosystem to learn about open banking from the perspective of individuals who have had an important hand in creating standards for their respective countries. During our latest Keep Up by C Minds Finance Innovation Series talk, interested parties had the opportunity to learn about open banking from an implementer’s point of view. On June 27th, Hetal Popat, Programme Director and Head, Open Banking and PSD2 at HSBC UK, detailed the bank’s road to adopting the UK Open Banking Standard.
HSBC ‘MIDWAY THROUGH THE JOURNEY’ TO OPEN BANKING IMPLEMENTATION
HSBC is currently ‘midway through the journey” to put into place a suite of open banking services, Hetal explained. The bank has a team of 200 people working on what is its largest undertaking; open banking is the single largest program that HSBC has in place. The bank has implemented product references and branch data, subsequently leaning into an open data component that has been steadily gaining traction. This component has encouraged price comparison sites and other intermediaries to consider using APIs instead of screen scraping. HSBC will also begin to share service quality data through APIs in August 2018, a move that will tell customers how the bank is performing on price and quality of online, mobile, telephone, and branch services.
Presently, HSBC is working with 19 active third parties and has its eyes set on building upon interest from the more than 160 providers who wish to benefit from open banking to improve their value offering. This includes FinTechs, which Hetal urges to stand out and offer solutions to banks.
Recent implementations, components, and collaborations have led to the beginnings of specific API-based use cases, such as HSBC Connected Money. Connected Money is a personal financial management tool that allows its users to categorize, understand, and forecast their spending within accounts from various banks. In the future, the bank’s goal is to enable the ability to transfer money back and forth between different accounts.
CHALLENGES ALONG THE PATH - AND RECOMMENDATIONS FOR MEXICO
1 - Start working on an open banking adoption blueprint
As the team has worked to create a product set to benefit customers and encourage third parties to engage in open banking, there have been some challenges along the way. HSBC is not unique in this position, as 6 of the UK’s 9 banks required to adopt the Open Banking Standard (called the CMA9) failed to meet the adoption deadline set by the Competition and Markets Authority (CMA), including HSBC. Hetal urges Mexican banks, and all financial institutions that will fall under the scope of the Mexican standard, to begin drafting a blueprint for open banking adoption, even though the secondary regulations are not yet available. This will allow a much faster uptake and might have had a positive impact on helping UK banks meet the deadlines set by the CMA.
2 - Leave enough time for live-testing
Another issue occurred when HSBC began the process of integrating their services. The bank collaborated with 8 other financial institutions and 11 third parties for a 3 month live-test process. Hetal iterated that the process was the most difficult thing that HSBC has ever done, as they found low level bugs on the third party or bank’s end. He strongly suggested that Mexico’s banks allow sufficient time for live testing once the system is built and ready.
3 - Spark industry-wide conversations about the future of screen scraping
Lastly, Hetal acknowledged third party provider’s reluctance to invest in adopting APIs. As Third Party Providers (TPPs) need access to a variety of financial information to provide their services, and only current payment accounts are accessible via APIs, there is insufficient incentives to adopt this technology, despite its proven benefits in terms of reliability and efficiency. Because of the restricted scope of the standard, TPPS may still need to resort to screen scraping to access certain information needed to provide their solution. In Mexico, however, because the scope of the planned open banking standard is expected to be much wider, covering all financial services, this should represent much less of a challenge.
AN EXCITING FUTURE
Overall, Hetal is very positive about HSBC’s open banking implementation plan and the future of APIs. The bank estimates that over 1 million customers will be using their Connected Money platform by the end of 2018. Hetal also applauded Mexico’s efforts, appreciating the country’s more broad and less restrictive approach.
C Minds looks forward to being a key player in the discussion and bringing together individuals from the banking, governmental, and Fintech sectors to ensure a smooth and inclusive implementation process that will benefit all of Mexico.
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