LIBERATING BANKING

Matt Cox, Head of Open Banking, and John Hutton, Director of Payments, at Nationwide, consider how the most transformational event in financial services will shape the society’s future

The Fintech Magazine: What are some of the benefits of Open Banking and the revised Payment Services Directive (PSD2) for institutions like Nationwide?

Matt Cox: This regulation is transformational. It’s going to require organisations to create an entirely new channel, based on application programming interface (API) technologies. In practical terms, that means if a member of Nationwide chooses to share their current account or credit card information, or enact payments via a separate third party, then they will be able to do that securely, and with trust in that service, across the whole industry.

Part of a broader set of trends, Open Banking will allow Nationwide to be a consumer of that data as well – we can access data on other people’s payment accounts and enact payments on behalf of our members, as a third party. We’re also there to give our members choice, and if they choose to share their data – and it’s their data after all – then that’s in their interests.

John Hutton: PSD2 has convinced well-regulated organisations that they have to change. They also have to ensure that transactions are made more secure at the same time as opening up the market through Open Banking.

You can see a future whereby you can bring in other industries, like pensions and insurance, through the use of API technology to be able to capitalise on a more open world construct, rather than just banking. However, at the moment in the UK, funding for Open Banking is sustained by the top nine banking institutions. As we progress, that funding model needs to change so that it becomes more equitable across the ecosystem.

TFM: What are we going to see from Nationwide in regards to customer experience, when it comes to data and incorporating third party companies?

Cox: As we move towards full PSD2 compliance in September 2019, we’ll see access to a wide range of payment accounts via secure APIs, and a radically different way to authorise sharing of that information with a third party. To bring that to life, we will go from redirecting someone to log in using internet banking credentials, to a touch-ID-based experience on a mobile.

We can already see propositions in the marketplace that allow our members to manage all of their money and finances in one place. And once you’ve got that data, you can start to do far more targeted and complex things with it to help them manage their money more effectively.

We’re also likely to see it transform the way mortgage applications run because you automatically know that somebody is receiving an income of a certain level. You can make better credit risk decisions because you can see what their previous history was and predict what their future payment history may be.

So, we are already, for example, in our remortgage journeys, choosing to partner with different organisations that can provide a salary check via an API and do really smart biometric ID and validation checks at the front part of that process.

We will see many, many more of these as we re-engineer our member journeys.

Hutton: Looking at the industry more broadly, I expect to see larger tech companies get into the payments space, in particular, not because they want to be a bank, but because they want to own the whole customer journey and the data that allows access to.

TFM: How do you see Open Banking shaping financial services and Nationwide in the future?

Cox: We’ve spent many decades being the single manufacturer and distributor of our products. Open data will start to see organisations operate in different spaces.

For Nationwide, my personal view is that we have a unique and differentiated position as a building society. The relationship is still the most important factor for us, and the investment we’re making in our technology is all designed to make sure that remains the key point of our proposition.

This article was published in The Fintech Finance Magazine: Issue #12, Page 46.