Open Banking

Open Banking is Thriving Around the World. Watch our Webinar to See Why.

As June was CDR (Consumer Data Right) month in Australia, it seemed only natural to host a webinar on open banking around the world and invite open banking experts from Australia, the UK, and the US, to share their unique viewpoints.

You can view this lively discussion on open banking here, and we’ll also share some of the key takeaways below.

What’s happening with open banking around the world? What lessons have been learned in various regions?

In the UK: Kat Cloud, EMEA Open Banking Compliance Principal Director at Envestnet | Yodlee mentioned there has been a big learning curve in the UK as the CMA (Competition and Markets Authority) issued a mandate to unlock financial data and allow third-party providers to access consumer-permissioned data via APIs. Prior to this order being issued in 2018, most data was accessed via screen scraping. With the CMA order, everything changed, and screen scraping was switched off as APIs became the primary method of accessing data.

As far as lessons learned, Kat says that the UK’s standardized approach to open banking accelerated the adoption of open banking and became a model for a lot of other countries. 

“In comparison to the EU, where there was no standardized approach, it’s a lot easier in the UK for a company to come and start building connections,” Kat said. “You can just come in and immediately, on day one, have connections to the nine largest banks in the UK.”

In addition, because open banking was regulatory driven, everything was explained to companies and details and guidance were provided by the regulator. This approach worked well for the UK, because financial institutions had to provide open banking data accessibility and the technical standards helped to enforce it. 

In the US: Jeff Schulte, US Open Banking Compliance Principal Director at Envestnet | Yodlee covered the US’ market-led approach to open banking. He outlined how a group of FinTech organizations representing data recipients, including Envestnet | Yodlee and some of the banks, came together in 2018 and formed a consortium called FDX (Financial Data Exchange). FDX built the first version of the FDX API specification and discussed how to eliminate screen scraping and enable full data coverage for the use cases that consumers need data for. 

Today, FDX has grown to over 250 member organizations, and has recently eclipsed 50 million active connected accounts. Many of the largest banks in the US have completely eliminated the use of credentials and have fully adopted open banking. The challenge, as Jeff sees it, is covering the entire long tail of consumer-permissioned endpoints for financial information, especially with 6,000+ banks in the US, credit card providers, lenders, investments in wealth firms, insurance providers, and multiple other sources of data.

However, Section 1033 rulemaking driven by the Consumer Financial Protection Bureau (CFPB), may accelerate the movement of open banking in the US and the adoption of open banking across the longer tail of data providers. This legislation generally requires financial service providers to make financial data concerning a consumer available to that consumer.

“Right now, it’s an open thing,” Jeff said. “But the regulation may give (organizations) a push to move forward, and it may establish some sort of time frame for which they’re required to have a consumer data right and ultimately provide that via an API or an open banking endpoint versus the current methods.”

In Australia: Dr. John Harrison, A/NZ Senior Product Manager of Open Banking, Envestnet | Yodlee discussed how Australia adopted a regulatory approach similar to the UK’s to achieve policy goals. Australia has gone even further though, and extended open banking and the Consumer Data Right to other sectors, too. While data sharing began with banking account data in 2020, today, open energy is going live, with consumer-permissioned data being used to power energy-related use cases. “Really, the vision is an economy-wide data sharing regime, and not just open banking,” John said.

How is open banking transitioning into open finance?

In Australia: The consumer-permissioned sharing of non-bank lending data is next on Australia’s list. Australia plans to expand open finance to facilitate data sharing in insurance, superannuation, telecommunications, and more. 

The consumer consent process for energy in Australia is very much the same as open banking, with similar policy rails, technology rails, security profiles, accreditation processes, and other controls. John mentioned that this standardized process will make it possible to leverage and combine data related to energy, healthcare, and other sectors for a number of open finance use cases. All the hard work being done for open banking is easily transferrable to other sectors.

In the UK: A lot of FinTech banks have offered to meet all the requirements that the CMA outlined for the UK’s largest nine banks (CMA9). Moving forward, the UK’s regulator will be requiring every single bank to provide access to authorized third party providers via an API. Kat explained how this API requirement is opening the doors for seamless integration of open finance.

In the US: The US has been focused on open finance from the beginning. Finance vehicles, like investment and loans and insurance, are already covered in FDX’s specification. Financial institutions that are implementing open banking are covering all of their products and fully eliminating financial account credentials. Jeff says that the regulation coming down the pipeline will hopefully remove some of the barriers to consumer-permissioned data sharing.

How is Envestnet | Yodlee supporting open banking?

At Envestnet | Yodlee, we support local and global access to open banking around the world. In the UK, we’re an authorized registered account information service provider (AISP) who can help you leverage open banking, and access connections to consumer-permissioned data.

In Australia, we connect to different banking institutions in the same way as we do in the UK, with access to data from both open banking regulated and unregulated providers. As an accredited data recipient (ADR), we allow customers to access financial data under a number of regulatory models, including the CDR Representative.

In the US, we’re focused on working with data providers participating in open banking. We continue to pursue data access agreements with large and small financial institutions and wealth firms for the seamless sharing of consumer-permissioned data, and enabling our customers to leverage these connections. 

To hear more details about how open banking and open finance is working in various countries, 
watch our on-demand webinar on open banking around the world.