Open Banking Expo Unplugged: Is this the year of hyper-growth in Open Banking Payments?

The latest episode on the Payments Podcast is from a recent Open Banking Expo conversation. Featuring Ed Adshead-Grant from Bottomline and Simon Lyons from Open Banking, hosted by Adam Cox from Open Banking Expo.

This episode focuses on the growth of Open Banking in the year ahead, highlighting progress made in both the ecosystem and broader adoption levels. Is this the year of hyper-growth in Open Banking Payments?

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Female: The Payments Podcast from Bottomline Technologies.

Presenter: Open banking is fast becoming ingrained in the life of the consumer, so how long until the same happens in the business world? We have a very special episode on today's Payments Podcast brought to you initially by Open Banking Expo Unplugged. Adam Cox, the director of the event, welcomes Bottomline’s very own Ed Adshead-Grant and Simon Lyons of the Open Banking Implementation Entity to discuss the future of open banking payments, headlines from recent consultations and the future of adoption levels for business.

Intro: Welcome to Open Banking Expo Unplugged, bringing you the brightest minds in open banking, open finance and beyond.

Adam: Hi, everyone, and welcome to the first episode in 2021 of Open Banking Expo Unplugged. I'm delighted to welcome you to episode 3 and, as a reminder, each podcast is available to download directly from Spotify and iTunes or you can stream directly from OpenBankingExpo.com. Now, it has been a busy start to the year, not least with the inauguration of the 46th President of the United States. If Mr Biden is listening, then, we wish him well in his term in office. Now, onto the serious stuff. So, banking licence applications aplenty, showcasing some serious adoption numbers and strategic market acquisition this year means 2021 started with a bang. Today, I'm joined by Simon Lyons of the Open Banking Implementation Entity. Good morning, Simon.

Simon: Good morning, Adam. How are you?

Adam: Very well, thank you. Thanks for joining us. No problem. It's a pleasure to be here.

Simon: I'm also delighted to be joined this morning by at Ed Adshead-Grant from our partner Bottomline. Good morning, Ed.

Ed: Good morning, Adam. Hi. Yes, I here. Hi, Simon.

Simon: Morning, Ed.

Adam: Good stuff. Perfect. Well, thanks for joining us, gents, much appreciated. So, over the next 30 minutes or so, we'll be tucking into the future of open bank payments, the headlines from the recent open finance consultation from the FCA and future adoption levels as we shift the narrative towards open banking payments and open finance. Ed, if I may, I'm going to kick things off with yourself and pass the baton over to you. Perhaps if you can just give us a brief introduction about yourself and your role at Bottomline and that would be good.

Ed: Thanks, Adam. Yes. So, I’m Ed Adshead-Grant. I run a business development function at Bottomline, where, basically, we look into the 12-month-plus horizon to see what's coming down the line. We liaise with the industry, see what the next strategic bets are for the organisation to help out in the payments industry and where our investments will go to help solve, you know, future pain problems for our customers to help them pay and get paid in the business sector in particular.

Adam: Perfect. So, well-placed to join the conversation today on all the themes I mentioned above. So, great, thanks for that, Ed. Simon, I'll put the ball in your court. For those that don't know you, a quick intro into your, kind of, day-to-day activity at open banking would be good also.

Simon: Hello, I'm Simon Lyons. My title is Head of Ecosystem Engagement. We've all got a long title. My job is to grow the ecosystem, to get banks and to get FinTechs to join it, which is a privilege. The other piece is to do quite a lot of industry awareness. So, I have a very, very lucky seat. I'm the person that gets there and gets privileged enough to sit in front of industries that want to use it and find out the way they do it. It's something that is both an education and a pleasure every day.

Adam: Great stuff. Thanks, Simon. So, let's get cracking then and let's set the scene slightly. Ed, I'm going to jump back to you, if that's okay. Just to look at, I guess, the role that a fintech like Bottomline have in the fintech ecosystem and, obviously, what it means for trying to accelerate adoption in open banking.

Ed: Yes. Thanks, Adam. Our role in a word is, really, enablement. So, we're looking to help our customers, be them corporates or banks, to find an easy way to participate in all the innovation that's coming down the line. So, we've got our roadmaps, our investments and we're looking to support any of our customers that might need bandwidth, extra bandwidth to do things, they may need some particular knowledge sets, they may need funding and support. So, at times, like, an innovation arm and an enablement arm, as a registered third-party provider ourselves, are very close to the open banking world to get use cases running and bring open banking to the market in whatever shape or form it arrives.

0:05:04

Adam: Great stuff. Thanks for that, Ed. I guess, similarly, then, Simon, maybe you can share some key developments on everything at open banking and perhaps the strategy for 2021 through your eyes.

Simon: I think the big change, really, Adam, that you've seen is we've become more mainstream and, by that, not so much that people go ask for open banking, there are certain shoots and growths of people using open banking and actually not knowing what it is. It's becoming an easier method of making payments. We can look at the Captain Tom example, we can look certainly look at lending examples where information is faster. As soon as people see the benefits of open banking and you start getting those green shoots, what you end up with is that greenfield site that grows.

Now, for me, 2020 was a great year of creating the start points for these, where people, sort of, considered it to be the norm. The only way you ever find out that technology doesn't work is when you turn it off. You very rarely find that people say it's very good. When we've seen interruption in service, sometimes, we've had people say, “My God, I need this,” and I think that's a very powerful statement. More to talk about later on, I think this year is very exciting, but we are seeing open banking become the norm for certain processes and that's very, very important for me.

Adam: Good stuff. Thanks, Simon. That, kind of, leads us nicely onto our initial question, then. This year, open banking became 3 years old this month and, each year, it's well-documented, both consumer and trade publications, that this is the year for open banking acceleration. I guess for those in the inner circles, it really has been and, actually, COVID has helped push that narrative on and helps deliver some fantastic use cases. I think, you know, we've seen huge digital adoption within the financial services more broadly. I think those levels will probably standardise as we start to come out of it and go into 2022.

So, before we jump into this year, then, and, Ed, I’ll come to you first, in your opinion, what were the key milestones for the industry last year? Then, perhaps you can pass the baton over to Simon once you're done.

Ed: Yes. I think, as I look back, it's really about open banking becoming more established. So, to me, there weren’t any really big bank moments. We could probably call out on the UK open banking, the 2 million user mark that was published. That really just proved out that the user journeys have improved, that banks have brought in various propositions and other players have started to play with it, and solve pain points and make it stick. So, we can see some trajectory of growth, that 2 million sticks in my mind. At a Bottomline level, I know that we've had some significant wins on first contracts, first of a type that are still in the delivery pipe. So, that's really exciting to see propositions actually land, whether they're white-labelled ones with banks or direct with corporates.

So, those early shoots that Simon mentioned are definitely there. That's really open banking in the UK. If we went wider, even this week, actually, even Saudi Arabia, we were involved with a trade mission there, they've just announced their open banking plans. So, although we're focused on more the UK today, it's great to see the movement of open banking coming through with significant milestones on a global level. That really helps the whole momentum and energy behind this.

Adam: Yes, great. Thanks, Ed. I'm sure, Simon, there’s probably quite a bit you agree with there, but were there any key milestones for you last year that really stick out and probably set a foundation as we then move into 2021?

Simon: Well, I think you've got to look at the cycle it takes of people's changing behaviours. If you look at anything that has changed in banking over the years, look at PSR1 or PSD1, I’m old enough for that, it took, sort of, public sector and local authority to use faster payments before they became mainstream, look at postal orders. What we had last year was, really, I think, a lot of the prep work to be able to set us on a launchpad for this year. We've got to split what we've got into three areas, which is, sort of, the banks that provide the APIs, we've got the corporates that go and use it and then we've got the TPPs and the fintech that will deliver it. I saw something last year, which I think is one of the most important statements. We saw a lot of the TPPs, and I’d be interested to see if Ed agrees with this, the FinTechs that we have within the open banking world, refining their propositions.

So, you know, we're only three-years-old, we've got to do it and we saw people refining it and reacting to industry need. We saw them looking at, you know, the decoupled way of sending a payment. We looked at the links and maybe not as much of the app presence, maybe not as much of the brand presence, because what suddenly was realised there was that this is to be a mainstream solution and it is, be that to provide data from a bank account or be that to provide payment facilities, but much more importantly, I believe that the fintech population understood the aggregation of data.

I think if you gave one big thing that came out of 2020, and we'll talk more about the more tangible events, the ones that will be measurable, but the, sort of, emotional one that changed the psyche was people understood that open banking, at the bottom, at the heart, is about aggregation. It's about embedding it within other processes. It's about understanding how CRM works, understanding how a corporate needs it and then those indirect benefits that come back down to the consumer. The perfect example is Captain Tom. If you go on the JustGiving site today, you will see that they have got that payment method on there. It doesn't matter who provides it, that's, sort of, irrelevant, but that psyche change from a mainline one was a big deal and it's a perfect example of aggregation. Long answer to say that the big legwork was done there to deliver what we need.

0:10:36

Adam: Ed, I think Simon asked, I'm sure you probably agree with that.

Ed: Yes. It's all about access to data and the aggregator model’s key. We have something we call the universal aggregator that's core to our business solutions set that people can plug into. So, bringing that real-time data to the user for decision-making and, next year, as we move on, I’m very excited about the actual payment that flows. So, you know, first stage, 2020, I can see a lot of the data work, the AISP, to use the jargon, work coming through, but, next year, I think it’s the PISP that will come through much stronger, which is very exciting.

Simon: Yes.

Adam: Yes. No, I think… sorry, go on, Simon.

Simon: No, just hear, hear. I violently agree with that, I really do.

Adam: Good stuff.

Simon: I mean, I think you've got you've got to qualify something, Adam, as well, which I think is so important as well, you know, Ed’s seat in Bottomline and my seat, where we sit in open banking, Ed’s in the flow of all these things and you've got to work out which verticals you're most important for, which use cases work. There are some you can't win with open banking. My biggest disappointment with open banking that frustrates me is when people look at it as a broad-blanket spectrum solution. It's not, it matches certain verticals and certain workflows. I think what Ed just said then about aggregation, you could compare it to SWIFT, to SWIFT GPI, to the corporate aggregation. We're getting that down at the retail and the SME level now and it's so important, it really is. Sorry I talk too much.

Adam: No, that’s good to know. Appreciate that. It, kind of, flows nicely into our next couple of questions or conversation points here, when we look at what the key differences are as we go into next year. You just mentioned the whole payments piece there, Ed. Then, we'll move onto the growth in adoption, both from a consumer and a business perspective. So, Ed, you know, we've seen and we continue to see stats circulating, you know, the 300 TTPs or third-party providers, for the long statement and around 6 billion API calls that have come to market. As we know, it's not all about the ping, ping, ping, but, you know, the success of those API calls is the critical part.

So, in a post-COVID world, arguably, and this is something that open banking experts, kind of, set out to do over the last few years, open banking adoption, it’s probably more important now than ever has been. So, what is different, then, for 2021, in your opinion?

Ed: I think the difference this year, and funnily enough, you say ping, ping, ping, and I go back to your expo, Adam, earlier this year, and listening to one of the speakers, I think it was Yolt, who gave out the figures that less than 0.5% of these ping, ping, pings are actually payment initiation APIs. So, back to those, kind of, foundation routes last year, people are getting used to data flows, real-time access to more information. The exciting bit is when the commercial reality of payments flowing starts. Some of our early contracts that we’ve just signed, we've seen, for example, the cost savings of moving off card rails over to open banking payments, more than 50% reduction in their annual fees for payment processing. I mean, that's significant numbers just as an opening business case before you get into customer journeys, and quicker reconciliation and other benefits.

So, I think the difference this year is it's proven. You don't buy open banking, no-one buys open banking. It's the proposition and pain points that get solved. So, it has proven to be a source of good that's in the industry. Now, how do we apply it and in particular to payments? I would expect, this year, the difference is we'll see a lot more payment-centric work that comes through and, you know, delighted to be in that space, so that we can bring this use case forward.

Adam: Good stuff. Thanks, Ed. Simon, just, I guess, an interesting one, you mentioned your role with the OBIE or Open Banking and in terms of growing that ecosystem. Let's look at, I guess, the growth, then, in terms of the adoption side, both from a customer and a business perspective. I'm sure you've got a great opinion on what you believe the catalyst will be, not only this year, but, obviously, looking at 2022 and beyond.

0:14:57

Simon: Yes, I am quite biased, so apologies. I think if you forget open banking and look at technology, we look at precedent and if we always look for our friends or people that we trust using something for us to go and adopt it, you can look at every piece of technology adoption across the cycle, from the motor vehicle with the red flag in front of it, you know, car crashes, deaths are higher on the roads in 1910 than they are now and we've got 140 times the people on the roads. It's very important to understand it.

We've got the government about to start using open banking on the front line in the next 4 weeks and 4 weeks is the maximum. The 4 products that the HMRC will publish are their four biggest products and there will be a button on that website that says, “Pay by bank.” Now, that, in itself, is great and there'll be a percentage of the payments that go through it, but there's a much more important message under there, that it's a very efficient method for government, because, obviously, it does remove the constriction of the cards flow, but, more importantly, it means that banks that haven't got that open banking capability now will have customers that can't use it. Maybe there will be some protestation or there will be some inclusion, because once we start doing things like putting fiscal payments and we open the tin a great deal wider…

We're doing a bit of work with the government at the moment on salaries and a little bit of work on submissions and that would include, sort of, our accountancy partners for small businesses. So, once again, we get to the aggregation point that the payment is not disparate from the accountancy platform or from the business, but then we've also got the data isn't disparate either, so filling your VAT return and making payment, these are all things that are happening now.

What I think we get there is I go back to the precedent argument and, as in all things in life, in technology, it's never a slow-growth curve, it's always huge bell curves, where things happen in big jumps. I personally think that by about July or August this year or maybe just after the summer break, because I think people need a holiday this year, after COVID, the spike for open banking adoption across the payments and the aggregation of the data will be high.

I think that's led by governments because the precedent of government is highly trusted, but there are so many other industries that are adopting open banking for such varied uses and if I could give you a couple of examples, the utility industry is quite remarkable. So, if I go through the electricity industry and you look at what they're doing, look at [ ___ 0:17:09] meters, look at the pre-paid meters, look at the benefits there would be there for people to top up instantly, instead of having to use a card with the chargeback, because if you want to pay for electricity, it's in arrears, you've got to go and use it. There are lots and lots of examples that start it. The precedent starts with public sector and starts with fiscal uses and then I believe the growth comes from there, but this is the year where the payments will increase and they'll be aggregated with the data and with the balances.

Adam: Great stuff. Thanks. I mean, I have a spin-off question off that. Ed, did you have anything to add to that before I ask my spin-off?

Ed: Just a reflection that I think we're really well-placed. So, just take this example. We've got the open banking and Simon speaking today centrally on the dashboard, looking at the UK industry, driving the government adoption, which I agree is a fantastic flag in the sand. Then, you've got these 300 TPPs, as you’ve mentioned, you know, we’re one of 300. So, that innovation, energy, money, interest, together with some, you know, central guidance and then the buying customers that have these pain points we know have been around for many, many years, it just smells right. Perhaps, just looking at the VC money coming in still, the PE money, it’s right to a lot of people, looking at the logic. So, hugely excited and this payment bit, I think is absolutely the key for next year.

Adam: Yes. You’ve, kind of, given me another question, actually. Simon, I'll direct this one back to you. We’ve spoken about those 300 TPPs. Ed just made a very valid point about the money still coming into market via VCs. In your role, then, Simon, in terms of growing that ecosystem, you know, what are your expectations in new FinTechs coming to market and making a play for this space? Obviously, COVID has had an impact across many sectors and many industries. I just wonder, you know, will you still see, kind of, that curve of FinTechs coming into market and the amount of investment that… what are your thoughts on the amount of investment coming into the market off the back of 2020 and, ultimately, what is still going to be a rocky year for many businesses?

Simon: Well, I mean, Adam, I get 10 emails a week or 5 phone calls a week from VCs saying, “Who do you know we should invest in?” Now, that's not my job, I operate under competition law, but the proof in the pudding is in the eating. On the phone with us today is Ed from Bottomline. Bottomline is a payment provider in the UK that, if there was a problem with them, there’s a systemic risk, they would change the entire profile, the payments landscape. So, if you want a statement about how attractive the open banking ecosystem is, you've got Bottomline. What are you, a £2.2 billion market cap, and you control about, what, 60% of the UK's direct debit volumes? They’re a TPP. Now, that's a powerful statement. So, what we're proving there is that the demand is there.

Then, we look across the market, as well. We've got AJ Bell wealth managing the ecosystem, as well as many, many others. I'm not picking on any particular names. The flow of money, I think, is a much bigger issue than just being FinTechs, while interest rates are where they are and where the yield on another market, other investments will be there. There are a lot of family funds and a lot of family [offices 0:20:16] looking for a return that's better than 2%, so they're taking some cautious views. I think are more established fintech or TPP, to get them into profit after 2 years is a great deal better chance of getting investment. However, the market is brand new. We're only 3 years in.

To be honest, to the point before about where TPPs are refining their propositions, you know, look at direct debits as a great use case for open banking and direct debits, and there are a lot of direct debits about at the moment, they're not going anywhere. There’s a lot of people that are looking at legacy industries. That open banking can add a flavour to that is a very, very safe investment. So, the amount of money coming in from VC and PE, I really don't see stopping in the short term at all. I think there's a lot of interest.

The biggest problem, and we're all guilty of it chaps, we’ve all got to give ourselves a slap on the wrist, we've got to stop using acronyms and make open banking accessible language, because the longer we persist with the AISP, ASPSP, PISP, TTP, TSP, we make it inaccessible to the market. The number of times I start presentations with industry and, you know, 10 people on the board of a utility company, which we did last week, or 10 senior managers said, “What is open banking?” We’re getting something wrong. I think that the flow of money and the investment gets higher and higher as the understanding gets greater as well.

0:21:33

Adam: On that note, then, Simon, we talk about, kind of, “What is open banking?” and I think if we, you know, delivered a podcast, just talking about what open banking is, for our inner circles, it probably wouldn't get much traction. So, then, have we failed in taking that communication to wider markets? You mentioned utilities and telecoms slightly behind the curve, obviously, from standard FS in terms of, potentially, the Tier 1 banks or the CMA9, of course. So, where does that lie, then, in terms of taking that broader communication to market?

Simon: Well, it's relevance, isn't it? It's, like, if you bought somebody a computer, but they weren't interested in it and they wouldn't use it. So, you have to present some kind of relevance. It’s a silly anecdote, my dad was a bookmaker and a huge racing fan. We bought him a computer and my dad wouldn't use the remote control on the television. Within about 3 weeks, when he worked out he could have live streaming of racing from 15 meetings across the world, he’d cracked it all. So, you have to have a reason. Now, it's a silly anecdote, but it's a real one.

So, when I sit in front of a utility company and say, “Hey, you know what you can do? You can get a more accurate assessment of your client, so you don't impair them, you don't put them in a difficult position for affordability,” because Ofgem and Ofwat are incredibly highly regulated bodies. We've got a reason… we've got to make it relevant to them. It's no good just talking about how it works, we've got to start talking about what it does.

I say the same thing to explain open banking to anybody. We've been dictated to how you use your bank. Well, suddenly, you're not. Open banking allows you to service your bank and your bank account, and that’s whatever method that is, in a way that you want to do it. Get the bank you want, not the one you've been given. That, really, is what we're getting to, the principle of it is our servicing channel for the bank has changed. Now, if you put that into the realms of a large corporate and they wanted to get bank account data on people in insolvency, say, their options are pretty limited presently, but, suddenly, open changes it.

If we'd have sat and had a beer, me, you and Ed, 20 years ago, and I’d have said, “You know what, Ed? In 20 years, accountants are still going to get a shoebox of receipts and the statements posted to them and cards are going to take 3 days to settle and a direct debit will take 10 days to settle it,” you’d probably have laughed. That’s where we are. The only thing I've seen that changes that fundamentally is open banking, because it gives you the chance. I personally think it's the biggest change I’ll see in banking in my lifetime and the most positive, but we've got to start making it relevant.

Ed: Yes. I remember, Adam, what comes to mind there from Simon's comments is it was about 18 months ago, the Dutch fintech world did an advert. It's on record of trying to explain open banking to the consumer. They had someone coming, knocking on the door asking for data. It was just done the wrong way. I mean, we learnt from it and we thank them for it, but people don't buy open banking, back to the same point. It is how do you make it relevant?

As soon as people recognise that they can get better advice, more real-time information, predicted products for them, extra choice, you know, you start rolling in the outcomes and it's very exciting. You can't put it back in the bottle. This whole open banking will lead to open finance, will lead to open data. Some countries are even starting at the other end, like in Australia with open data and then open banking as a subpart of it. So, these business cases, the benefits, the relevance is so important and we’re not selling open banking itself.

0:24:55

Adam: I think we've skipped a few hurdles there. I mean, I am going to go back to one of my spin-off questions, but, for instance, Dan Globerson said, he's the Head of Banking at NatWest Group, you know, when we stop talking about open banking, that's probably when it will be considered more mainstream. I think that, ultimately, sets the tone and mirrors what you both have just said there.

In terms of just going back to, and, then, I want to look at moving onto, kind of, broader open finance and the recent variable reoccurring payments consultation, when we look at growth in the market, I just want to quickly look at or touch on 90-day re-auth. So, is that something that you see over the next… or, certainly, in 2021, maybe beyond… I know Imran from Open Banking Implementation Entity was talking about it very recently. Obviously, coming under a directive, is that something that you think may change over the next 12 months?

Ultimately, it's causing a massive issue, especially within businesses who are, effectively, getting everything set up, are using various accounts and software to streamline their business processes. Then, they've got this huge, kind of, 90-day re-auth hurdle. Is that something that we can see some movement on over the next 12, 18 months? I don’t know if either of you have got an opinion on that.

Ed: Simon, did you want to jump in first, given Imran has been on the stage?

Simon: Yes. I mean, it's a difficult one, isn't it? I mean, the fact is, it would be wonderful if we could turn around and say that auth will be until the person cancels it as well, but we boil down to that nasty word in banking every time, which is liability. We've got to be very respectful. I mean, number one, I've got to compliment and pay a great deal of respect to the guys that work in policy, in the [ ___ 0:26:42] standards, because even to get the banks to agree to, you know, “We're going to impose a standard that's 90 days,” that’s 3 months, you know, it’s a [backwater], if you look at it that way, as well, round. To extend it is difficult, but I think you've got to understand the challenges.

As with everything in life, it is never the bulk of the population or the bulk of the users that cause the risk, it is always a minority. If you look at any abuse of anything when the liability comes in, you have to say what happens in the worst-case scenario. So, what we've got to do is look at the worst-case scenario and extending that auth to 180 days or 360 days. Let's say somebody forgets and then they use it for identity. It's very, very difficult, because, in the mainstream, if you've not worked in the banking world to look at liability of payments, or flows or data, it's what happens if it goes wrong with your agent. I think it will change and I think it will change when the trust and the precedent comes in from each of the industries.

The interesting thing, which I was talking to a colleague about, it's not an OBIE opinion, which, obviously, I can't express in that respect, but the interesting would be, wouldn't it be great if you could have a variable one? Wouldn't it be wonderful if you could actually have a user-defined one? Now, that’s probably throwing a cat amongst the pigeons. I think I think it will change. When? I don't know, but I do know that it's something that Imran, that Alan, that Chris, that all the guys back at Open Banking talk about a great deal and it's very, very high on their agenda. Obviously, for it to grow, it would help if it does, but I'll finish there, if I may, on the subject.

Adam: Did you have anything to add on that, Ed? I'm coming to you next on another question, but…

Ed: I think it's timing on this. So, when you look at... well, let's look at contactless just recently and how that has taken off with the COVID conditions. That's not new. Contactless has been around for a long, long time. Suddenly, we put up the limits, that's a use case, and it's now, you know, ubiquity. Even 20022, I’ve got a session on 20022 later today. That has been around… the original papers were at the Millennium, 2000, published in 2004. Now, that's finally coming into, I would say, ubiquity as the financial services standard around ISOs for the ISO geeks around us.

So, it takes time and just with consent models and the liability, the trust builds and it will move. I don't know the timing around it, but it will move, and it will become accepted norms and it just becomes the risk-accepted way of working.

Simon: Yes.

Adam: Great. Thanks, Ed. I'm going to stick with you, if I may. We're going to move the conversation on slightly. So, as we look, kind of, at the move to open finance and, I guess, more specifically, the recent VRP or variable reoccurring payments consultation, Ed, I'm sure you've probably got some potential headlines or snippets that you'd like to share in terms of your thought process, you know, both personally, but also from a Bottomline perspective.

Ed: Yes. Well, I think we started to touch on them. So, at a specific level with VRP, in terms of the varying recurring payment, that's a welcome consultation. To me, this is all about adding more functionality around the open banking payment, which, in fact, even now, we're calling it an open banking payment. Well, it's a faster payment, at the end of the day, it goes faster payment rails. So, the consumer, the man on the street, the business would probably just understand, “Oh, it's a faster payment.” So, to me, it's adding some steroids to the opening point of open banking payments, it’s more functionality, it has got the sweeping piece in there.

So, I'm not sure when the actual publication of output is from that, but, certainly, we've written a lot on the inputs. It's under discussions as various meetings and it's welcome to bring more value to the potential of open banking. The open finance bit, which is more the FCA’s call for input recently. Again, we're waiting for publishment of that, publication of that. That is, I’d even use the word inevitable.

So, let's talk about it, but let's speed that up and understand the pace of change. Already other economies are moving there and if UK PLC wants to compete, wants to be interoperable with the world, let's throw in a bit of post-Brexit energy in terms of trading around the whole planet, then this, kind of, open finance stuff, it all helps in terms of information flows, mutual, reciprocal work with different bodies. It just gives a whole 360-view for the consumer or the business to make better decisions real time, be more effective, be more successful, more profitable, so it's welcome. I'll just tag on the end, it's the interim bit before we get to open data, which is the ultimate goal of data flowing securely around the ecosystem.

0:31:32

Adam: Great. Yes, thanks. I think, and I guess moving on slightly in terms of some news that came out from HSBC earlier this week and how we look at open banking payments or faster payments, let's call it that, that's far simpler. Ultimately, that's the raw piece behind it and what it is. So, yes, I mean, HSBC, as I mentioned, announced a deal to provide open banking payments or the platform to a car and salvage auction company earlier this week, which is interesting, and we can start to see that roll out across many industries.

I think, in conversations we've had here at Open Banking Expo, even as far back as potentially Q1, when we hosted a live, kind of, TV debate with the likes of ClearBank and Lloyds Banking Group, you know, many are saying that open banking payments are the route to broader open finance and open finance implementation. Would you both agree with that? Is that the key part, do we think, you know, open banking payments have got a critical role to play?

Simon: Do you want me to pick that up? I mean, for me, once again, you get back to the word of precedent. We put the word open in front of a lot of things and we put it in front of open finance, but the first one was open banking. So, we could actually go a little bit further. I'll throw you another one in there, open government. Why shouldn't we have our government services API’d, so we can get to VAT, corporation tax, probate, DWP, HM Majesty’s Court Service? There are lots and lots of things there and we're giving them the name, Ed said it before, open data, but I think what we've done is we've started… it's not Pandora's box, it's a much more pleasant experience than that, but we've started this journey of saying, “Well, actually, you know what now? We can open up everything and see what works together well.”

The journey of open finance, for me, is a very exciting one and I think there is the example that we have got the chance of opening up much more data and sharing it in services we want to consume. I think it's all good. The HSBC one is really interesting if you think about the actual legal change within the scrap industry and within the car industry of taking payments and the £9,000 limit. Once again, when you delve into the use case, you see how well open banking matches it, you see just how strong that case is about open banking payments at an auction. They are really, really solid. I used to bank a big auction house in my days at The Co-operative Bank.

We're getting more and more relevant as open banking is allowing that and it's only being allowed because we can use the data, use the payments, use the services in the manner that are needed by that industry. So, vertical applicability is critical for me.

Adam: No, it really is fantastic to see when we start looking at how open banking principles are being applied across industry. Ed, did you have anything to tag onto that? I’ve got, kind of, a final question specifically around the Plaid and Visa deal, just to have a quick conversation on that before we wrap up, but I didn’t know if you wanted to tag anything onto Simon's thoughts there.

Ed: I think it's… probably, one thought is as the incumbents look around, and every incumbent, I hope, has an open banking strategy at board level, “What are we doing with this? What are we doing with the extra data? How do we compete? Where are we relevant?” I think a lot of incumbents need to ask, “Where are we going to add value? So, what do we keep in-house, and fight for and put our scrum teams on an IT resource? Where do we partner and where do we collaborate?”

Literally, I had this conversation with a bank yesterday, where it's on a topic where they've already got a solution around a certain fraud-preventative area and they're saying, “Do you know, Ed, we have no value whatsoever to take this any further? We might as well buy this in now, it’s going to become a utility and we'll focus on other client journey pieces.”

So, I think there is the area of collaboration models and a moment in time when you, kind of, look at the mirror and go, “Right, all this data is flowing around. We've mentioned all the TPPs that have come in to add innovation, and competition and collaboration into the ecosystem. How can I be discerning on where I can add value to my customer journey, remove pain points and what do I really need to keep in-house or what can I, you know, partner and take forward in a different way?” That's quite a key question, I think, for people in 2021 to get their heads around, the massive project of stuff that could be done, because we all have too few people and too long a list on the projects. How do you make that best decision to optimise it?

0:35:56

Adam: Yes, completely agree. Thanks for that, Ed. I just want to touch on the Plaid-Visa deal, we talk about M&A. My final question after that will be around, you know, if we sit down in 12 months’ time, we talk about adoption levels, we talk about growth in the ecosystem and we talk about, kind of, open banking becoming more mainstream, I will be asking you for your predictions as to what that conversation might look like if we were to sit down in 12 months’ time in Q1 2022.

Before we get to that point, so, obviously, the Plaid-Visa deal fell through very recently and was announced very recently. That being off the table, but, obviously, with the continued growth that we're seeing, you know, what type of M&A do you see in the marketplace, both in the short and the long term? That was a really interesting deal. There were various reasons in the press as we see why that didn't happen and we can draw our own conclusions, but just M&A generally, it’d be good to maybe get a bit of commentary from you both on that.

Ed: Happy to jump in and I'm sure that there must be tears in San Francisco, but I think the Plaid deal was fantastic and I mean it. I mean, VISA are great partners and I thought it was beautifully set up, fascinating valuations in this space. We do a lot… in fact, I think at the expo, Adam, I talked about the cross-border payments work we do with VISA. So, those guys will bounce back, I know there's a plan B and they will be relevant to open banking, of course, but what can we learn from it? What's going on? Well, it's definitely a busy area. I think there could be some consolidation in the API providers. There are quite a few out there. It does become a utility depending on how they show their growth curves into connectivity and adding all the different API systems together.

Just generally, I would say domains, where if you look at real-time data enriching the current technology that's out there and if you've got platforms out there, we've just invested ourselves, just recently, in some more cash management technology. That's an example where, for treasurers, you know you can enrich the fields and experience through open data, open banking pools. That's an interesting area for, I think, combinations M&A work. Just a few ideas.

Adam: Yes, great. Thanks, Ed. I appreciate your thought process, Simon, might be slightly different. Obviously, you’re under competition law, but do you have any thought processes on that?

Simon: Well, it's what you were buying, wasn't it? I mean, I looked… I've got to say, firstly, you've got to compliment the person that did the deal in Plaid to get that valuation, that was awesome. It broke every single point of it and you can't discount the public scrap that goes on, maybe, sometimes, between a couple of the players or it does inflate the prices, rather. I think what it does show is something much more important, that, you know, that was essentially an aggregator. American banking, as Ed will know as well as any, but I’m sure you do, too, Adam, it’s completely different to European banking, as German banking is different, you know the way Sparkasse branches work, and they needed to gain access to these branches to build the open data. It shows the value of aggregation, the value of getting to the banks.

What I think it does, as well, is it means that the next level of aggregators, the next level of TPPs that come into the market, the next level of the [ ___ 0:39:24], who were probably in the best seat on the planet about 5, 6 years ago, they're going to look at them and going to say, “You know what? We need to do more. We need to make sure that the offering we've got now is so much richer.”

So, I think the next big purchase is someone that doesn't just build aggregations, they build journeys. What they do is they basically say, “Right, you can connect to this bank, Mr Corporate, and you need to do so little work.” They're just going to do all the legwork for them, they're going to plug into more things like KYC and AML, account opening, and aggregation becomes much more of almost banking as a service for that back office. Is there going to be more of them? 100% and I think there’ll be one announced in about 10 days as well. There's no 2 ways about it, the rumblings of are already.

0:40:04

Adam: Perfect. Thanks. Right, gents, you've got a 30-second shop window, each of you. We're going to sit down, maybe we'll sit down beforehand, but we certainly will sit down in early 2022. We're having a conversation, potentially, maybe, we'll be able to do it face-to-face in a studio in London somewhere, who knows? What predictions are you making for the next 12 months? We've touched on quite a lot of it already, but if someone's just coming into the podcast late in the day, you've got 30 seconds. Ed, I'll start with you first.

Ed: I'm going to predict a lot more action in the business area. I think the UK government have stolen a march on that fantastic… on the way that they've brought open banking in. There has been a lot of focus on consumer. Don't forget the corporate and business in the middle. I think we'll get some fantastic use cases this year, but not just open banking, I think you combine the open banking with the real-time nature. We mentioned 20022 data. These 3 or 4 different elements come together at quite a unique point in time to, I think, next year, bring some fantastic business use cases, where open banking has solved pain points with that combination of data and real time.

Adam: Great. Thanks, Ed. Simon, you've got 30 seconds. Off you go.

Simon: I think that you will find that there will be a lot of consumers that will realise by the end of September or October and, to Ed’s point, I agree, they’ll be business consumers and retail consumers and businesses that have used open banking and they didn't know they did, because they trusted the partner they worked with and they trusted the buyer and seller relationship they have. The numbers we will see by the end of August will be a multiple, in my opinion, of 3 digits.

Adam: Well, great. Well, both those predictions are imprinted mentally in my mind. I'll hold you to them and, like I say, we'll certainly revisit them. So, as we look, then, and continue to work towards, kind of, the pinnacle of open banking payments, as we look to wrap up now, and bringing open banking into the mainstream, which has certainly been a theme not only in this podcast, but the narrative at many events and other virtual platforms over the last 12 months, I do think it's clear that 2021 could really be the year we finally create a bit of a melting pot, if you like, between regulation and innovation that really will work in harmony to make a better marketplace for all. I think the last 40 minutes or so on this podcast session probably proves that.

So, to Ed and to Simon, many thanks for joining the Unplugged session for today and we hope to welcome you back again soon. So, thank you very much to you both.

Ed: Thank you. Thank you, Adam. Good to speak to you.

Simon: Thank you very much for your time.

Adam: Good stuff. Thanks. To our listeners, thanks again for tuning in. Remember, all previous Unplugged sessions are available for download via Spotify and iTunes and, also, can be streamed directly from OpenBankingExpo.com. Perfect. Thanks again all and goodbye for now.

Presenter: Well, what a fantastic insight that was on the future of open banking and thank you once again for joining us on this special episode. As ever, you can listen to more episodes on all things payments at the touch of a button using your preferred provider. Don't forget to like, subscribe, rate the show or leave a comment as you wish and we'll see you all next time.

(Music)

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