‘Open banking’ is set to create “serious disruption” to financial services and could help address financial inclusion, a leading UK Parliamentarian has told Global Government Forum.
Lord Holmes of Richmond, who is vice-chair of the UK Parliament’s All-Party Parliamentary Group (APPG) on FinTech, and co-chair of the APPGs on the Fourth Industrial Revolution and Blockchain, described “a real opportunity” for technology and data to address societal challenges such as financial inclusion. Combined with the “oceans” of digital data available, he said, it could empower citizens in respect of financial inclusion and financial management.
Open banking involves creating real-time data links between banks, public bodies and other financial services, typically via apps. The technology “forces banks to release their data so that it can be shared more easily between organisations online,” Holmes explained. “It’s a new – secure and regulated – way of facilitating data sharing. Initial commentary has been around the potential to improve services for the customer by reducing fees, streamlining payments and helping manage spending. But it’s the first step on a road that could lead to serious disruption to the sector.”
Opening up banking
“One of the areas most in need of disruption is the challenge of financial inclusion. More than 1.7 million people in the UK do not have a bank account and 40% of the working-age population has less than £100 in savings. Disabled people are often excluded from financial services by poor communication and procedures,” he said.
Holmes was speaking after a panel session on data’s transformative potential at a two-day conference, hosted earlier this month by University College London and entitled ‘Data for Policy’. The peer, who published a report entitled ‘Distributed Ledger Technology for Public Good; leadership, collaboration and innovation’ in 2017, told the conference “the opportunity is immense, but not an inevitability”.
The panel session also saw representatives from Uruguay, South Korea and Singapore discuss the challenges and opportunities presented to governments worldwide by the surge in digital data availability.
Representing Uruguay was Laura Rodríguez Mendaro, deputy chief technology officer in the country’s Agency for Electronic Government and Information Society and Knowledge (better known as AGESIC). She described how Uruguay is pushing to make it mandatory for people in employment to receive digital payments.
The move is part of a drive to boost financial inclusion and digitise payments in a country that sees itself as an e-government pioneer in Latin America. Speaking to Global Government Forum, Rodríguez said of Uruguay: “We see ourselves as the Estonia of Latin America”.
About 30% of Uruguay’s 3.5m-strong population do not have an account at a financial institution. In 2014, the government introduced a Law on Financial Inclusion to encourage digital payments – with the goal of ensuring that all those in employment receive digital payments by 2020. Rodríguez explained that new rules are being implemented gradually, with the roll-out currently excluding rural areas and regions with fewer than 2,000 inhabitants.
Other initiatives undertaken by the Uruguayan government include the use of a ‘single payments gateway’ between public agencies and the financial sector, and encouraging banks to recognise citizens’ digital ID and digital signature.
The conference panel, which was chaired by Stefaan Verhulst of the GovLab at New York University, also featured Junseok Hwang from Seoul National University in South Korea, and Aaron Maniam of the Government of Singapore.
Maniam pointed to the potential to use financial data in public service delivery, arguing that government should play a role in encouraging credit card companies to share data. “Each of them [companies] see that data as proprietary, despite the fact they only have a tiny part of the overall [data],” he said. “Data is only useful if it all comes together. I think government has a role to play in convening the multiple parties.”
Expanding on this point to Global Government Forum afterwards, he said: “Amalgamated and anonymised credit-card data could provide invaluable insights on consumer patterns, especially in terms of products and footfall in specific locations. This value is most fully realised if data from all card providers is combined, shared and treated as a common resource. Governments play an important convening role to create a space where such sharing can happen.”
The opening keynote at the Data for Policy conference was given by Margot James MP, the UK’s minister of state for digital and the creative industries. Focusing on the UK, she discussed developments including including the UK’s pilot ‘data trusts’; NHSX, the recently created UK government unit working on technology, digital and data for the National Health Service; and the UK’s new Centre for Data Ethics and Innovation.