How an Open Standard API Could Revolutionize Banking

An anonymous reader writes: Open bank data will give us the freedom to access all banks in real time and from a single view, automatically calculating the best deals in complete transparency, which will be a significant step forward for social good and give people more control over their finances. Meanwhile, financial tech incubators, accelerators, and startups are creating a more experienced talent pool of developers ready to act upon these newly available assets. From the article: "The United Kingdom government has commissioned a study of the feasibility of UK banks giving customers the ability to share their transactional data with third parties via an open standard API. First mentioned alongside the autumn statement back in December, the chancellor has now outlined plans for a mandatory open banking API standard during the recent budget in March."

Comments

LMAO

[SeaFox]

Does the author serious thinks banks are going to adopt anything that is "a significant step forward for social good and give people more control over their finances". Most of the money they make is off people who can't control their finances effectively.

Keep in mind their entire business is moving numbers from one pile to another. Anything that keeps them in control of the access to these piles and information about them is a good thing to them.

Re:LMAO

[Anonymous Coward]

the chancellor has now outlined plans for a mandatory open banking API standard during the recent budget in March.

I presume you know what "mandatory" means?

Re: LMAO

[Anonymous Coward]

Yes. It means the little folks have to do it and the big corporations and their rich CEOs/paid off politicians can ignore them.

Re:LMAO

[NoNonAlphaCharsHere]

I presume you know that "mandatory" doesn't mean anything* when bankers of any ilk are involved?

*Actually, it means "tell me the rules, so I can get around them".

Re:LMAO

[Livius]

the chancellor has now outlined plans for a mandatory open banking API standard during the recent budget in March.

I presume you know what "mandatory" means?

I presume you know what "plan" means?

Re:LMAO

[Anonymous Coward]

Actually the UK government has forced banks to do things for the good of the customer many times.

A similar example would be the "faster payments" system. It used to take about three days to make transfers between accounts, the government (well, regulator, but same thing really) told all of the banks in the UK to sort it out.We can now transfer money between accounts in less than 90mins, typically it's moved as fast as you can logon to another bank and check to see if it's there.

Other examples include making it easier to move accounts by moving DirectDebits (a system to allow bills to be paid directly electronically from bank accounts, without cheques) between different banks, which never used to be possible.

Re:LMAO

[Anonymous Coward]

This will never happen. We can't even agree on a document standard, and mostly because companies prefer the lock-in vector to keep customers at their doors. Anything that makes your service more fungible is always going to be shunned. It's good to have choice as a customer, but it's bad for a vendor.

We've been playing this cat-n-mouse game for a long time now. You can't win this.

Re:LMAO

[rizole]

I can pay for good and services with my debit card. I can also make withdrawls and get cash back from 3rd parties. I can even withdraw money from competing banks cash points but I can't go into a different bank and pay money into an account with my debit card. The reason I can't do this is competition between banks (the kind lady behind the counter told me confidentially). This is not a technical problem. What I want to be able to do with my money is not my banks priority.

Re:LMAO

[Meneth]

I presume you know what "plan" means?

Well, what you plan and what takes place ain't ever exactly been similar. ;)

Re:LMAO

[SeaFox]

the chancellor has now outlined plans for a mandatory open banking API standard during the recent budget in March.

I presume you know what "mandatory" means?

The best laid plans of mice and men often go awry

Re:LMAO

[datavirtue]

Are you new to earth? Banks have a dominance that you simply do not understand. There are always loopholes that they are very good at ensuring and exploiting. Banks love having big scary, complex, dirty systems and regulation in place becasue it keeps them in control of moving money...they make money by moving it and clearing transactions. Of course...I saw one just lose 2MM because they did it wrong....hehehehe....passed on to customers....doh!

Re:LMAO

[datavirtue]

"DirectDebits (a system to allow bills to be paid directly electronically from bank accounts, without cheques) between different banks"

Damn that sounds yummy...the US banking system is a troglodite as are the "regulators."

Best deals?

[abies]

I can understand benefits of standard, open API for automatic processing of orders for companies and various home-budget tools. But I don't get "automatically calculating the best deals in complete transparency". Do you really need a program, querying 100 of banks in realtime for the best place to have your current account _today_? And tomorrow you are going to switch, because international transfers over there are half cent cheaper?
API for transactions - sure yes. But API for bank offers metadata? Isn't it bit too much?

Re:Best deals?

[gnupun]

It's likely one API for UK government to access/store bank transaction data about its citizens (big brother). Having one API for multiple banks appears useless for customers.

Re:Best deals?

[Cederic]

Without commenting on your Government usage assumptions, if there's a single API that works with all UK banks then it becomes far easier to develop banking software designed for consumer use, and for consumers to switch bank accounts without having to change everything.

Re:Best deals?

[pseudorand]

Before the most recent crash, the financial sector of the US economy represented 40% of GDP one year (and I doubt the UK was too far off from that). Clearly a ridiculous figure. While most of that was probably fees on stock trading and the like, some part of that was consumer financial services.

And besides, banks are a good place to start to modernize because they're already heavily regulated so consumers have more of a chance of pushing what's good for us. But once we prove the possibility and utility of digital fiances, imagine that instead of a piece of paper, you get a digital receipt for everything you buy. Imagine XML or JSON that specifies not just a total, but each line item, the quantity, the discount, the amount, and each tax it;s subject to. And imagine all that data being automatically and instantly received integrated into your personal financial app. You could know exactly how much ($ and %) you spend on gas, kids clothes, cheese, state taxes, local taxes, etc. You could get a history of your spending and see trends. All without any data entry.

Now imagine you and millions of others choose to share that data anonymously with some server somewhere. And imagine an app that, by knowing exactly how much and where other people have paid for things in the last few minutes, could tell you the cheapest way to buy everything on your grocery list. Willing to drive up to 10 miles? It has an even better deal. Willing to go to up to 3 stores? You can get it cheaper still! Want it delivered? Companies have already bid on it and there's a price for that too.

I don't object to either private companies or the government collecting data on everything we buy, everywhere we go and everyone we associate with. I object to them not sharing that data with me in a useful format. I can make way better use of it than big business or big government ever could. But if consumers and citizens actually had such data, real competition would mean both big business and government would be in a heap of trouble.

The banking industry will love this

[houghi]

They will love it, because what they want is transparency and more competition, because that is what banks want: to give you the ability to compare.

Oh wait, they don't. They will fight this with everything they have and they have money.

Re:The banking industry will love this

[Anonymous Coward]

They will love it, because what they want is transparency and more competition, because that is what banks want: to give you the ability to compare.

Oh wait, they don't. They will fight this with everything they have and they have money.

Despite the paranoid occutard ring to it, this guy is right.

Here is what will happen:

Banks that think they can compete on both customer service and rates will do this. ("Rates" here is a generic term for "differences in fees, rates, periods, and interest that might cause a consumer to switch".) Because they can scoop up a wide variety of the people looking at that stuff.

The rest of them, the ones that compete on location, pain-in-the-ass factor, cute tellers, ATM networks, etc. who really don't have means to compete, will either slowly dwindle, or go extinct quickly. These banks make money on fees, and by having slightly worse interest rates and slightly worse loan rates... only they NEED that money because they are mismanaged or disadvantaged in some way. (In a dying city, grandson of founder has no interest in running a bank, or they are unlucky and one of the dozen or so vice presidents or senior vice presidents isn't brighter than an 8 color box of crayolas, so they have no one with brains.)

On top of this, the tens of thousands of "little guys" that won't move because they can walk across the street to a branch won't matter anymore because the guys who can benefit are the big accounts... who will be able to jump around as soon as a bank with better interest across the country posts their numbers. Large chunks of money that were once "stable" will now become very liquid. That will force the feds to back off on "well, you are insolvent now, time to close" or to close a bunch of them. You can't make a mortgage loan off of a bigger portion of deposits anymore because those deposits might be gone in a day or two. The federal reserve (or equivalent in Germany) will be the only place to get the money for the loan, so now basically you have ONE government bank with lots of multi-named and themed branches.

So a bunch of banks will fail.

If there are federally functioning bailouts, those will be engaged, putting further stress on the resiliency of the federal side.

Guys who can move lots of money around, will make (or keep) even more money. Services, and jobs will disappear, and the remaining "little guy" will get left stuck with where banks can make a profit to survive (fees). With savings of several thousand, it's not worth it to jump to a new bank for a quarter percentage point. For someone with hundreds of thousands... it sure is.

I am not saying that an open API and fast data collection is NOT a good thing... however it is my opinion the banking industry is NOT ready for it. The industry is full of retards with NO TECH KNOWLEDGE that choose from a number of vendors that do who provide what they need... poorly. Some banks, have NO IT staff. NONE. They carefully evaluate if they should call the outsourced IT company for each thing they need. If possible, they stumble along without. The days of the bank being a high technology forward technological thinking place are long gone. Having an accurate clock out front (with TEMP!) used to be really cool in the 50's. Having a clockwork vault with machined parts used to be unusual, nobody else in town had anything like that. Look at how many banks STILL have the clock and temp on the sign.

Anyway, this will be interesting, but don't think it'll be interesting in a good way.

Re:The banking industry will love this

[Anonymous Coward]

This is why we need Elizabeth Warren to run for president.

Re: The banking industry will love this

[slick7]

Correct, they have their money AND ours. The only way to level the playing field is to nationalize the banks, END the FED, disassociate from the IMF and the World bank, and limit loan interest. GO BRICS!

Among the Many Big Questions

[BBCWatcher]

1. Customer opt in or opt out? Binary control, or more fine grained control?
2. Security? Liability?
3. Will the "financial tech incubators, accelerators, and startups" be held to the same requirements and same standards? If not, why not?
4. How will API evolution and versioning work? Who's responsible?
5. How will compliance with the standard(s) (and service levels) be enforced?

Re:Great!

[Chrisq]

Because I really want advertisers and the NSA/IRS knowing even more about my financial habits. Yay for openness!

You think they don't already?

How this could be awesome.

[queazocotal]

Imagine that instead of having your shitty bank app or website, or in many cases, several shitty bank apps or websites, you had one unified app that accessed that consistent API across banks, and presented a nice interface.

Transfer from bank 1s savings account on the right day to pay your incoming card bill from bank 2. ...
Unified balance and tracking of upcoming bills - warning you if you're about to go into the red with a hypothetical purchase in a week and your forecast income, ...

And yes - security is an obvious issue, and there need to be strict permissions.

Re:How this could be awesome.

[Dr_Barnowl]

Currently most non-routine transfers in the UK for personal accounts are authorised by 2FA - you get a PIN terminal, you stick your debit card in the slot, and it interfaces with a challenge-response app on the smartcard in your plastic.

I hope they keep that air gap in there. There's potential to use the NFC loop in your phone to cut the separate device out of the loop, but that would mean your phone might be running malware that takes the opportunity to run some other transactions. Better to have a simple separate device with no opportunities for malware "upgrades".

Re:How this could be awesome.

[nukenerd]

Imagine that instead of having your .... several shitty bank apps or websites, you had one unified app that .... presented a nice interface.

Why do you assume that the unified interface will be nice? I have accounts at several [UK] banks; the Nationwide interface is good but the FirstDirect interface is bad. For example, to view up-coming payments with FirstDirect is a job of work - I think they want you to over-draw so they can charge you for it. As another example the Nationwide show your statement in what I would call correct chronological order - oldest at the top. Most banks however have latest at the top; and some (only some) of those allow you to reverse it but do not remember your preference for next time.

Factors like these determine my choice of which bank I use routinely; the others I only use for spreading the risk and being able to use more ATMs around. I bet though that a unified interface would not be the one that I would choose.

warning you if you're about to go into the red with a hypothetical purchase in a week and your forecast income, ...

How TF can a bank know that you are going to make a "hypothetical purchase"?

Re:How this could be awesome.

[queazocotal]

I apologise for being unclear.
I was assuming that the API was sufficient to allow banking apps to do this.
So, for example, both existing banks apps could support other banks, and new providers, or open-source apps could be used.
In other words - a choice rather than 'pick bank, get app'.

Re:Sounds good to me

[dmbasso]

I feel your pain... I left my previous bank because they "improved" the UI with a brain dead design, that required pixel hunting and clicking "next page" until all the records had been displayed for the selected month before being allowed to save as CSV. Btw, the bank I'm talking about is the CGD of Portugal (Caixa Geral de Depositos). Fuck you CGD, please slowly die in a fire.

I made a small script with xdotool to dump all my data before I switched to another bank. It was ugly, but did the job.

Re:Sounds good to me

[jonwil]

My bank gives me a simple "export" button that lets me pick from several export formats (including csv and what I think is some sort of Quicken format).

Re:Sounds good to me

[arglebargle_xiv]

An OAuth2 + REST API to just grab this data would be very useful.

Yeah, the banks are going to allow this. And big pharma will make make medicine freely available for the good of all mankind, the music industry will distribute MP3s of all their artists for free over BitTorrent, and Microsoft will cede the desktop to Linux. Any minute now.

Sounds like hype to me

[tomhath]

Through a self-perpetuating ecosystem of developers, the banks will continue to gather high-value data from customers through third party integration.

I read the article but don't really understand what a "self-perpetuating ecosystem of developers" would do for me. It sounds like they're planning to breed.

Re:Sounds like hype to me

[dcooper_db9]

It sounds like they're planning to breed.

Developers don't breed. We spawn. And we swim in schools, preferring oceans of Mountain Dew.

How about "NO"?

[johnnys]

Hmm, all banks with a common API so any flaw in that API means that the cybercriminals have instant access to all banking information for everyone everywhere. And we know d*mned well that there WILL be flaws in that API.

I prefer the bazaar to the cathedral, please.

How about proper support for OFX first?

[Zombie Ryushu]

How about proper support for OFX first? I have enough issues with my bank sending me broken OFX Files that are broken, or that every OFX Client for Linux remotely supports.

Banking Revolution? I think not!

[Spidyr2k]

This is just a superficial technology implementation that will make the BIG banks richer, more powerful, and better organized, financially and politically. Not a revolution at all. It's a step backwards for humanity. A REVOLUTION would to be breaking up the BIG banks into much smaller and better regulated entities that cannot use depositors money for risk-implied investments, i.e. Wall $treet.

There already is an open banking API: Bitcoin

[dotslash]

Bitcoin is the open, decentralized and open-source banking API.

Despite what you may have heard, the technology is thriving and the number of developers, projects and startups in the space is exploding. 2015 is on track to be a $1b investment year for bitcoin, most invested in USD (not bitcoin) in more than 700 startups.

It's a lot more than a currency, it's the Internet of Money, or Money-over-IP (MOIP). Read the Satoshi Nakamoto whitepaper, every geek should.

Re:There already is an open banking API: Bitcoin

[SinisterEVIL]

Beat me to it :)

Re:Sounds good to me

[LifesABeach]

Bank name?

Finance::Bank

[bill_mcgonigle]

Other posters have already demolished the idea that banks will do this voluntarily or by edict.

The engineering approach is to not involve them. The Finance::Bank collection is the closest you're going to find to a workable solution.

Anybody who has money to spend on a government "solution" should send it to these developers instead.

it exists, just not for the UK or AU

[Gravis Zero]

while the UK has their issues, this issue is all but settled in the US. the Open Financial Exchange defines a way to interface with banks. the problem is getting software that can do this with ease.

Re:Sounds good to me

[Cederic]

Barclays in the UK offer a range of options.

Re:You don't even understand how banks work...

[pseudorand]

PositiveMoney has it all wrong. The video says "if we all paid off our debt, the current economic system would collapse". But if we all paid off our debt and stopped working because we didn't need to anymore, then the real economy (i.e. the thing that actually produces food, clothes, houses, cars, computer, electricity, clean water, etc.) really would also collapse because there would be no one doing the work to create all that stuff.

There is a big issue of inequality of both income and wealth distribution. But debt itself isn't the problem. Think about Zimbabwe where the government printed money and handed it out to the poor. Everyone paid off their debts. But the currency is worthless because inflation was 1000%. No one bothered working because the money they got from selling it would be worthless before they could spend it. There was no point in doing anything for which you didn't receive some immediate benefit. The concept of savings simply ceased to exist. (Hoarding, however, was very much still alive.)

Debt, in fact, is the biggest and best backstop a currency has. Debt is the promise that the people who owe money in that currency will work for you in the future. Stuff is still relatively plentiful, but labor, especially skilled labor, is very dear indeed. And debt means a currency is backed by that labor. That's a big part of why the dollar reigns supreme.

Re:Sounds good to me

[jonwil]

Bank of Queensland.

Re:Sounds good to me

[arglebargle_xiv]

the chancellor has now outlined plans for a mandatory open banking API standard during the recent budget in March
Reading comprehension fail.

No, I read it all right. Do you think the banks are just going to stand by and let him do that?

Re:Damn you

[davester666]

beta really annoyed a lot of people.