By Andrew Dare, Director and CTO for Banking and Financial Markets at CGI Open Banking (OB) has come of age in 2022. You need only look at HMRC’s adoption of the OB Overlay Service; Request to Pay (RtP). Not only was HMRC the first national tax authority to adopt RtP but in September 2021 they […]
By Andrew Dare, Director and CTO for Banking and Financial Markets at CGI
Open Banking (OB) has come of age in 2022. You need only look at HMRC’s adoption of the OB Overlay Service; Request to Pay (RtP). Not only was HMRC the first national tax authority to adopt RtP but in September 2021 they had received over £1bn in tax revenue through the service. A fraction of the trillions of pounds HMRC received, but a significant amount of money passing through a service made possible by the definition of an API standard. Indeed, if you look at OB Payments, they increased in volume from 9,000 a day in July 2020 to 124,400 in January 2022.
At this point, I think it’s worth looking at how the conjunction of OB with the investment being made in technologies such as Cloud Computing and AI is impacting banking. I do not doubt that one of the biggest contributors to the rise of FinTech has been Cloud. If we look at cloud as well as something like RtP as an example, the infrastructure required to run an RtP service with the associated management and hosting could easily run into a capital investment of 6 figures. With the additional risk that you would be stuck with physical hardware and any hosting contracts if it doesn’t go well. With cloud, you can put it on a credit card and if after a few months it’s not working just switch it all off. Cloud has significantly lowered the barrier to entry into the technology market.
We’ve found at CGI that the conjunction of cloud and the data made available by OB’s API set has generated a boom of FinTechs based on these technologies. Indeed, these technologies have birthed a host of services from RtP through to applications that round up your spending to add to a jam jar savings account to services that are helping businesses complete their tax returns based on that OB data. It’s not just FinTechs here either, the Banks themselves are offering these services in order to prevent any further erosion of customer share.
The introduction of the next phase of OB, Variable Recurring Payments (VRPs) will see a new tranche of functionality introduced. The first functionality available will be “sweeping”, the automatic transfer for funds between accounts for saving or avoidance of overdraft fees. However, the use of VRPs to provide Direct Debit and card on file payments will provide real benefits to customers over the current mechanisms in that tight limits around the value of and the number of payment iterations. For businesses, quick, cheap payments without some of the risk of accidental payments being requested plus the added benefit that card details will not need to be held by businesses make VRP an attractive prospect.
At CGI, we have looked at cloud and OB, so what about AI? AI is a broad church covering a number of technologies so some background may be useful here, current use cases for AI are predominantly around; improving customer experience with conversational AI and advice, improving fraud detection and regulatory compliance and finally reducing operational cost from the use of Robotic Process Automation (RPA). A recent McKinsey report stated that AI will bring an extra $1 trillion of benefit to the banking sector every year. This conclusion and the research report from the Economic Intelligence Unit that found that 86% of Financial Services executives plan on increasing their AI spend through 2025 paints a rosy future for AI. If we then consider that data is the lifeblood of AI, the conjunction of Open Banking running on Cloud platforms promise some tantalising rewards. The addition of data has the opportunity to significantly change the coverage and scope of AI in banking. The ability to add transaction, payment and saving data into AI models will greatly expand current capabilities. Clearly, there will be challenges, AI ethics and model bias to name two but the potential for AI to benefit both customers and bank is there we just need to grasp it.
