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Brook Williams discusses how Open Banking can help us create an inclusive economy



“Robots will destroy our jobs – and we’re not ready for it”, according to a Guardian headline.

“1 million jobs will disappear by 2026”, says a CNBC report.

If you read the newspapers or watch the news, you’re probably petrified by new tech. But there are lots of reasons to be positive.

And one of them is that technology looks set to make our economy more inclusive – and Open Banking in the UK is a prime example.



What is Open Banking?

The new Open Banking regime was recently launched in the UK to great fanfare. But what is Open Banking?

At its most basic level, it gives customers back control of their banking data – and, crucially, who it is shared with.

The UK’s big nine banks have been effectively forced to allow third-parties to hook into their customers’ data – if the customers give permission.

Why is this important? Because for the first time ever this data has been freed from the hands of a handful of banks. If a customer chooses, they can make their banking information accessible to new tech companies whose very purpose is outflanking the banks with innovative new products that give greater power and control to the consumer.

One of the potential benefits is more fluid and responsive credit markets. There are big failings with the UK’s current credit scoring systems. Open Banking can solve these be enabling competition. Consumers will be able to share their bank transaction data with third party businesses with better technology which can evaluate their creditworthiness much more accurately.

As the UK’s City Minister, John Glen, has said: “Those data flows untap greater financial prospects for a broad range of people and allow them to access new products and services, such as innovative investment opportunities, tailored and appropriate debt products, and technology-driven solutions such as open banking.”



Open Banking and inclusivity

But how does this relate to robots, automation and jobs?

One of the criticisms I dislike most about technology is that it creates a two-tier, divided economy; that people at the bottom of society end up losing their jobs while those at the top enjoy all the upsides.

This could not be further from the truth. In fact, Open Banking has already made finance much more accessible to a wider swathe of society.

One of the most economically and socially damaging things to society is that many people cannot access even basic financial services. According to the Financial Inclusion Commission (FIC), in the UK there are still 1.5 million adults without a bank account.

And of those who do have bank accounts, many do not have access to affordable credit from either legal or illegal sources. According to the latest government figures, 300,000 people are using illegal lenders while a further 300,000 are borrowing from ‘family and friends’.

The figures are similarly stark in the US. In fact, as many as 10 million US citizens do not have a bank account.



The examples of Safety Net Credit and iwoca

This is the type of problem where technology really comes into its own; it is very good at solving so-called ‘distribution problems’ – getting things to hard-to-reach people – and making things much cheaper.

In the UK, for example, one company which is taking advantage of Open Banking to improve financial inclusion is Safety Net Credit.

Safety Net Credit uses Open Banking to access its customers’ bank transaction data and very quickly build an accurate picture of their financial lives. It uses proprietary analytics to categorise different kinds of income and expenditure. It predicts future spending trends with much greater accuracy than blunt credit reference agencies; and it can be much more responsive than banks whose customer-service instincts have been dulled by a lack of competition stretching back over decades.

As a result, Safety Net Credit extends their customers credit when it is needed without them having to resort to costly overdrafts – or something even worse.

Jonathan Davidson, Director of Supervision (Retail and Authorisations) at the FCA, recently acknowledged this: “The effects of [Open Banking] are potentially radical. I was talking to someone recently who had a permission to provide consumer credit unsecured loans and had recently received their Payment Services Directive (PSD) permission to access the accounts of customers.”

“The business had 1/2m customers and access to 1m bank accounts. He set up a business model where if his customer was about to go into overdraft the app would see this via their access to the client’s bank account and lend that customer money. It was a win for him to lend money profitably and a win for his customers who got to borrow at a much lower rate than on overdraft.”

Jonathan Davidson was talking about Safety Net Credit.

Another company using a similar technology is iwoca, but rather than using Open Banking to provide individuals with finance, they do it for business.

Up until recently, small businesses had to go through the arduous process of submitting pages and pages of physical documentation to get finance to expand their businesses and take on new employees. Being a small business owner myself, I know how painful that process is.

But by opening up direct access to bank accounts, iwoca is able to almost instantly decide whether they can support a business’s development.

Technology has the power to positively transform our businesses and our economy.

It has the power to make products and services available to more people at an affordable price; we have already seen that with retail through Amazon and entertainment through services like Netflix. Now we are starting to see that with finance too.

But rather than always raise a skeptical eye at the latest technology, we need to engage with it positively. We need to embrace it.




Brook Williams






Brook Williams is a dual British-American citizen who grew up in UK and studied a tech and engineering at Virginia Tech. After college, he stayed in the US for eight years working for startup technology companies in the retail and social sector before joining a large investment bank in San Francisco, California. Working on their tech investment side, Brook built an enviable network in Silicon Valley and advised on corporate venture capital.

In his early 30s, Brook relocated back to London and joined a seed fund focusing on fintech. From there he moved into the private advisory space, advising a sovereign wealth fund on VC and tech investment.

Brook set up Clearwater Strategies in 2012 and with his small team of experts exclusively advises family offices.