We live in an age where we benefit greatly from some of the most open and connected technologies ever created. The Internet and the the world wide web built on top of that, have given rise to all manner of technological and societal change. They have seen corporate giants rise upon the shoulders of open and connected, yet they all seem headed towards ever more closed gigantic networks where inter-operation is always at a bare minimum and usually only to benefit themselves, they will let you share outwards in some cases but not all, they will let content in but it must come in through their chosen and tightly controlled methods.
Now I suspect a lot of people will be thinking the answer is blockchain/distributed ledgers/new rails etc. and they might be right but I have avoided mentioning them in this piece. I have avoided them because I am interested in the fixing of the existing system rather than its wholesale replacement. Longer term perhaps new rails will exist but that will not be for decades at least.
I have long desired for banking to be far more open and inter-operable. Open APIs are on the horizon in Europe driven by regulations such as the second Payments Service Directive (PSD2) and UK government initiatives such as the Open Bank Working Group backed by HM treasury. I worry however that these are fragile initiatives even if they are mandatory regulatory changes. The lack of implementation clarity allows for too many opportunities to brick up experiences. Be that making accessing your own transaction data so complicated it is better to screen scrape the data than use official methods. Payment options that are so complex in using that plastic will always be preferred. The closed nature of banking remains even when the rules say open up because of UX disasters.
Mobile payments are also showing worrying trends in heading down these paths. Mobile payments are here yet not quite evenly distributed at the moment. They are tied largely to handset makers (Apple and Samsung Pay), or telcos, or existing card schemes. Interoperability remains patchy at this early stage as the market finds its feet. You need to have phone X or operating system Y and then you need to have the luck of the gods in finding merchants that actually accept your chosen payment method. The big boys are playing for keeps, they want to own the ecosystem as much as possible and they want to lock in the consumer to this perfectly constructed world. The new tech giants are just doing what banks have always done. Is it hubris that their global scale and technical prowess can allow them to succeed where banks have failed? Is it an us vs them story playing out? The new breed vs the old breed? Or is Apple Pay just helping the incumbents become more so? Technological progress is welcome but what is the end game and who will be allowed on the playing field?
My concern is that we will never get the interoperability I, and I am sure many others, desire. What if Sir Tim Berners Lee had patented the World Wide Web? Where would we be today? We have so many innovations limited by their lack of interoperability. We will surely never see a universal dial tone for say video or instant messaging. Even just something like presence, am I available to talk right now? Am I online? Am I in this country or that city?
We have had many great standards to help unify things but they are rejected at every turn and now lay dying. XMPP for messaging, RSS for all manner of content is an afterthought or seen as a historic anomaly. Anyone remember Open Social? An attempt to make interoperable social network components.
Those standards arose from a technical need to solve specific problems I.e. interoperability, and did so well but it is a problem solved that most companies would rather not have solved. Marketing money wants to know who, how many and how engaged the audience they are targeting is. The higher the walls of the garden the more it looks like a barrel and the more users look like fish fresh for shooting.
Those walls also seem to get ever thicker. Bickering between companies feels school yard level as they trade tit for tat blows. Whatsapp users being unable use their Telegram ID in their profile, Instagram and twitter blocking users/photo sharing and all manner of other petty nonsense. I guess when marketing money drives the company though then a barrel is the shape to aim for. What battles will we see between payments companies? Early shots were fired when telcos blocked software based payments like Google Wallet.
The telephone, fixed line and mobile talk too each other irrespective of telco provider, country or make of phone. This took both regulatory change to ensure networks and patents were used to benefit the greater good and avoid monopolies being formed. Email can be routed to any provider and software user due to the open standard of SMTP. Can you imagine if you could only send email to specific email clients Gmail to Gmail, Outlook to Outlook etc? Or Vodafone to Vodafone or Sprint to Sprint? (for some old enough they can probably remember what that was like). Now we acccept these closed networks as the norm as we all have Facebook Messenger, Whatsapp and Snapchat and lots of other messaging apps. I strongly believe this should not happen with financial services.
I cannot pay everywhere.
I cannot get my data from every financial product and use it with other providers or services.
I see this exact same thing playing out in the tech world playing out in the finance world with payments and financial data. Those with the most to lose want to retain control. Those with the most to gain (Tech giants, new fintech entrants) cry for openness but will they reciprocate this in the future once they have a market share outcrop to cling to? Can we build a set of principles and standards that ensure once banking data and payments are opened up they stay open ensuring more and more layers can be built upon them, web like.
I worry for PSD2 because of how the design seems to be happening. Loose guidelines, country specific translations and implementations. Who are the people designing these technical guidelines? Are they bankers or people that understand the web? Can the fintech industry build a solution better/quicker? A better fit for what we need rather than this design by multiple committee stuff that seems to be dragging on and on. Is this regulatory change ultimately just a stick to make the market come up with something better? Will it be OSI vs TCP/IP all over again? Working and well implemented code beating the 172 page page guidelines document?
Money moving is complex and risky. The governance requirements are huge. The liability issues byzantine. I just feel that if we see a few more companies getting some working code (APIs, Auth Methods, Data Standards etc.) then it will make a greater dent in progress. Companies joining forces could do a greater good than yet more committees I reckon. I like the work Xignite has done in joining forces with 21 other companies to form a Fintech API Revolution Ecosystem. I would love to see much more of this ecosystem building, how about just some simple principles or badges of honour for those that make APIs available in FS? Maybe we see banks and FS firms joining initiatives such as the Web We Want (The bank network we want?) Build awareness to allow more building, more inclusion, more access.
The tech giants have built their new gardens and we humans seem to love silos. We love to control and be controlled but these things ultimately limit the scope and scale of technological shifts. They seemingly ensure maximum value can be extracted by the corporate overlords rather than making something bigger, more open that I strongly believe would be better. Will we just end up living in a world where you are either a Google, Apple, Amazon, Alibaba, BBVA ecosystem person and have no choice otherwise?
The opening up of transaction data access and payments instructions is clearly a huge complex change and I have simplified massively but my main point is that walled gardens will lead to fragmented experiences unless you are willing to commit yourself entirely to a single ecosystem owner. The banks have been the ultimate walled gardens as they try to ‘own the customer’ instead of being truly customer centric. They would do well to understand this shift. Excel where they can and make it is easy or seamless for their customers to do business elsewhere. Think platforms and ecosystems not locked in and owned.
Ultimately what is the end game the regulators desire for PSD2? Stop existing incumbents getting an ever stronger hold over the European Payments market i.e. EMVco. To enable greater competition and allow market forces to create a beautiful open ecosystem.
I think PSD2 will eventually crack open the transaction data and payments markets in Europe and hopefully the shockwaves will be felt around the world. The changes proposed however are seen as a real threat to a great many very powerful players and what the country level implementations of PSD2 we finally see in 2018/2019 will look like is a concern. I think the Open Data Institute are doing well to take a lead in the UK but do they wield enough power? Do they have enough momentum? I would like to see more involvement from the W3C. I would like to hear more from HM Treasury and the Competition Market Authority and I believe moves are underway. Also from the governments around the world making openness key. The bottom line is I would like to see a far more open approach to PSD2 from as many parties involved as possible. There are so many people relying on it and it will lead a great change. That maybe too terrifying for those that enjoy the benefits of those huge walls today.
Unless cooperation is forced is the chance of it happening lost forever? Also is the wrong sort of force / design potentially even more harmful? There are industries that need a kick to get started and some industries that need a kick to remember their history e.g. Telcos. I want PSD2 to succeed in cracking the engine open but while the bonnet is up I want to be sure then when it slams shut it’s not all covered in glue and irreparable, licensed components and parts only, registered dealers the only ones allowed to fix and the DIY hobbyist i.e. the individual user is left out.
This all points to a wonderful opportunity for forward thinking financial services players, be they the incumbents or the newer breed but either way I want more of them to work together, to aim for something more open, flexible and altruistic like the web. Altruism and banking might not be easy bedfellows but if you want to be truly customer centric as most keep saying and to truly digitally transform then it would be a wise goal to aim for.