We recently visited Starling Bank’s offices in London to speak to its head of Marketplace Platform Megan Caywood about the provider’s open banking strategy.
What is your background and how did you come to work at Starling Bank?
Megan Caywood: I’ve worked in financial technology, previously with Intuit and Xero, which are financial software companies. I came to the UK with Xero in 2015, and from there joined Starling Bank. We’ve seen a lot of disruption in the financial industry but not yet in banking, so this was too exciting an opportunity to pass up. I’m leading the Marketplace Platform, which involves everything with APIs.
Why is Starling Bank going down the route of opening up its systems? Is this just to comply with PSD2 and other regulations, or are you using this as an opportunity to stand out?
We see this as being a much bigger opportunity than just compliance. We see the regulation as a huge step forward, as being about giving customers control over their data. We believe that their data belongs to them, and our open API strategy is an extension of this. We’re creating a Marketplace Platform where we can integrate best-in-class products and services, which gives consumers a choice as well as control over their money.
So the Marketplace Platform is a portal where your customers will have access to the best products from across the market, gathered together in one place?
At Starling we’re focusing on developing a mobile app based around a current account, but obviously our users will have diverse needs and will need access to more financial products, and that’s where the Marketplace Platform comes in. Imagine being able to move money with one click, from your savings account into an investment or P2P lending platform, for example.
So you need to target your resources at one thing?
APIs are fundamentally changing the way that software is created, because developers are realizing that a lot of the functionality they are working on has already been addressed by other companies. So for us, rather than trying to create a full set of banking products and spreading our resources everywhere, we can focus on our current account, while also providing access to the best-in-class financial services from across the market. So we can offer the best of both worlds.
From the customer’s perspective, will everything be fully integrated into your interface with respect to branding and other aspects, or will customers be aware that they’re using third-party services?
They will be totally aware. We are about transparency and authenticity, letting our customers know who they are using and where their data is being shared. So if we partner with a P2P lending platform, customers will be aware of this and it will be clearly branded. Our proposition is about giving customers a choice from any number of providers, and being clear about this.
And will those interactions with third parties take place within your user interface or will customers be redirected to their sites?
In some cases it will be within our UI, in other cases customers will be able to use it within other applications, and sometimes we will use a hybrid approach. It will depend on the particular situation.
Given that customer data is one of the most valuable assets that a bank owns, care has to be taken as to how this is shared with third parties. What is your approach to this, who will control the data, how much access will you retain where customers are using third parties?
Our view is that data belongs to customers, and who that data is shared with and how it’s controlled lies with them. When, and for how long, the data is shared is authorized by them. The data is owned and controlled by the customers and they set their preferences for this. Traditionally, banks have had a culture of owning the customer, and customers are breaching their terms and conditions if they share their data. But we want customers to be able to share their data when they want, and we want to help them to do this securely. Open APIs offer the benefit of safe and secure sharing of data, and allow consumers to grant and revoke access.
Will you be working with outside parties to co-create new products, or will you integrate existing products on an off-the-shelf basis? For example, will you set up a developer portal to crowdsource the creation of new products?
For sure, we will be opening up our API and developer portal to allow other parties to build new applications on top, to co-create new applications together. This is something we will definitely do following our launch.
Historically, the UK banking market has been dominated by a handful of providers, and the Competition and Markets Authority sees open APIs as being instrumental in breaking down barriers to entry, particularly through the introduction of account aggregators. Are you working on your own aggregator?
Definitely. We want to be the gateway to every part of a consumer’s financial life, and developing an account aggregation tool will be a natural part of this, so that they will have a window to all the financial products they hold. Given that we only offer a current account, our customers will have loans, credit cards, and other products held elsewhere that they need to access, and we will enable this through an account aggregation facility.
Starling Bank has built a full stack bank with its own systems. Will you open up these facilities to third parties, as, for example, Fidor Bank does? Do you envisage allowing fintechs, for example, to plug into your payments capabilities and shelter under your banking license?
It’s something we’re considering, but we don’t have any firm plans at the moment. It’s definitely an option when you create a full-stack bank, to allow others to build off that.
Some banks are experimenting cautiously with APIs, just granting access in the first instance to non-customer data such as branch and ATM location data, for example. But it seems like you’re jumping in feet first from the start.
When APIs are opened up, you need to ensure that you’re doing this with the customers’ data privacy and protection in mind. Banks will eventually have to make transaction and payment data available to be compliant with legislation, but we want to lean in to this and be ahead of the curve.
With respect to data security, have you done any research among prospective customers to assess how happy they would be to share their data?
It’s not so much whether consumers are comfortable sharing their data, but how the services they use connect to each other and how they share data with each other. Currently, the banks own the relationship, and customers who try to share their data violate their banks’ terms and conditions. Banks want to cross-sell you their own products and don’t want you to use third-party services. It’s against their monetary interests to let you share your data.
Banks are sitting on masses of customer data, but seem to have real difficulty in leveraging this to provide useful insight to their customers. Will you be able to do more in this area?
It doesn’t matter how much data you have, it matters how effectively you can structure and analyze it and provide something useful for the customer. So how can we take data about customers’ financial patterns and behavior and use this to help them make smart financial decisions. The idea is to provide customers with in-app access insights about their financial lives, for example do they have enough money to last them to the end of the week, the month, or the end of their lives. To offer a level of insight the banks can’t currently provide.
For more on open banking, please read our new report Open API Banking: Defining the Potential and Opportunities.
By Daoud Fakhri, Prinicipal Retail Banking Analyst