RESEARCH Sponsored by:

2024: Open Finance’s

Moment To Shine?
• The Roadmap
To Open Finance
• Lessons From Australia,
Brazil And The US
• VRPs: Gamechanger
Or Damp Squib?

altfi.com
Contents
An Interview With Open Banking Trustee Marion King 5
Plotting Out The Roadmap To Open Finance 8
Greater Expectations: What’s Next for Open Banking? 11
VRPs: Gamechanger Or Damp Squib? 13
Unlocking More Customer-Centric Services With Open Finance 15
Open Banking Lessons From Australia, Brazil And The US 17
Inside HMRC’s £13bn Payments Revolution 19

altfi.com 2
Introduction
Fresh Excitement

A fter years of frustration, fresh excitement has been injected into the
open banking community, courtesy of a new roadmap and direction
set by the UK government.
This has the potential to improve basic API availability and
performance, advance open banking payments, and pave the way to
unlock both new financial datasets with open finance and non-financial
datasets with what is being called “smart data”.
If the UK can become a smart data leader, then, as open banking
trustee Marion King explains in Chapter 1, “it will strengthen the case
for investment into the UK”.
Much hangs in the balance if the UK can place its next steps right,
meanwhile, the rest of the world is forging ahead on its own journey
with the US, Australia and Brazil among the global leaders.
AltFi Research, in partnership with TransUnion and Plaid, is proud
to present our latest report exploring this topic, 2023: Open Finance’s
Moment To Shine?
This report delves into the present opportunities of open banking, the
new possibilities presented by the UK’s roadmap, the emerging potential
of open finance, plus much more.
We hope you enjoy reading the coming chapters and gain valuable
insights into where the open banking landscape is headed next.
A special thank you to Marion King (Open Banking Implementation
Entity), Huw Davies (Ozone), Brendan Jones (Konsentus), Natasa
Kyprianidou (Publicis Sapient), Andrew Boyajian (Tink), Dr Eloise Taysom
(Bud), Jess Turner (Mastercard), James Hickman (Ecospend) and Helen
Child (Open Banking Excellence) for contributing their valued insights.

Oliver Smith
Managing Editor and
Head of Content, AltFi

altfi.com 3
TransUnion & Bud:
Accelerating Open
Banking’s Evolution
TransUnion is committed to increasing financial infrastructure and insights expertise with Bud’s
inclusion by continuing to expand the information open banking and data intelligence platform.
available to create an accurate and reliable picture
of each consumer.
Find out more about our partnership and work
Working with Bud marks the start of an exciting with us to evolve your lending experience
future partnership, combining our global transunion.co.uk/openbanking

Copyright ©2023 TransUnion International UK Limited. All Rights Reserved. TransUnion International UK Limited
is incorporated and registered in England and Wales with company number 03961870. TransUnion is an agent of Bud.
Bud is a trading name of Bud Financial Limited who is authorised and regulated by the Financial Conduct Authority
under registration number 793327 as a regulated Payment Services and Open Banking provider.
An Interview With Open
Banking Trustee Marion King
The new trustee has high hopes for open banking in the UK, despite the
question mark over the Open Banking Implementation Entity’s future.

Source: Shutterstock

I t’s fair to say that eyebrows were raised

in January when Marion King was
appointed as the new trustee of the UK’s
Open Banking Implementation Entity
(OBIE).
Previous trustees had been plucked
from industry groups or consultancies,
positioned as neutral players able to
balance the data demands of the fintech
community with the requirements of the
banks providing said data.
King, coming straight from NatWest
Group where she was formerly director of
payments, appeared at first glance to be
far less of a ‘unity’ candidate and more a
concession to those bankers who’ve long
complained that they bear all of the cost of
open banking with few of the benefits.
“I think we’ve moved beyond the big
bank having their ‘hooks’ into this type of
area,” King told AltFi. “I represent a level of
understanding for the banks, but I’m
independent and I can also reach out and
connect with trade bodies and other
Marion King, Trustee, OBIE
parties. I have a background and I guess a
profile that represents understanding and
inclusion of all groups.” become all too familiar for many in the
Four months on, and it’s fast becoming open banking sector.
clear that King’s understanding and “I think the levels of consultation that
insider knowledge of the incumbent the regulators have done have frustrated
banking sector might be exactly what’s I think the levels some, but I personally believe it’s
needed to navigate this period of absolutely necessary because I’m very
uncertainty for open banking. of consultation mindful of unintended consequences or

that the regulators potential outcomes or issues that we

Navigating Uncertainty
While the UK government has just
published an open banking roadmap for
the next two years—containing 29
individual actions which the OBIE and
other industry groups will have to
implement—the document has left as
many questions open as it answered.
Critically the structure, funding and
core functions of the ‘future entity’ which
will oversee open banking going forward is
still under “consultation”. A word that has
haven’t thought through,” says King, who
have done have has first-hand experience of exactly that.
In the 2000s she worked as CEO of
frustrated some, payments company VocaLink during the
but I personally period that it built and launched the UK’s
Faster Payments service.
believe it’s “We didn’t foresee how real-time
[payment] rails would progress, and we
absolutely certainly didn’t foresee the potential of
scams. So this time I think we need to try
necessary. and think through every eventuality, not
Marion King, Trustee, OBIE just for tomorrow, not just through the
delivery program, but for the next five and

altfi.com 5

10 years as this open architecture
approach to the ecosystem accelerates,
which it clearly will.”
Indeed, the open banking roadmap is
already looking to fix or improve on some
of the early issues with open banking,
from confusing error codes to the lack of
consumer protections. With that in mind,
the trustee’s biggest concern going
forward is “getting it right” as open
banking expands both on a technical level
and at a political level, with ‘smart data’ as
What happens
after these two
years is a little bit
more uncertain,
but I think it’s
great that we’ve
got that sort of
roadmap in place.
Marion King, Trustee, OBIE
altfi.com
the all-encompassing buzzword seized
upon by the government to cover not just
the expansion of open banking into new
financial datasets, but also the
development of data sharing in entirely
new sectors like energy or telecoms.
“If the opportunity for different smart
data use cases becomes a reality, then
hopefully it will strengthen the case for
investment into the UK,” explained King.
“I think it’s very real, albeit these things
can get hijacked and we have an election
in 18 months’ time, but I’m optimistic that
we could position this as a reason to invest
or a reason to look to invest in the UK.”
Into The Unknown
For now, King’s most immediate priority
is rather more short-term, to continue to
“deliver the order” (a trustee catchphrase
of sorts, meaning don’t be too distracted
by the longer-term decisions being made
in Whitehall and by regulators, but rather
to stay focused on the task at hand).
This in itself will be a change of pace
for the OBIE, an organisation that just 18
months ago was flung into crisis and
firefighting amid a bullying scandal, the
fallout of which took the entire tenure of
former trustee Charlotte Crosswell to
resolve. With the OBIE’s fires
extinguished and an open banking
roadmap in place, the new trustee has
Source: Christin Hume on Unsplash
the gift of focus that her predecessor
never had.
“What happens after these two years is
a little bit more uncertain, but I think it’s
great that we’ve got that sort of roadmap
in place,” says King. “It gives everyone that
sense of relief, like we know where we’re
going.”
The industry may have certainty, but
that benefit is yet to be shared with the
OBIE itself, an organisation which has
reached the end of its original purpose but
has yet to be given clarity on what role
exactly it will play in the ‘future entity’.
King in all likelihood will be the last
trustee of what is now the Open Banking
Implementation Entity or Open Banking
Limited, and the first trustee of the ‘future
entity’ which her organisation is
earmarked to evolve into. Not that this
uncertainty weighs on the high hopes of
the new trustee, whose optimism and
excitement about the future are plain to
see.
“This is the start of the next phase
really, [former trustee] Charlotte Crosswell
and her team did a fantastic job delivering
against that order, and now it’s about
saying ‘what more do we need to do to get
this really functioning?’” says King.
“That means more work for banks, it
means more work for Open Banking
Limited, more work for regulators. We’ve
all got a lot more work to do.”
6
Plotting Out The Roadmap
To Open Finance
After a lengthy wait for the industry, the JROC has delivered its thinking on
the future of open banking, and how to transition to open finance. But how
secure is this pathway, and is the UK now at risk of losing its prime position?
T he UK has built up an enviable
reputation when it comes to open
banking. In the first Open Finance Index,
compiled by industry group Open
Banking Excellence, the UK received the
highest ranking in the world, with
Australia five points behind and most
competitors more than nine points lower.
In many ways, the UK set the benchmark
for policy-led innovation.
“The UK open banking ecosystem is
thriving,” said Huw Davies, co-founder of
Ozone API, who previously helped lead
the growth of open banking at the Open
Banking Implementation Entity (OBIE).
“We have seen significant investment,
altfi.com
job creation and economic growth. We
have also seen a huge amount of open
banking-powered innovation, which is
helping people to get better access to
credit, enabling consumers to manage
their money more effectively and giving
businesses the ability to optimise cash
flow.”
However, market participants had
been getting increasingly edgy waiting
for an update from the Joint Regulatory
Oversight Committee (JROC) regarding
the future of the nascent sector, with
many concerned that the momentum
was starting to wane.
The JROC, comprising the Financial
Huw Davies, Co-founder, Ozone API
Source: Aaron Burden on Unsplash
Conduct Authority (FCA) and Payment
Systems Regulator (PSR) as co-chairs and
HM Treasury and the Competition and
Markets Authority (CMA) as members,
was created in March 2022 to design and
oversee the next phase for open banking,
and the pathway to open finance. It was a
move generally welcomed by the
industry.
“Regulatory coordination is always a
good move,” said Brendan Jones, chief
commercial officer of Konsentus. “The
UK has a plethora of regulators who all
touch on open banking in some
capacity—a holistic approach is therefore
always welcome.”
In April 2023, the JROC finally laid out
its thinking in a 50-page report,
highlighting a two-year roadmap
comprising 29 individual actions. The
report has injected a new sense of energy
and dynamism into the sector.
Marion King, chair and trustee, Open
Banking Limited (OBL), was quick to
respond to the report’s release, saying
that it “secures the future for our open
banking ecosystem in the UK.”
“In just over five years, the UK’s
approach to open banking has created a
world-leading regulatory framework,
delivering competition, innovation and,
most importantly, real-world benefits to
seven million consumers and small
businesses.”
A Route To Further
Success?
The report outlines five key themes with
delivery dates as soon as Q2 2023 on
some actions. The roadmap themes
consist of levelling up availability and
performance, mitigating the risks of
financial crime, ensuring effective
consumer protection, improving
information flows to third-party
8
providers and end users, and promoting
additional services—using non-sweeping
variable recurring payments (VRPs) as a
pilot.
The accompanying actions for these
themes are aimed at establishing a
sustainable and competitive footing for
the ongoing development of the open
banking ecosystem, and—importantly—
adopting a model that is scalable for
future data-sharing propositions and the
eagerly-awaited transition to open
finance. The JROC has stated the
roadmap is “necessarily ambitious”, but
is confident it can be achieved if
“stakeholders collaborate effectively.”
Collaboration has underpinned open
banking since its establishment, and will
continue to do so moving forward.
In terms of immediate wins, payments
is where the report will have the most
impact. It explicitly outlined that the
ambition of the JROC is to enable open
banking payments to act as a competitor
to card payments, specifically calling out
retail payments. It also highlights the
upcoming steps that will be taken,
including producing a framework for the
collection of fraud data so that banks
and technology providers can better
align to tackle the issue. This will help to
fuel the broader adoption of open
banking payments.
And perhaps most notably, it talks
about premium APIs, like VRPs and data
Brendan Jones, Chief Commercial Officer, Konsentus
APIs, that were not part of the original

“The UK was a pioneer in the

Other countries that are transitioning
to open finance have generally taken a
broader view of open data from the start.
Brendan Jones, Chief Commercial Officer, Konsentus
CMA order. “The focus on non-sweeping
VRPs will unlock new use cases and
heighten open banking’s potential,”
explained Jones. “Combined with
enhanced consumer protection, this will
further progress in account-based
payments.”
Guided By A New Entity
The JROC report also covers current
thinking on the design of the future
entity that OBL, formerly the OBIE, will
transition to alongside the new policy
roadmap.
There is no firm outcome on funding—
yet. The report notably calls out
“divergent views” on the preferred
governance, structure and funding
model of the future entity. To reach a
balanced conclusion, the JROC will work
with market participants to finalise
detailed proposals and provide an
update in Q4 2023.
This is where there are concerns that
delays will hamper the UK’s leading
position, with other markets already
pushing ahead in some areas.
development of a national open banking
framework,” said Davies. “That was no
small feat. In doing so, it created a
blueprint that has been widely used as a
baseline by other countries around the
world, such as Australia, Bahrain, Saudi
Arabia and many others.”
“Open finance is already being
launched in markets such as Brazil,
which is now in the midst of the
implementation of open insurance.
Other markets are working hard to
ensure account providers are
encouraged to embrace change.”
“Other countries that are transitioning
to open finance have generally taken a
broader view of open data from the
start, such as Australia,” agreed Jones.
“Some countries avoided the narrow
definition of open banking that was
implemented in the EEA and UK and took
an open finance approach from the
outset, implementing a broader set of
financial services into their definitions.”

altfi.com 9
The Long-term
Regulatory Thinking
In terms of the longer-term regulatory
future, the report touches on the role of
HM Treasury and the respective roles
that the FCA and PSR will have in
providing oversight across the open
banking ecosystem, including over the
future entity.
“JROC’s recommendations and other
government initiatives will allow us to
maintain momentum, and for the UK to
extend the benefits of open banking into
other financial services and sectors
through open finance and smart data,”
explained King.
“The government is taking steps to
establish the long-term regulatory
framework as soon as parliamentary
time allows, giving itself a two-year
timeframe,” said Jones. “There is a risk
this is too slow—particularly with the
election focus as we approach 2025.”
“We are at an inflection point,” added
Davies. “The right leadership over the
coming months could be the difference
between unlocking this huge potential
by ensuring the UK remains a global
open finance and then open data leader,
or it may result in us falling behind other
AltFi's monthly fintech deep-dive.
altfi.com
F I N D O U T M O R E AT A LT F I .C O M
markets as they build on our learnings
and move forward more decisively,
whilst the UK gets stuck in a quagmire of
The right committees.”
One thing that is certain is the shift to
leadership over open finance is inextricably linked to the
powers scheduled to be created as part
the coming of the Data Protection and Digital
Identity (DPDI) Bill that is currently
months could be making its way through the UK
the difference Parliament.
The bill delegates powers to create
between unlocking smart data schemes within key sectors
to the relevant ministers of state. These
this huge potential powers include the ability to mandate
by ensuring the UK participation from market participants,
and it is made clear in the report that
remains a global data sharing for open finance will be one
of these smart data schemes.
open finance and The thinking for the roadmap to open
then open data finance is firmly in place. The industry is
now looking forward to its delivery, with
leader, or it may the pace of developments set to dictate
the extent to which the UK can keep its
result in us falling headline role.
“The UK has been a pioneer for some
behind other time in open banking,” said Davies.
markets… “Hopefully, it can be a fast follower in
future years. And with the Smart Data
Huw Davies, Co-founder, Council announced on the same day as
Ozone API the JROC report, it was a good day. Now
we need many good days of delivery.”
%
£ £
£
10
Greater Expectations: What’s
Next for Open Banking?
Globally, the UK has led the way with open banking.
We’re at a juncture where we can lead and inspire again.
Sponsored by:
W hilst the debate continues around
how the original vision of open
banking compares with its reality, there’s
no doubt that it has shaken up the UK
financial service sector. It’s driven
innovation in banking and FinTech, and
encouraged transactions that are
unmistakeably customer centric.
Half a decade in the solution is a
recognisable feature of the lending
customer journey and is accelerating
along the maturity curve. Thinking
strategically, the socioeconomic
headwinds we’re experiencing provides
open banking with a chance to become
further embedded into consumer
expectations and provide lenders with a
vision for a modern and purposeful digital
banking experience.
TransUnion was an early supporter of
open banking, viewing the technology as a
means to improve customer acquisition
and customer experience (CX), and enable
more informed and fairer lending
decisions. The last goal resonates
powerfully with consumers considering
altfi.com
applying for financial products to better
manage household budgets being
squeezed by the cost of living crisis. With
its ability to provide accurate information
on the financial situation of existing and
potential customers — including insights
into their financial resilience,
creditworthiness and ability to afford
repayments — open banking helps lenders
to reach the underserved without
compromising risk appetites. Ultimately
helping to improve financial inclusion in
the UK.
Indicators For Responsible
Growth
There are numerous high-level, actionable
indicators for open banking to better serve
consumers.
For example, consumers are telling us
they’re still experiencing friction and
looking for real-time decisions on
applications. TransUnion research
indicated that when considering applying
Source: TransUnion
for credit or refinancing existing credit,
15% of consumers ultimately decided not
to because they felt it was too much work,
and 1 in 10 gave up as they could not verify
their identity1. Over 50% expect a real-
time decision for a digital loan.
Drilling into the research, there’s a clear
demographic bias towards younger people
getting frustrated with the CX offered. One
in five Millennials quit an application due
to the number of questions asked and 70%
of Gen Z thought getting a real-time
decision on an application was important.
As younger people with a limited credit
footprint move into the workforce and flex
their spending power, it’s important that
lenders aspire to meet their needs and
expectations. Open banking is one of the
pieces that can help solve the puzzle. For
journeys that involve price comparison
websites — go-to platforms for digital
natives — open banking can enhance
decisioning to give customers greater
choice, potentially better-priced products,
and greater confidence that they’ll be
accepted for the product. For customers
Source: TransUnion
11
who arrive organically on a lender
platform, open banking offers income
verification, and affordability and credit
risk assessments, identifying vulnerable
customers and optimization of the
application process.
With its ability to provide accurate
income verification, streamline the
application process in a CX-friendly way
and enable tailored, real-time offers, open
banking is an essential component for any
lending platform wanting to succeed with
younger consumers.
Two Emerging Use Cases
For Open Banking
1. Across all consumer segments, open
banking offers strategic value for lenders
adapting to the FCA’s Consumer Duty
regulatory update. It can strengthen
affordability assessments at the
acquisition stage and enable better
informed decisions. It can also improve
engagement with existing customers by
identifying those whose affordability
resilience is changing — so lenders can
apply the right customer care strategies.
Open banking can help lenders spot
consumers showing early signs of
financial difficulties, allowing them to
proactively engage and support them in
getting back on track.
2. Other significant challenges
organisations face are fraud and digital
crime. The scale of fraud in the UK is such
that it should be “considered a national
security threat”2, and can damage
commercial performance, brand
reputation and consumer trust.
TransUnion’s 2023 State of Omnichannel
Fraud Report, which uses our vast
intelligence network, revealed 4.6% of all
global digital transactions in 2022 were
potentially fraudulent.
Over half of UK consumers were worried
about identity theft, while 45% cited
1
TransUnion Consumer Pulse Q2 2023
2
https://www.ukfinance.org.uk/news-and-insight/press-release/uk-finance-calls-urgent-action-all-sectors-fraud-continues-threaten
3
https://www.openbanking.org.uk/news/uk-reaches-7-million-open-banking-users-milestone/
4
https://www.openbankingexcellence.org/blog/what-the-jroc-report-means-for-the-future-of-open-banking-in-the-uk/?j=299418&sfmc_
sub=41877303&l=69_HTML&u=6886836&mid=510004407&jb=2003
5
TransUnion International UK Limited trading as TransUnion is an Agent of Bud. Bud is the trading name of Bud Financial Limited. Bud is
authorised and regulated by the Financial Conduct Authority under registration number 793327 as a regulated Payment Services and Open
Banking Provider
altfi.com
Our strategic
investment in Bud
marks the start
of an exciting
new partnership,
combining
our global
infrastructure and
insights expertise
with Bud’s end-to-
end open banking
platform.
Celso Nogueira, UK Director
Of Open Banking, TransUnion
concern about stolen credit card
information. For lenders, the security
advantages open banking offers should
not be overlooked: 49% of consumers
surveyed ranked security of personal data
as the number one quality or expectation
when deciding what online company to do
business with. Lenders should view open
banking as a tool that can strengthen
fraud strategies and address consumer
concerns.
How We’ll Help Shape The
Future
In the UK, there are 7 million active users of
open banking3. Strategically, we’re at a
pivotal moment where consumer use is
growing, opportunities for lenders are
highly attractive and the ecosystem is
primed to evolve following the recent
recommendations published by the JROC4.
Globally, the UK has led the way with open
banking and as other countries catch up,
we’re at a juncture where we can lead and
inspire again. To do this effectively we’ve
recently invested in data intelligence
specialist Bud Financial Ltd (Bud)5.
“TransUnion is committed to increasing
financial inclusion by continuing to
expand the information available to
create an accurate and reliable picture of
each consumer,” states Celso Nogueira,
TransUnion UK director of open banking.
“Our strategic investment in Bud marks
the start of an exciting new partnership,
combining our global infrastructure and
insights expertise with Bud’s end-to-end
open banking platform. Bud was
recognised as a ‘Leader’ in the Forrester
Wave ™ Open Banking Intermediaries, Q1
2023 report, underscoring the high regard
their technology is held in within the
industry. Our partnership will help deliver
an open banking platform that makes it
simpler than ever to onboard consumers
in the digital age.”
As those working in the industry know,
Bud has led the way in making financial
decisions simple. “At Bud, we’ve proven
that use of transactional data via open
banking enables lenders to gain deeper
insights into their customers’ financial
behaviour, meaning they can make more
informed lending decisions and offer
tailored products and services,” explains
George Dunning, Bud COO and co-
founder.
TransUnion’s ambition is to improve
financial inclusion in the UK, and it’s clear
how working with Bud to enhance open
banking’s capabilities will help make this
happen. From employing AI to improve
models to using dashboards to engage
customers in arrears and increase
chances of better outcomes to an
in-house UX team laser focused on an
optimized customer journey, the next
phase of open banking and open finance
will deliver a customer experience that’s
meaningful.
12
VRPs: Gamechanger
Or Damp Squib?
VRPs could one day represent an important part of the consumer
financial landscape. But can they overcome a lack of clarity around
implementation, or the dearth of consumer awareness anytime soon?
Source: Erik Witsoe on Unsplash

T he trusty direct debit has served

consumers and businesses well for
over 30 years. But could Variable Recurring
Payments (VRPs), under the right
circumstances, steal some of their coveted
position?
Well, mainstream adoption isn’t quite
there yet. The nine major UK banks (CMA9)
were given a mandate by the Competition
and Markets Authority (CMA) to implement
what’s known as “sweeping VRPs” back in
August 2022.
With a sweeping VRP, a type of “me-to-
me” payment, customers can
automatically transfer money between
their own accounts, within certain
boundaries. For example from a higher
interest saving account to a current
account, just in time for a payment.
However, for commercial use cases,
where consumers can set up a VRP to
transfer their funds to accounts owned by
others, for example, an online retail
payment, support is much less
widespread, at least at the moment.
At the time of writing, NatWest is the
only mainstream bank to support these
commercial VRP applications, and they
aren’t yet mandated by regulators.
We’ve seen it many
times, anything
that is mandated
by the regulator
becomes a priority.
Natasa Kyprianidou, Director Of
Financial Services, Publicis Sapient
“That’s how we’ve previously seen the
adoption of other new financial
technologies being introduced to
customers play out over time, which
replaced something that they were more
comfortable with.”
That being said, Kyprianidou feels that
the right type of regulatory pressure could
expedite the process.
“Seeing how tier one banks operate,
and how slow the pace is, in delivering and
executing anything, unless it’s mandated,
and there is a regulatory deadline, I think
they will struggle to put something out
there sooner rather than later,” explained
Kyprianidou. “We’ve seen it many times,
anything that is mandated by the regulator
becomes a priority.”
Optimistically, Andrew Boyajian, head
of variable recurring payments at Tink,
predicts that we’ll see a handful of other
banks, “three, perhaps four”, to start to
experiment with VRP, for example by
running a pilot or proof of concept
programs over the course of the next year.
What Will Drive Adoption?
Though sweeping is a great use case, the
commercial applications of VRP are what
are going to drive future growth, according
to Boyajian from Tink. The exec believes
that the ongoing cost of living crisis could

When Will We See

Adoption?
Natasa Kyprianidou who is a director of
financial services at Publicis Sapient, and
has previously held roles at Barclays and
Hellenic Bank, one of Cyprus’s largest
banks, is fairly conservative about how
she sees adoption playing out in the short
term.
Kyprianidou thinks it’s unlikely that we
will see widespread VRP use “any time
soon”, or over the next year or two,
however, she’s more optimistic about
adoption over the course of the next five Source: Erwan Hesry on Unsplash
to seven years.

altfi.com 13

“A very basic principle is that there should
be a potential payback period and return
on investment for banks.
Andrew Boyajian, Head Of Variable Recurring Payments, Tink
potentially be a key factor spurring
commercial VRP adoption, as consumers
generally are now looking for more
flexibility to cover their backs in case of
financial emergencies.
“If a consumer gets the advance that
this is going to be an expensive bill, they
have the possibility to engage with that
provider and say that they want to pay the
bill, but the maximum value of the bill is
too much for them to pay right now,”
Boyajian explained.
“With VRP, because you have the option
to do as many transactions as you want,
as long as it doesn’t exceed that maximum
value, you now have the ability to do
maybe two, three smaller transactions
over a span of days or weeks, to lessen the
impact to the cash flow of the end user.”
Kyprianidou feels that VRPs could find
common use for HMRC tax payments, for
example, if you have an unaffordable tax
bill, as well as for integrations with Buy
Now, Pay Later (BNPL) services.
Though at the time of writing NatWest
is the only major UK bank offering live VRP
integrations for commercial use, Boyajian
feels current government actions could
help spur things along. Boyajian pointed
to the Joint Regulatory Oversight
Committee (JROC) recently publishing its
altfi.com
recommendations for the future of open
banking in the UK, and feels confident
that this will help “nudge” the industry
towards further implementation.
JROC called for the “ecosystem,
coordinated by the relevant trade
associations and supported by the OBIE,
to come together to draft a framework for
rolling out non-sweeping VRPs, with a
path to scalability”.
The FCA and PSR are set to provide
“terms of reference” for this in Q2 2023.
What Can The Industry
Do?
Boyajian from Tink feels the industry
would benefit from greater clarity about
how VRPs could work in the future, and
who will foot the bill for their future
development.
“A very basic principle is that there
should be a potential payback period
and return on investment for banks,”
argued Boyajian. “What that payback
period is, can be defined amongst those
players, but there should be a common
acceptance that these are a
commercially-driven API, and that there
should be some consideration for that
Natasa Kyprianidou, Director Of Financial Services, Publicis Sapient
payback period.”
Kyprianidou predicts the rise of VRPs
could be broadly comparable to how
other open banking use cases such as
one-click payments in the case of
embedded finance have slowly come into
use without anyone noticing a sudden
transition. However, the exec feels that
consumers may need at least one good
compelling consumer use case to “break
through” into the financial mainstream.
“I think the benefit to customers of
choosing a VRP versus, let’s say, a direct
debit needs to be clear,” said Natasa.
“What’s the difference from a user
experience perspective?”
“And what are the benefits versus
setting up a direct debit the traditional
way?”
Boyajian thinks that consumer
education about what a VRP actually is
will be key to spurring consumer
adoption. Though practically no one who
doesn’t work in finance walking down
the street could define a VRP, Boyajian
thinks that VRPs could gradually enter
the public vocabulary in the same way
that Bitcoin has over the next five
years—provided that media and financial
institutions take the appropriate steps
towards educating the public.
VRPs have many promising potential
use cases, and JROC’s recent show of
faith is a promising encouragement for
mainstream adoption.
But it’s likely that the rise of VRPs may
be more a case of the next decade than
over the next few years, and the parties
involved will need to provide a strong
use case that will be able to tempt
consumers to depart from what they are
familiar with. It may be early days yet.
14
Unlocking More Customer-Centric
Services With Open Finance
Non-sweeping VRPs are just the first of many new opportunities to
enhance open banking in the UK, writes Martijn Bos policy officer at Plaid.
Sponsored by:
I n just four years since its inception,
open banking in the UK has made
significant strides, setting a solid
foundation for the evolution to open
finance. Having learned from the
experiences of open banking, the UK
stands on the brink of exploring the
extensive possibilities of the next phase:
open finance.
While excitement is growing for the
next phase of open banking since the
publication of the JROC report, we need
to take stock and learn from phase one
and bring our lessons forward in order to
build valuable services for UK consumers.
Collaboration Will Unlock
Value
A key lesson derived from open banking is
the paramount importance of
altfi.com
The path to Open Finance is paved with
collaboration; it’s the spark that fuels
innovation and propels us into a future
where data is a shared and valued resource.
Martijn Bos, Policy Officer, Plaid
collaboration. The synergistic interaction
between financial institutions and
third-party providers (TPPs) has resulted
in a collaborative ecosystem that fosters
innovation, benefiting customers by
addressing their evolving needs. As we
transition to open finance, this spirit of
collaboration needs to deepen further
Martijn Bos, Policy Officer, Plaid
Source: Shutterstock
Financial institutions should be
provided with more incentives to broaden
the range of use cases and share richer
data sets. Instead of viewing regulation
as a burden, fintechs and banks should
see it as an opportunity to advance their
product offerings. As consumer
expectations shift rapidly, they seek
greater accessibility to high-quality data.
Strategic incentives can ensure a more
value-driven delivery to end-users.
Education Is Key To
Adoption
Open banking has underscored the
criticality of data privacy and security.
The paradigm is clear: customers own
their data, and the onus lies on financial
institutions and TPPs to safeguard it and
use it appropriately. The successful
implementation of robust security
measures under open banking has
significantly boosted customer
confidence in data sharing.
However, it’s natural for consumers to
be wary of new technologies. While the
uptake of open banking continues to
surge, the majority adoption may still
face a slow curve. Therefore, education
becomes a pivotal factor in mitigating
apprehension and fostering trust.
15

Consumers need to understand the safety
measures inherent in open banking and
open finance. As open finance promises
broader access to data, it may trigger
increased concerns. Building trust, hence,
becomes even more vital.
Standardisation = Speed
The expansion to open finance requires a
comprehensive approach that integrates
diverse data sources, ensures
interoperability through broader API
access, and adopts standardised API
protocols. It entails creating and
maintaining robust data management
policies, addressing data storage,
privacy, and security concerns. The
development of universally accepted API
specifications, like the UK’s Open Banking
Implementation Entity (OBIE) standards,
will facilitate smoother and faster data
communication across financial
institutions.
Cross-sectoral alignment, another
Open Finance isn’t just about sharing
more data, it’s about establishing
standards, creating interoperability, and
crafting a universal language of financial
communication.
Martijn Bos, Policy Officer, Plaid
altfi.com
Source: Radu Prodan on Unsplash.
crucial factor, can enhance consumer
value, leading to a more inclusive,
competitive, and innovative financial
ecosystem. This necessitates fostering
collaboration between the financial
sector, regulators, and other industries
like telecommunications, utilities, and
retail. By establishing a coherent
framework that encourages data sharing
and interoperability across sectors, open
finance can enable the development of
innovative platforms that cater to
consumers’ multifaceted financial needs.
The Next Phase Of VRPs
Looking forward, one of the most exciting
advancements in open finance will be
non-sweeping VRPs. They can offer a new
payment model where customers can set
up recurring payments without
continually moving money between
accounts, and most importantly -
accounts that are not necessarily held in
their name, as is currently the case. This
unique feature endows TPPs with a
commercial advantage, enabling them to
provide more customer-centric services.
It not only strengthens existing Payment
Initiation Services (PIS) and Account
Information Services (AIS) use cases but
also combines data from these
traditionally separate products into one
dynamic and powerful payments
product. One could even imagine an open
finance future where variable recurring
payments could be utilised for all types of
accounts (e-wallets, investment
accounts, specialised savings accounts,
loan repayment accounts etc) not just
payments accounts under the payment
regulations.
Regulatory bodies like the FCA and PSR
are keeping pace with this innovation,
considering updates to rules and
requirements to maintain a robust open
banking ecosystem. They’ve recognised
the strong demand, especially from TPPs
and retailers, for expanding non-
sweeping VRPs beyond sweeping use
cases.
A Framework For The
Future
Efforts are underway to create a
framework for the rollout of non-
sweeping VRPs. This involves industry-
wide coordination, supported by the OBIE
and relevant trade associations, and is
aimed at providing a path to scalability.
This framework will consider various
aspects including products and areas
covered, dispute handling, liability
arrangements, and a market pricing
structure to incentivise cross-market
participation.
This year, significant progress is
expected through industry coordination,
with non-sweeping VRP use cases being
enabled in a phased manner. As non-
sweeping VRPs scale up from lower-risk
to a broader set of use cases, a robust
framework will be crucial to ensure
consumers and businesses can benefit
from safe, reliable, and cost-effective
open banking services.
In conclusion, non-sweeping VRPs offer
a significant opportunity to enhance
open banking in the UK. Their potential to
provide more customer-centric services,
coupled with the commitment of
regulatory bodies and industry
stakeholders to create a secure and
scalable framework, heralds a
transformative future for open banking.
16
Open Banking Lessons From
Australia, Brazil And The US
Economies around the world are taking far different approaches
to opening up their banking data. But are some of these bearing
more fruit than others - and are such comparisons even fair?
W hile the name of the legislation, or
lack thereof, differs depending on
the country you look at, the balance of
data ownership in many of the largest
economies is shifting from banks towards
consumers.
Though countries all over the world
have opened up access to consumer
financial data, in many cases, adoption
isn’t being spurred by top-down
government legislation. But with the
radical differences in the financial
systems, regulations, and the size of
countries like the US, Brazil and the United
Kingdom, is it even possible to judge which
approach is faring best?
The American Approach
Unlike the UK and mainland Europe which
had their hand forced by PSD2, the US has
opted for a “market-led approach” to
opening up banking, where private
Looking at the US,
there are a lot of
banks that have
that awareness,
but because the
landscape is so
large, for a lot of
banks, it’s not
so high up their
strategic agenda.
Eloise Taysom, Head Of Product,
Bud Financial
altfi.com
companies choose to open up their data,
without any regulations forcing them to do
so. Without legislation forcing data sharing
many US third-party providers (TPPs) use
a method known as “screen scraping” to
get the needed data, where the providers
grab the information from the consumer’s
bank account without the bank’s
knowledge.
Dr Eloise Taysom, Head of Product at
Bud Financial, feels that from her own
experience, there simply isn’t as much
awareness—or prioritisation—of open
banking within US markets.
“You go into any bank in the UK, and
they know what open banking is, and
they’ve already had strategic
conversations about how to use it,” she
explained. “Looking at the US, there are a
lot of banks that have that awareness, but
because the landscape is so large, for a lot
of banks, it’s not so high up their strategic
agenda.”
Source: Andrew Butler on Unsplash
But it’s not just regulation that may be
prompting the relatively low current level
of awareness in the US. Taysom pointed to
the highly dispersed and fragmented
nature of the US banking industry as a
reason why open banking hasn’t seen as
much widespread adoption. With the US
having over 4,844 insured commercial
banks according to the Federal Deposit
Insurance Corporation (FDIC), it’s easy to
see how strategic priorities can differ so
widely in the US.
Another reason the US may be coming
in behind the UK is purely technical, in
Taysom’s words, the APIs “simply aren’t
there”.
“Large US banks have those direct
relationships and have proprietary APIs
from providers like Bud or MX
Technologies,” she explained. “Those
companies presumably are adding to
those API integrations all the time, but it
requires them to go to each provider and
Eloise Taysom, Head of Product, Bud Financial
17
have a conversation and create a
commercial structure around that and set
up the API.”
“This is obviously a huge investment,
they’re not going to do that for near-5,000
banks,” she added.
Jess Turner, Executive Vice President
and Global Head of Open Banking and API
at Mastercard wanted to point out that
though open banking adoption may not
necessarily be faster in the US than in the
UK, it’s certainly “busier”. Pivoting these
many different institutions to a whole new
way of doing business is a big task,
meaning a cornucopia of new deals and
technical challenges may be on the
horizon.
Latin America’s Leader
The approach of the US comes in contrast
to how open banking adoption is playing
out in Brazil, another huge market for
financial services. Brazil is taking what is
in a sense another “top-down approach”,
with its Open Finance Initiative which
launched in 2021 being broadly
comparable to the UK’s legislation.
Aside from regulation itself, the actual
open banking use cases that financial
services companies are exploring are
quite different in Brazil, according to
Turner from Mastercard.
Turner thinks that use cases in a nation
like Brazil may naturally differ from the US
or UK, because Brazil has what’s known as
“Pix”, an extremely well-established
non-debit card payments system which is
used by over 119 million people. As a
result, Brazil may mainly look to open
banking to provide value in areas outside
of payments. In particular, Turner feels
that this could help Latin America much
more, where there are significantly more
underbanked people and a wide “digital
divide” to traverse.
“There is more focus on the data
altfi.com
Each country’s
approach might
be right for
that country.
Jess Turner, Executive Vice President
and Global Head of Open Banking
and API, Mastercard
exchange element,” she explained.
“What’s really exciting about this is
depending on where you live in the world,
you can take for granted that you have a
credit score or can gain access to capital
or lending at certain rates.”
“But this is not at the same maturity in
Brazil, from my perspective. I think what
open banking can really start to do is
enable different types of lending and
underwriting, or maybe more robust
credit scoring.”
Turner feels that open banking could
help open up Brazil’s financial ecosystem,
leading to more access to capital with
lower default rates for a larger population.
Open Banking In Aus
Australia’s approach to open banking
bears more similarity to the UK’s top-
down approach than to the US’s market-
first strategy.
Australia implemented its own open
banking-like legislation, the Consumer
Data Right (CDR) in mid-2019. Though
banking was the first sector forced to
share data by the act, its impacts are set
to be felt far more widely. The legislation
will eventually be applied to multiple
sectors, covering everything from utilities
and telecoms data, all regulated by
different public sector bodies. Australia’s
regulations look a lot more like “Open
Finance” or even “Open Data” when
compared to the UK’s open banking
legislation.
Though it’s apparent that different
economies are traversing their open
banking journey’s at obviously different
speeds and for different uses, Turner from
Mastercard thinks this is fine—every
country may need to pick their own pace.
“Every country has to really understand
what the benefits of open banking are for
them today,” she explained. “What is the
primary scale use case that’s going to
make that country a better place?
Turner also thinks there are potential
issues around moving too quickly with
open banking and “killing it before it
scales”.
“It is a little bit of a scale-up getting to
a place where it’s having the same level of
accuracy and the conversion rates that
we’re all used to in the digital world.”
Turner went on to posit that “each
country’s approach might be right for that
country”, adding that companies, at least
the successful ones, will naturally follow
consumers’ demands for newer, better
financial services.
Regardless of how different nations
approach their open banking journey
initially, over a long enough time period,
they may end up at roughly the same
place. Though countries may differ in how
they benefit from or approach open
banking adoption, basic consumer desires
for ownership of their data, easier-to-use
services, and more innovative services
don’t really differ all that much whether
you are in Mexico, Antarctica or Bali.
Though there may be pros and cons to
both a market-led and top-down
regulatory-focused approach, with
countries as different as the UK and Brazil,
it seems unlikely a “one size fits all”
approach could be recommended.
Source: Andrew Butler on Unsplash
18
Inside HMRC’s £13bn
Payments Revolution
Just two years since launching its proposition, HMRC has become the leading example of
open banking payments being used effectively and at a vast scale. How did it come about,
what were the challenges and what does its success mean for open banking’s future?
A dvocates of open banking payments
say they are quicker, easier and more
secure than card payments. It seems many
agree, with Juniper Research estimating
open banking payments transaction
values will exceed $330bn globally by
2027—up from the projected $57bn in
2023.
The UK’s HM Revenue & Customs
(HMRC) is at the forefront of
developments. Its initiative in introducing
next-generation technology to its payment
systems is unprecedented within the
global public sector.
As the first known example of any
government integrating with open
banking, it was perhaps clear from the
start that HMRC would establish the
‘golden’ use case of open banking for
multiple sectors and industries, given the
profile of the organisation and the volume
of payments it collects annually.
With a view to simplifying payments for
taxpayers, as well as generating significant
cost and efficiency savings through
account-to-account (A2A) payments,
HMRC issued the open banking tender in
late 2020 with the help of the Open
altfi.com
When we found
ourselves on the
shortlist against
global blue chip
brands, we didn’t
think we stood a
chance.
James Hickman, Chief
Commercial Officer, Ecospend
Banking Implementation Entity.
“We applied for the HMRC tender just as
we launched our commercial strategy, so
it was exciting to be participating in this
process so early on in our lifecycle,”
explained James Hickman, chief
commercial officer at Ecospend, which has
worked with HMRC to bring the
proposition to life.
Source: John Schnobrich on Unsplash
Source: Ink Drop Shutterstock.com
“Apparently 80+ organisations took part
in what is widely known as the most
forensic analysis of the UK open banking
landscape to date. When we found
ourselves on the shortlist against global
blue chip brands, we didn’t think we stood
a chance. The fact we did win and have
delivered such a robust solution is
testament to the quality of our
technology.”
Overcoming The Hurdles
“Although HMRC had clear foresight in
understanding the benefits of A2A
payments and shared our vision in
bringing the innovative force of open
banking to the public sector, there
remained the ultimate barrier of user
uptake,” said Hickman.
In order to clear this hurdle and
encourage user adoption, ‘Pay by Bank’
was introduced as the top payment option
on the HMRC website. Starting off as an
additional payment method for Self
Assessment tax returns in March 2021,
‘Pay by Bank’ was soon introduced to
Corporation Tax, PAYE and VAT payments.
Due to substantial growth in user
adoption, ‘Pay by Bank’ was later
extended to nine further tax regimes,
including Stamp Duty Land Tax, Capital
Gains Tax and Class 1A National Insurance
Contributions. This eventually culminated
in ‘Pay by Bank’ being the only payment
option on the new HMRC app.
“Payment channels reach a point where
the shift from niche to mainstream
becomes inevitable and starts to
accelerate,” said Helen Child, founder of
the industry group Open Banking
Excellence. “We saw this with contactless
payments initially with the Transport for
London use case, and then as we reacted
to the Covid pandemic and tried to limit
social contact. When we look back at how
open banking payments reached their
19
 James Hickman, Chief Commercial Officer, Ecospend

tipping point, the HMRC use case will be incorrectly. With ‘Pay by Bank’, every
talked about in those terms.” detail of the payment is pre-populated
and every payment is clearly traceable to
Open Banking’s Big each payer, leaving no chance for a

Arrival On The Payments

When we look misallocation of funds.”

Scene back at how A Yardstick For Further

This revolutionary open banking project
has helped HMRC to streamline and
automate parts of its payment processes
and simplify its payment journey for
taxpayers, while saving money for the
public purse by encouraging people to
pay by open banking rather than by card.
As payments are initiated directly from
the payer’s online banking environment,
the payment solution provides a secure,
low-risk mechanism for collecting
amounts owed. The irrevocable nature of
A2A payments also eliminates the
possibility of chargeback fraud, enabling
HMRC to receive instant payments at
bank-grade security.
Since ‘Pay by Bank’ went live on the
HMRC website and app, Ecospend has
processed nearly £13bn worth of
payments. This includes £2.3bn across all
tax regimes integrated with ‘Pay by Bank’
in January 2023 alone, ahead of the
deadline for Self Assessment tax returns—
and £320m of this figure was transacted in
less than 24 hours (31 January 2023).
open banking
payments
reached their
tipping point, the
HMRC use case
will be talked
about in those
terms.
Helen Child, Founder, Open
Banking Excellence
“No other use case has introduced
more first time users to open banking
payments than HMRC’s integration with
A2A payments,” said Hickman. “Our
technology also resolved a long-standing
pain point for HMRC: millions of pounds in
tax payments going into suspense
accounts every year as a result of
taxpayers entering their details
Progress
The success of the HMRC use case has
generated incredible awareness of open
banking amongst different sectors and
their end users. It has not only elevated
the nationwide adoption of open banking,
but also continues to set the tone across
the international payments landscape.
“Already we are seeing pickup in
contexts like credit card repayment which
can be attributable to the precedent laid
down by HMRC,” said Child. “As those
pieces proliferate we are fast approaching
mainstream adoption for open banking
payments.”
“A2A payments are well on their way to
becoming the market standard,” added
Hickman. “However, there is still some
mileage to be covered before the
inflection point is reached. Given the
success of open banking with online
payments, the next challenge to tackle is
A2A at point-of-sale, which will kickstart a
new era in modern payments.”

altfi.com 20
 AltFi provides market-leading news, opinion,
insights and events for the rapidly-growing
alternative finance and fintech community.

Sponsored By:

altfi.com

@altfinews

Advertising and sponsorship enquiries:

sponsorship@altfi.com

© 2023 ETF Stream Ltd

All editorial content and graphics in AltFi Research reports are protected by UK
copyright and other applicable copyright laws and may not be copied without the express
permission of AltFi, which reserves all rights. Reuse of any of AltFi's editorial content
and graphics for any purpose without AltFi's permission is strictly prohibited.

Permission to use AltFi Research content is granted on a case-by-case basis. AltFi

welcomes requests. Please contact us on sponsorship@altfi.com

AltFi Research is published by AltFi