Fans of Travel Man and IT Crowd star, Richard Ayoade are doubtless already aware of HSBC’s Connected Money service. In a TV ad campaign launched earlier this month, Ayoade deploys his comedic talents to promote the virtues of a new smartphone app that brings together data from up to 21 different banks, giving customers visibility of all, or most, of their financial transactions through a single window – a window supplied by HSBC.
HSBC has launched Connected Money at a time when Open Banking regulations – which came into force in January 2018 – are expected to bring innovation and competition into the financial services market. Arguably by allowing its customers to keep track of all their financial affairs through an HSBC app, the bank is aligning itself with this spirit of innovation, but at this stage, it would be wrong to describe Connected Money as an Open Banking product. However, it does represent the beginning of a journey.
The Age of Data
Under the freshly-minted new Open Banking rules, Britain’s nine biggest banks and one building society are required to make customer account information available to licensed third parties through a secure software platform. Essentially this means that information can be shared seamlessly, once a customer has given permission.
If all goes according to plan, this will mean that account data from multiple sources will be used by licensed financial services companies to create a new generation of enhanced products. For instance, a savings app might have seamless access to one or more current accounts and advise when surplus funds can be channelled into a pension plan or stocks and shares. Equally, Open Banking might underpin a budgeting app designed to encourage better money management by tracking and analysing a consumer’s transactions across cards, cash machines and direct debits. It’s thought that challenger banks and fintech companies have most to gain from this opening up of the finance infrastructure, but big banks have an opportunity to gain a competitive edge by building their own added-value products and services.
Enter Connected Money, which marks the first attempt by a major British bank to offer a budgeting tool covering multiple accounts. After extensive testing in 2017, the app was officially launched on May 10 with the aim of making it easier and quicker for people with more than one account or card provider to manage their finances.
As HSBC’s Head of Personal Banking Becky Moffatt put it:
“Having access to one app that shares insights across a customer’s UK current accounts, mortgages, credit cards, savings and loans saves time by not having to individually log into each account and provides a clear view of their financial position.”
Not Quite Open Banking
But that doesn’t quite mean that HSBC is ahead of the game in terms of developing Open Banking services. While Connected Money looks, on the face if it, like Open Banking in action, it uses a different set of technologies – and in particular a technique known as screen scraping.
As a spokesperson for HSBC confirmed, HSBC hopes to fully embrace Open Banking by the end of the year but for the moment the service depends on customers who download the app providing the login details for all the accounts that they want to include in their financial view. Once armed with the login details, the app then accesses the relevant accounts and extracts the data.
In contrast, under Open Banking, licensed financial services companies can access shared account information without a need for usernames and passwords. This is considered by some industry experts to be more secure. Perhaps more importantly, when a customer authorises a finance provider to access information from a third party account, the user can specify exactly the type of data that will be exposed. This is not necessarily the case when account information is accessed by a login.
Joined up Banking
At one level, this doesn’t necessarily affect the ability of Connected Money to act as an efficient budgeting tool. What the app certainly does do is deliver what HSBC describes as ‘joined up’ banking. For instance, once a user has provided account details, the app enables that customer to see at a glance how much he or she has (in terms of cash, overdraft facilities, etc), how much is being spent day-to-day and how much will be remaining once the bills are paid. And just so customers know when the bills are due, the app contains a calendar.
Connected money also contains an analysis feature, which allows users to break down their spending into categories and keep a check on exactly where the money goes. Perhaps unsurprisingly, the app also does a fair bit of nudging customers in the direction of more responsible financial behaviour. It will, for example, message users with insights into their spending and tips on how they could be saving money.
As things stand, the App is only available to users of Apple devices (IOS 10 and above) but an Android version is promised in the near future. However, because the service uses login details, rather than the relatively new Open Banking software protocols, it works with just about any major card or account provider that offers online banking and can be accessed via a username and password. That includes all the major banks plus card companies, such as American Express
The Road To Open Banking
If HSBC has not yet embraced the technologies associated with Open Banking it has arguably anticipated public demand for a new kind of banking service. As a spokesman for the bank told MoneyGap:
“We have been listening to our customers and giving them the sort of service that they want.”
And if that’s the case, HSBC may be putting some clear, blue water between itself and rival High Street banks. New banking services such as Monzo and Loot have gained traction, partly because they offer a degree of money management functionality on top of basic transactional banking. Meanwhile, dedicated money management apps – notably Yolt – are already using bank data to drive their budgeting tools.
According to Christian Ball, Head of Retail at GFT – a consultancy that works with major banks on digital transformation – the big players in the financial services industry have much to gain from embracing Open Banking. It is not, he says, something that only benefits challengers.
“It’s a case of anything you can do I can do better,” he says. “Any large organisation with an appreciation the importance of a customer-centric experience can gain from Open Banking.”
But it’s important to get it right. Aside from HSBC, the big High Street banks are keeping their powder dry. As yet, Barclays, Lloyds, Santander and Royal Bank of Scotland have not officially announced any plans to move into the open banking arena, although there is work going on behind the scenes. According to a spokesperson for Lloyds, a lot of testing has gone on since the launch of Open Banking, with the focus on finding out what customers want. Similarly, a Barclays spokesperson said the bank was likely to move when it was satisfied that services could be delivered securely and to the standards expected by its customers.
And as Ball points out, Open Banking is about more than sharing data. It is about creating new models. For banks, it may also mean moving away from a focus on their own services a more collaborative approach with other providers. This, in turn, has to be sold to customers.
“So banks are going to have to think about how they reach out to customers,” he says.
In the meantime, Open Banking is levelling the playing field. If Challenger banks, accountancy firms, money management app providers and a whole host of other fintech companies can build new services that draw on data from the top ten banks, then the big players in the banking arena will, in turn, feel pressure to improve their own products in line with public expectations.
Thus, HSBC’s Connected Money may not as yet be an example of Open Banking in action, but it probably does represent a response to new competitive pressures.