As part of chancellor George Osborne’s Autumn Statement, the government has called for a review into how banks an open data up to customers, helping increase competition by enabling easier comparisons between financial services providers. However, reliance on legacy IT could delay plans, a report into the proposals has warned.
The ‘call for evidence’ from the government revealed that price comparison website GoCompare would be one of the first to offer a current account comparison tool as part of the midata scheme in April 2015.
“The government is determined to support a more competitive banking sector where new banks, alternative providers and financial technology (fintech) firms can thrive alongside the established players, competing to offer new and improved services to customers,” Osborne said in the Autumn Statement document.
The problem of legacy IT
The announcement coincided with the publication of a report into the use of open data by the Open Data Institute and Fingleton Associates.
The report centres around how banks can allow fintech firms to build consumer-facing services by providing access to transaction data through standardised application programming interfaces (APIs). APIs allow two pieces of software to exchange information in a secure manner.
However, the Open Data Institute report warns that the legacy IT environments built up by large banks over decades could struggle to cope with supporting new information-sharing plans.
“The core IT systems were designed before many of the current uses and applications were envisaged, let alone modern data sharing techniques,” the report states, adding that the situation “creates a number of specific challenges”.
For instance, retrieving new data from core banking systems running on mainframes will be difficult, while drawing together information from across multiple databases will also present a challenge for some, with each siloed database required to connect to the API independently.
In addition, increased load volumes resulting from offering third-party API access could put a strain on already creaking systems.
“Some of the people we spoke to voiced concerns over whether banks would be able to cope with another increase in enquiry volumes without changing the way that some of their systems work, or reducing the quality of their digital services - for example, by increasing the time it takes for each enquiry to return an answer,” the report stated.
API cost barrier?
Question marks were also raised over the time and cost of developing open APIs – with independent estimates tending to be lower than £1 million, while some banks put the figure closer to ‘tens of millions’ of pounds. Meanwhile building and maintaining an API ecosystem requires a “very specific skill set” and would involve banks hiring more experts in this area.
Despite these barriers, in each case there were workarounds to make data available, and many bank experts approached as part of the report were “confident” they could manage the extra demands.
The report also makes the point that there are already a number of access points from which APIs could be developed without needing to tap into core banking systems. This includes private APIs developed by the banks for mobile banking apps, direct feeds for accounting software used by the banks, and ATMs across the LINK network. Meanwhile, start-ups like the Open Bank Project already provide services around open APIs.
The Open Data Institute also claims that banks will benefit from opening data, becoming a "platform for third party innovation", allowing eco-systems of apps to be created to enable additional functionality, in the same manner as the Apple AppStore, Salesforce API ecosystem and eBay's 'app centre'.
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