Open Up 2020 Summary Report

The Open Up 2020 Challenge

The Open Up 2020 Challenge Summary report December 2020

The Open Up 2020 Challenge has shown the potential that open banking has to revolutionise financial services – transforming and opening up the UK banking industry by giving people control over their financial data and enabling the development of innovative, personalised products.

This wave of innovation brings significant benefits to both consumers and small businesses and holds particular promise for people partially or entirely excluded from access to fair financial services.

The challenge prize generated a wealth of insights from a wide range of sources; from innovators, consumer research, a national marketing campaign, and from experts

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who supported the innovators through the challenge. The full report explores some of these insights, focusing on four areas: • Consumers and open banking • Innovation and open banking • Open finance and beyond • Challenge prize impact In this summary report, each of these themes is briefly explored, with details of where to find more information and evidence in the main report and the accompanying campaign report, which focuses on the campaign and insights for the ecosystem on how to talk about open banking to build consumer trust, awareness and adoption.

The Open Up 2020 Challenge

About the challenge The Open Up 2020 Challenge, which ran from July 2019 to October 2020, aimed to unlock the power of open banking for UK consumers. It was delivered by Nesta Challenges in partnership with the Open Banking Implementation Entity (OBIE).

The challenge attracted over 100 entries from which 15 incredible fintechs were selected as finalists by an independent judging panel. The

15 finalists developed and scaled their solutions over ten months whilst receiving non-financial support from the challenge and being featured in a national marketing campaign.

In November 2020 four winners were announced, representing the most innovative open bankingpowered products on the market to help consumers make the most of their money.

Open Up 2020 winners

Open Up 2020 finalists

Read more in Section 2 and Section 3 of the full report 2

The Open Up 2020 Challenge

Consumers and open banking Learning from the challenge, it is clear that the open banking ecosystem today is delivering consumers not only value but also choice, with an incredible range of apps and services built using open banking – far beyond the initial aims of the regulators.

Millions of people in the UK are responding by adopting these products, with over two million

regular users of open banking in the UK as of August 2020. Consumers are happy to access their data via third parties to use innovative solutions that genuinely help them manage their money better. There is evidence illustrating how these products are boosting financial wellbeing in the UK.

Supporting others

Learning about money

Simple charitable giving Supporting vulnerable people

Childhood savings Financial education Structuring a budget

Planning for the future

Building financial resilience

Saving towards a goal Preparing for a mortgage Applying for a mortgage Building a pension Investing

Building a credit score Getting a loan Managing debt Managing a budget Avoiding fraud and scams

Everyday money management Comparing accounts Renting a home Paying tax

Saving money on bills Saving money on spending Saving money on fees abroad

Read more in Section 5 of the full report

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What’s really exciting about the entries is that

financial education in a much more intuitive way

The Open Up 2020 Challenge

Innovation and open banking What has powered innovation The innovation arising from open banking is broader and deeper than was anticipated by the legislation. The challenge explored what had powered this innovation, highlighting two key enablers that have fueled the growth of open banking for consumers:

A. Building a trusted ecosystem with clear rules and guidelines Open banking’s clear rules and guidelines have lowered the barriers to entry for innovators, levelling the playing field. There is strong evidence that entrepreneurs and innovators are entering the sector to build on this platform to deliver value using data that once only the largest banks were able to access.

B. Supporting the growth of strong aggregators Aggregators are potent enablers of current and future innovation in open banking, allowing start-ups to integrate speedily at low-cost and maintain their customer focus by facilitating swift ‘test and learn’ iteration of their products.

Read more in Section 6 of the full report

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What is needed to supercharge future growth in open banking Open banking in the UK has had a steady trajectory which looks to continue – the challenge highlighted two opportunities to further supercharge this growth.

A. 90-day reauthorisation Both entrants and finalists underscored the challenge that requiring users to re-authorise in their banking app every 90 days creates.

This rule often leads to high user attrition for fintechs which, in turn, increases costs and reduces the lifetime value of customers for fintechs. If this rule were revisited, finding lower friction routes to informed consent, growth in users would likely increase.

B. Variable recurring payments Finalists have raised issues relating to the development of variable recurring payments (VRPs). Users currently have to authorise individual payments every time a payment is made, meaning many fintechs instead use direct debits which give consumers less control than open banking-enabled payments could.

The Open Up 2020 Challenge

Open finance and beyond Lessons for other markets and sectors Although open banking in the UK is now gaining strong traction, there are three insights that other markets and sectors should take note of to enable fast growth from the start:

The demand for open finance The potential for open finance is now more apparent, with both consumers and innovators calling out for the next stage of regulation to enable UK consumers to take control of their entire financial lives, following the model set by open banking.

A. Easy-to-understand consumer rights

A. For consumers

One of the main factors finalists feel has slowed open banking adoption is a lack of consumer trust, stemming from unclear consumer protection and little proactive communication from banks.

Consumers want to be able to take control of their whole financial lives – not just their current accounts, with strong adoptions of open banking-enabled products across the financial products landscape.

Clear, simple consumer protection guidelines that are well communicated by trusted entities could help to boost new sector growth.

B. Holding data providers to account Insights from innovator experience suggest that there should be a focus on incentives for data providers to ensure high quality data, infrastructure and support to ultimately enable a better consumer experience.

C. Inclusive design: starting with vulnerable consumers Other sectors and markets should consider using inclusive design at the beginning of standards and regulation development – ensuring that underserved and vulnerable consumers can easily access and benefit from the new technology and not increase the digital divide.

Read more in Section 7 of the full report

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B. For innovation Innovators highlight the need for open banking to go further, enabling them to deliver more value to consumers by being a single source of truth. Open finance would enable innovators to adapt and strengthen their business models, increasing the likelihood of long-term, sustainable success for new entrants.

The Open Up 2020 Challenge

Challenge prize impact Open Up 2020 is one of the largest challenge prizes to support the scaling of an innovation in the UK in modern history and the first with a major national marketing campaign, incorporating digital advertising and public relations (PR), as a key component for finalists.

A regulator-led challenge prize Open Up 2020 was led by a regulator – reflections from OBIE show how challenge prizes can be invaluable in understanding and mapping the development of an ecosystem.

From a regulator perspective, a challenge prize with a clear focus can deliver: A. Insight into the way the market is innovating as a result of regulation.

B. How the market is delivering consumer needs.

C. A ‘window’ into how companies are developing and the barriers and issues they face.

These insights can be invaluable in informing the regulator on how to address issues, incorporate learnings and support a developing ecosystem.

Read more in Section 4 of the full report

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There is evidence of the positive impact of the Open Up 2020 Challenge; some highlights are below on the role of challenge prizes for regulators and policymakers and the impact of the marketing campaign.

A marketing campaign as part of a challenge prize Using a marketing campaign has been a hugely successful element of the challenge; not only in building awareness and adoption for the finalists, but also delivering a wide range of insights for the sector on how to build awareness and trust for new technologies.

The Open Up 2020 campaign reached more than 7.7 million people, with 12 per cent of people in the UK recalling seeing it. The campaign included over 180 advert variations, paid media partnerships and over 380 pieces of press coverage.

Research showed that those exposed to the campaign had on average a three times higher awareness of open banking and were twice as likely to trust and adopt it than those who could not recall the campaign.

Due to this success, the use of marketing campaigns should be explored for future challenge prizes that are used in sectors where there is low awareness or trust in a new technology that is ready for scaling.

banking ecosystem in the UK. What it looks like, how consumers are benefitting, and lessons for other sectors November 2020

Nesta is an innovation foundation. For us, innovation means turning bold ideas into reality and changing lives for the better.

Within Nesta, Nesta Challenges uses challenge prizes to stimulate innovative solutions to some of the biggest challenges we face. Challenge prizes are a simple but powerful idea. A problem or opportunity is identified, the challenge is publicised and rewards are offered to those who can deliver the best solutions.

Open Banking Implementation Entity (OBIE), also known as Open Banking Limited, was created in 2016 by the UK’s Competition and Markets Authority (CMA) to create software standards and industry guidelines that drive competition and innovation in UK retail banking.

Nesta Challenges’ Better Markets team works with regulators, policymakers and innovative enterprises to make markets work better for people. We advise regulators and policymakers how regulatory reforms and targeted public investment programmes can work together to achieve greater impact.

OBIE are governed by the CMA and funded by the UK’s nine largest banks and building societies: Allied Irish Bank, Bank of Ireland, Barclays, Danske, HSBC, Lloyds Banking Group, Nationwide, RBS Group and Santander.

Nesta Challenges 58 Victoria Embankment London EC4Y 0DS challenges.org @NestaChallenges www.facebook.com/NestaChallenges www.linkedin.com/company/nesta-challenges Nesta is a registered charity in England and Wales with company number 7706036 and charity number 1144091.

Registered as a charity in Scotland number SCO42833. Registered office: 58 Victoria Embankment, London, EC4Y 0DS.