Barry O’Donohoe on the move to open finance

FinTech Intel spoke to the chief executive officer of Raidiam to get his insights on how the transition is progressing

Barry O’Donohoe, along with his co-founder Ralph Bragg, is known as one of the founding fathers of open banking in the UK. Following his time working on the project at RBS, he left to found Raidiam, a company dedicated to data sharing not just across banking but all industries. 

Our reporter spoke to him about his journey, how he became one of the founding fathers, and what the future of open finance might look like.

Please could you give me a brief bit of background?

I started as a humble computer science graduate before working in various start-ups in the US and UK. Before founding Raidiam in 2017, I spent over a decade at the Royal Bank of Scotland (RBS), which is where I met my co-founder and chief technology officer, Ralph Bragg.

We were inspired to form Raidiam after foreseeing the challenges created by large-scale data sharing, particularly when it comes to trust and security. Our work began in the UK with the implementation of open banking in 2018 where we spent the first four years conceiving, designing and delivering how to get it done, and how to make it real.

After we successfully delivered open banking to the UK, we went on to implement it elsewhere, most notably in Brazil where we got the process down to six months. Alongside that, we’ve been working with the Open ID Foundation for the last eight years to develop a global standard for open banking. It’s been a long and complex process but what we’ve developed has now become the dominant standard across 12 international markets and growing, from APAC, Europe, Latin America, North America, and the Middle East. Now, we’re seeing other markets working to reach these standards.

You’re considered one of the founding fathers of open banking – which seems ironic that we’re doing this interview on the 4th of July! – how did that come about? Was it something you were passionate about and that you chased, or was it just a case of being in the right place at the right time?

It was a mix of being in the right place at the right time, but I’ve always been passionate about digital identity, trust, security and their application across the industry — open banking was the next big thing and we set our sights on solving the unique challenges it posed.

During my time at RBS, we focused on solving the digital identity challenges that come with the implementation of scaled data sharing. When open banking arose, it was a natural next step, so to speak. We’d been involved in a transformation programme which had started a couple of years before open banking and allowed us to do some of the early groundwork.

We knew we had the right team to make it real; we created a prototype for open banking over a single weekend. We did a hackathon to build an early model of what we thought it should look like. Then, with that in place, we convinced everyone that it was the right way, that it stood up on merit, and would satisfy the principles that everyone was seeking to achieve with open banking.

Now that open banking is embedded here in the UK and across Europe we’re talking about moving to open finance. What do you think are the biggest challenges in the transition? 

The biggest challenge is to get the base of open banking set up to a high standard, with current accounts on the retail and business side. Once those are in place, the same frameworks that underpin open banking today can be used to expand the scope to include other datasets and product types in the future. In my opinion, the patterns and frameworks of open banking are technologically mature, established, proven at scale, and ready to be scaled to further sectors.

That’s what we’ve seen happen in other markets like Brazil, for example, which has rapidly gone from open banking to open finance. They started with the current account product set before making the move to include read/write APIs for payments and then insurance, wealth etc. Brazil is now four years into this and they’re widely regarded as the reference point internationally as having the most complete and well-executed open finance ecosystem in the world.

Brazil’s a gigantic country, so if they’ve managed to achieve it what do you think is holding us back in the UK, Europe and America? Is it a reluctance for the risk, a problem of borders, or something else?

In the UK, there is certainly a clear intent to expand the scope beyond open banking to include wider financial services sector data sets to move us closer to open finance. This is an established direction that’s being followed across other markets too. A key challenge has been to ensure adequate regulation underpinning it, that privacy laws are sufficient, and that the right protections and safeguards exist. There is also the need to address how different supervisory requirements are met for accrediting new entrants and aspects related to licensing.

Different markets have understandably taken different approaches. The US, for example, has been data sharing at scale for some time now such as sharing account information for accountancy packages or tax filings. However, that’s without consumer financial information protections or regulation; creating a market for data access providers to aggregate consumer account data at a massive scale.

Open finance requires new companies to be involved, and there’s a level of uncertainty about what these new entrants are going to be. Currently, the custodians of the data are the incumbent banks themselves, and they’ve held that relationship with their customers for some time. Understandably, they want assurance that these new players are going to meet some minimum standards to protect their end customers.

So, there’s a reticence and reluctance and some heel-dragging, but I believe after people overcome the compliance requirements, they will realise that there’s a competitive advantage to using this as a modern distribution channel for not just third-party access, but for new first-party propositions to their customers.

Is there a risk of theft and fraud? The more open people’s finances are, the more data you have in one place, the more attractive that is to potential theft. 

The term open finance understandably raises questions about theft and fraud. Banks, regulators, and privacy bodies share those concerns alongside consumers. That’s exactly why it’s key to put an accreditation standard in place for new entrants.

Being able to assure users that there is a minimum standard of expectation for privacy policies, fraud, information security and risk management would certainly aid in gaining the confidence and trust of consumers.

There is also a balance to be struck, in that they shouldn’t end up as undue barriers to entry for new entrants to effectively engage in the market to provide innovative services to both consumers and businesses.

Do you think there might be a reluctance from consumers about the sheer amount of data that’s being shared?

Understandably, the terms open banking and open finance do initially raise concerns for consumers who don’t want their finances and data to be ‘open’ and visible. But, in reality, that information won’t be ‘open’ in that way and consumers shouldn’t have to consider these terms at all. Instead, it will likely be introduced as a new proposition that will save them time and money or otherwise enable them to do something that they can’t currently do with their incumbent bank. That offer will be transparent with all it entails, giving them the confidence to safely and securely share the data that they choose with the parties of their choice to achieve whatever benefit they desire.

Can you tell me a bit more about Raidiam’s place in the open banking to open finance transition?

Our role is very much in the centre of the ecosystem. Our customers tend to be the party that’s orchestrating that ecosystem, such as a sector regulator or a central bank that wishes to manifest this scheme. We provide not just the expertise but also the central market infrastructure technology that secures the distributed connections between fintechs and data providers.

In the UK, there are different regulators for different parts of the ecosystem; it’s not necessarily one regulator covering everything, and that’s true in other markets as well. So there’s a need for the supervisory bodies who are responsible for licensing and supervision of governance to retain that control. That’s something they can do using the capabilities that we provide in our Raidiam Connect platform, which is essentially a B2B SaaS platform that we host on behalf of the ecosystem operator.

For national open banking/finance programmes, our customer is the central market authority and not the banks or the fintechs themselves. And whilst we don’t have a direct consumer proposition, our work is all about empowering consumers to be able to securely share their data and access its value. We’re enabling that indirectly by ensuring that the ecosystem can be established, that it’s secure and that it can be trusted by all the actors participating in the exchange.

Image: Raidiam