Combining all their financial data into one place is allowing people to avoid overdraft fees and get loans without a credit history in the United Kingdom, says an expert in open banking.

Uttiyo Dasgupta, the head of strategy for HSBC's digital bank in the United Kingdom, points to these as examples of what open banking has already done for people since it was made possible earlier this year.

The UK changed its laws in January forcing banks to make customers' financial data available to be shared with trusted third parties via application programming interfaces (APIs).

HSBC was the first major bank to launch an app bringing people's financial data together, although challenger banks have also moved into the space.


Dasgupta, who visited New Zealand last week to talk at the Future of Financial Services Conference in Auckland, said around 130,000 people had signed up to use its Connected Money app already.

Uttiyo Dasgupta, head of strategy digital bank at HSBC in the United Kingdom, has been in New Zealand to talk about the UK's experience with open banking. Photo/Supplied.
Uttiyo Dasgupta, head of strategy digital bank at HSBC in the United Kingdom, has been in New Zealand to talk about the UK's experience with open banking. Photo/Supplied.

While that was tiny compared to its 13 million banking customers Dasgupta said he expected take-up to be slow as the concept needed to win over the trust of the public.

"In a year's time, we still expect it to be a fairly low take-up. It is a question of building trust with customers so that people will share the app."

Most customers wanted to see the benefits before they shared their personal banking information, he said.

But already there were examples where open banking had helped people to avoid fees or borrow money they might not have been able to under the typical banking model.

Dasgupta said consumers who had an account about to go into overdraft at one bank received a nudge to transfer money from savings at another bank to ensure they weren't hit by penalty fees.

Payment transfers were not able to be done via the app yet but Dasgupta said that technology was coming.

In another case, one bank was able to loan money to a young man who didn't have a credit history because they could see his banking history with another bank.


Banks were also able to nudge people about certain products but only if people had already showed interest in it, he said.

Dasgupta said open banking was safer than other data sharing services as people still had to log in to their own bank to share the data through the API whereas companies who screen scraped to get the data had to use a person's bank log-in details to do that.

He said one of the challenges had been launching without giving people access through biometrics.

In the UK younger banking users had become used to logging into their accounts using a fingerprint or facial recognition technology.

The app had received some criticism that it had taken people back three years in terms of logging in by not offering the new technology.

But Dasgupta said he expected that to be rectified by April next year for banks that already used biometric technology.

Dasgupta said coming to New Zealand had been an eye opener due to the open attitude towards open banking.

"Everyone seems to be quite welcoming and open to it. Nobody is blocking it."

In New Zealand, the regulators and the industry body were already collaborating on the concept.

He said it didn't help if regulators forced players to change and it was better if there were common standards of sharing data.

Dasgupta said New Zealand should focus on educating the next generation about open banking and needed to foster start-up fin-tech businesses to stay and grow here.

He said young people should be encouraged to go into fin-techs rather than being a staid banker like him.

Dasgupta said the technology was also helpful for vulnerable customers.

He said open banking could give early warnings for people who had problem gambling habits and could send those customers alerts.

He said those who jumped into open banking now were the early adopters and predicted the same would be the case when New Zealand joined the move.

But he said if there was a tie-up with a supplier like Trade Me or an airline the take-up could be much higher.