On January 13, 2018, open banking, new banking directive requiring banks to open API (application programming interfaces) to third parties comes into effect. Despite several major fintech companies strengthening their payments, business lending and other products, few banks have publicly launched open banking-ready solutions, preferring to take a “wait and see” approach.
Nesta’s Open Up Challenge seeks to address the gap between fintechs and banks in the level of innovation and user-focused products and services they can offer small businesses. The £5 million prize fund aims to inspire the creation of next-generation services, apps and tools designed for the UK’s five million small businesses.
Nesta announced the challenge in February in a global search for organisations who would use new open banking APIs to transform the way small businesses discover, access and use financial services. The prize capitalises on the UK’s world-leading role in fintech and open banking to stimulate customer-focussed innovations that will help UK small businesses thrive in a connected digital economy.
The 20 teams, who were selected by an independent judging panel, each receive a £50,000 grant, fully funded technical and business support and exclusive access to the Open Up Data Sandbox, containing one of the largest anonymised UK banking transaction datasets ever made available. There is an opportunity for them to win a share of a further £3.5 million if successful during the challenge.
Participants include both established fintechs and start-ups, adopting a range of data-driven approaches to creating value for small businesses – including in neo-banking, alternative finance and invoice financing, credit scoring, product comparison and selection, automated financial intelligence and infrastructure. A key theme is the appetite to use advanced machine learning techniques to help small businesses make better financial decisions and to streamline routine finance processes that consume entrepreneurs’ time.
“We now have twenty teams who we firmly believe can build next generation services that will transform small business banking. By supporting these teams with financial rewards, expert support and access to the Open Up Data Sandbox, we hope to play a part in revolutionising a sector that has been slow to exploit new technology and respond to customer needs,”Chris Gorst, challenge prize lead at Nesta, said.
Earlier this month, the Open Banking Ltd, the entity overseeing the development of the UK’s open banking standard, released the API specifications for account and transaction information and payments initiation, which will go live in January 2018. The Open Up Data Sandbox aligns with this specification and provides access to real anonymised data, enabling challenge participants to build and test new services in readiness for this development.
Imran Gulamhusainwala, trustee of the open banking implementation entity believes open banking is the catalyst that will accelerate the creation of an entirely new market for dynamic, rapidly evolving, financial services. “From automating activity that currently takes valuable time away from businesses, to making access to credit and advice easier and smarter, it will revolutionise the way companies are run and grown,” he said. “Nesta’s Open Up Challenge demonstrates the range and quality of innovations enabled by open banking and I look forward to seeing these develop into game-changing products for small businesses.”
The Open Up Challenge is part of a package of retail banking reforms which are recommended by the Competition and Markets Authority (CMA) and aims to transform the way small businesses manage their finances. The challenge is managed by Nesta’s Challenge Prize Centre, who deliver innovation through challenge prizes including the Longitude Prize and the Inclusive Technology Prize.
The 20 winners
- Beyond Labs
- Bud Financial
- Coconut Banking
- Credit Data Research Ltd
- Fractal Labs
- Funding Options
- Funding Xchange
- Growth Street
- Handle by Bizfitech
- Iwoca Limited
- Ormby Street
- Solo – Smarter Freelancing