Innovation foundation Nesta is launching a £5 million prize fund to inspire the creation of apps and tools to help small businesses compete in the digital economy. The Open Up Challenge will give cash awards to 20 winners, as well as access to a unique data trove of anonymised UK banking transactions.
The challenge, which opens today for applications, is designed to encourage fintech firms to explore the opportunities provided by the new banking data being made available from 2018. The Open APIs for UK banking will give third parties access to anonymised transaction data in the same way Transport for London, for example, gives businesses such as Citymapper access to its passenger information.
Read more: To change how you use money, Open Banking must break banks
“Open Banking is potentially revolutionary for how banking looks and feels and works,” says Chris Gorst, Open Up Challenge prize lead at Nesta. “The purpose of the prize is to stimulate innovations for small businesses in the UK using that opportunity.”
Barclays, Lloyds, Santander, HSBC, Royal Bank of Scotland and three Northern Irish banks have put up the money for the prize, which is run independently by Nesta. To give successful applicants a chance to test their ideas using real data, the five big British banks have also pooled anonymised current account data to make what Nesta says is “one of the largest anonymised UK banking transaction datasets ever made available.”
In the first phase of the Challenge, which open on 23 March and closes on 31 May 2017, Nesta’s group of judges – including Rowena Ironside from accelerator Digital Catapult and Open Data Institute CEO Jeni Tennison – will take applications from businesses around the world. The 20 successful entrants will receive a £50,000 cash grant in July, followed by the opportunity to compete for further prizes of £3.5m. Neither the funders nor Nesta takes equity in the finished businesses, which will compete for a final prize pot of £2m in September 2018.
While the identity of the successful entrants won’t be known until July, Open Banking APIs could enable tools to help small businesses compare loan offers or move money around automatically so it can earn the best returns. “It's well known that cash flow is a killer of small businesses,” says Gorst. “What if you had a service that could analyse your transaction history and offer some kind of predictive analytics about when you might be needing to call on an overdraft or some other kind of facility, and can get a suitable product on the best terms. These are things that businesses out there are thinking about.”
One of the firms weighing up an application is small businesses loan service Funding Options. “Even the most technology-driven lenders we work with are forced to manually pore over scans of bank statements to make loan decisions,” says founder Conrad Ford. “Open Banking will change all that, enabling innovative lenders to carry out instant online customer verification, and to make realtime loan decisions based on rich new bank account data.”
Fords adds: “Open Banking is a global phenomenon, with the forthcoming Revised Payment Services Directive (PSD2) in Europe, and the newly-formed Consumer Financial Data Rights (CFDR) coalition in the United States. Farsighted regulators have given the UK a clear head start, so it's incredibly exciting that the Open Up Challenge will represent the very first steps in transforming banking around the world.”
Nesta – led by former Tony Blair advisor Geoff Mulgan – has experience with prizes, having relaunched the £10 million Longitude Prize in 2014. Originally offered in 1715 to anyone who could solve the problem of locating ships at sea, the newly refreshed prize is now asking for solutions to antibiotic resistance. Between 2015 and 2019, any team that presents a diagnostic tool that can rule out antibiotic use or help identify an effective antibiotic to treat a patient will win a prize of £8 million, with a further £2 million available to help develop the entry.
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This article was originally published by WIRED UK
