Nationwide Building Society is making an initial £3 million available to financial technology companies and academics to develop products that use Open Banking technology to help the "financially squeezed" manage their money.
The building society launched a national competition, the Open Banking for Good challenge, on Oct. 15 that will provide funding, mentorship and lab space to companies and individuals to develop applications and services that help financial vulnerable consumers.
Open Banking is a U.K. government initiative launched in 2018 aimed at boosting competition in retail financial banking. It requires banks to provide data on consumer transactions (with consent) to third-party fintechs, banks and payment services providers.
While Open Banking represents a "huge opportunity" to shake up financial services in the U.K., most fintech products that make use of Open Banking technology are aimed at more affluent consumers, Nationwide CEO Joe Garner said at a House of Commons event Oct. 15.
There has been little innovation that tackles the day-to-day problems faced by consumers who are underbanked or "living on a financial knife edge" because these products and services are not obviously profitable, he said.
Nationwide's initiative will help fintechs to "scale solutions that address the problem of financial inclusion," he said. "This is about how you use Open Banking to actually help people — not just for financial gain."
Participants selected for the program will be able to get advice and mentoring from Nationwide and its partners including consultancy giant Accenture, the Money Advice Trust, innovation foundation Nesta and think tank Doteveryone.
Fintechs that go on to launch products and services will not be under any obligation to use Nationwide branding, Garner said.
Speaking to S&P Global on the sidelines of the event, Garner said Nationwide was not treating the Open Banking for Good challenge as a corporate social responsibility or environmental, social and governance strategy as distinct from its core activities as a building society.
"We haven't approached this as an ESG initiative," Garner said.
A spokesperson for Nationwide said: "As a mutual, this is at the heart of what we do. We are looking across the board at how Open Banking can support all consumers, especially those who are one broken washing machine away from being in serious financial distress."
Open Banking technology can be used to help consumers in areas such as managing income and expenditure to avoid costly unauthorized overdrafts, income "smoothing" (providing financial products for those who work in the gig economy or are self-employed, and experience fluctuating incomes) and accessing help for debt-related problems quickly and seamlessly, according to a statement from Nationwide.
Nationwide receives more than 5,000 calls a month from members experiencing financial difficulties, of which it refers 500 to debt advice charities.
The building society said its own data shows that more than 60,000 members get "substantial" income from the gig economy. This includes 5,000 "gig drivers" who are almost three times as likely to be within 5% of their credit card limit, or to have used an unauthorized overdraft.