Open Data Open Innovation

[vc_row][vc_column width=”2/3″][vc_column_text]I had an interesting lunch with a Tweep the other day, an indefatigable mobile Wikipedia on technology trends both locally and globally. Our conversation turned to open data and how it can be applied in the banking industry. I have to admit I had heard of the term open data but never really paid any attention to its potentially game changing application in the financial industry. “If Kenyan banks converted their records into open data, it would lead to greater financial innovation and a better product experience for customers,” said the tech pundit. I put on my fairly ignorant and thoroughly obtuse nitpicking hat on. “Banks cannot share such sensitive data, there’s customer confidentiality to be maintained and quite frankly, such information is a key intangible asset that the bank has,” I retorted. He proved to be quite unflappable and converted my healthy skepticism into acquiescence with just one question: who said that the data provided should be given with the client name?
I was an immediate convert. If banks openly shared customer data to fintech providers, the third party would have a treasure trove of information on customer spending habits, borrowing tendencies, repayment history, saving culture and basically the whole kit and caboodle of a client’s behavior. According to the Central Bank of Kenya’s latest annual banking supervision report, for the year ending December 2015, there were about 34.6 million banking accounts in Kenya and these numbers include mobile banking accounts of the Mshwari and KCB M-pesa extraction. That is 34.6 million data sets that can clearly demonstrate spending, borrowing and savings behavior within a certain age, gender, regional demographicor business segment, which can lead to finer product targeting and pricing.
The United Kingdom (UK) is a trailblazer in this area and in January 2015, Her Majesty’s Treasury launched a “call to evidence” asking stakeholders in the financial industry on how best to deliver an open standard for application programming interfaces (APIs) in UK banking and to ask whether more open data in banking could benefit consumers.
Application programming interfaces, or APIs, allow two pieces of software to interact with each other. In banking, APIs can be used to enable financial technology (fintech) firms to make use of customers’ bank data on their behalf and with their permission in innovative and helpful ways. For instance mpesa payment platforms for businesses make use of APIs supported by Safaricom.
The aim was to produce an open API standard for UK banks to drive more competition in banking and help the UK remain at the forefront of financial technology. The report was published less than 3 short months later in March 2015.
In summary the responses from the forty respondents who included a number of banks, fintechs, the Law Society of Scotland, the Association of Accounting Technicians and the British Banking Association raised concerns around privacy of customer data and fraudulent use of that data. The need for appropriate security and vetting systems for third party providers was a key concern. The respondents did note that open data in banking would enable customers make more informed decisions on which banking products to purchase and who to bank with. An Open Banking Working Group, bringing together key stakeholders such as banks, fintechs, consumer bodies and government, was then created and an Open Banking Standard (OBS) was produced. The OBS is a guide for how banking data should be created, shared and used.The group recommended that an independent authority should be established to ensure standards and obligations between participants are upheld. The authority would govern how data is secured once shared and the security, usability, reliability and scalability of APIs. It would also vet third parties, accredit solutions and maintain a whitelist of approved firms. The UK is cautiously but steadily moving towards this standard, with the key premise being that customers will have to consent to their data being shared.
Back in the +254, we have already established ourselves as early adopters in the fintech space with the amazing innovations that have been generated by the mpesa phenomena. Moving towards open data may perhaps be the key that will unlock the risk based customer loan pricing that the interest rate capping has miserably failed to deliver. It would also provide much needed customer portability on banking services generated by product pricing sense rather than brand affinity.

[email protected]: @carolmusyoka[/vc_column_text][/vc_column][vc_column width=”1/3″][/vc_column][/vc_row]

The City of Nairobi as a Financial Hub

‘Our ultimate aim is to create a vibrant and globally competitive financial sector that will promote high level of savings to finance Kenya’s overall investment needs. That will not happen without extensive reforms. Let me highlight some of the most important. First, we will establish a Nairobi International Financial Centre. Our model is the City of London. Once complete, it will consolidate Kenya’s position as our region’s hub, while also supplying the world-class financial services that East Africa’s rapidly growing oil and minerals sector needs.’

The above mentioned quote is extracted from a presentation made by Manoah Esipisu, the Secretary of Communication and State House Spokesperson on February 3rd 2014 at the Bloomberg Africa Forum. So I decided to dig up a little information on why the City of London stands tall and worthy of emulation in Esipisu’s educated eyes. First of all, the Greater London administrative area is made up of 32 boroughs. There are two cities within the 32 boroughs, namely the City of London and the City of Westminster. The City of London is the trading and financial nucleus of Greater London. Colloquially known as the Square Mile due to its geographical acreage of 1.12 square miles, it houses the London Stock Exchange, the Bank of England and Lloyd’s of London. Over 500 banks have offices in the City while a number of the world’s largest law firms are headquartered there and, consequently, the Square Mile accounted for 2.4% of United Kingdom’s GDP in 2009.

As at the last census in 2011, the City has a population of about 7,000 residents, but over 300,000 commute there daily to work, mainly in the financial services sector. Administratively, the City of London Corporation headed by the Lord Mayor governs the City. According to Wikipedia, the 2001 census showed the City as a unique district amongst 376 districts surveyed in England and Wales. The City had the highest number of one-person households, people with qualifications at degree level or higher and the highest indications of overcrowding. It recorded the lowest proportion of households with cars or vans, people who travel to work by car, married couple households and the lowest average household size: just 1.58 people. It also ranked highest within the Greater London area for the percentage of people with no religion and people who are employed. The City has its own police force with slightly over 800 police officers separate from the Metropolitan Police Service covering the remainder of Greater London.
My conclusions: to live in the City of London you have to be paid a ton of money to do a lot of work and have a total lack of discretionary time for matrimonial, social or religious matters! Oh, and that thing called traffic? What traffic? The public transport works quite well thank you! Well enough to get 300,000 in and out of the City environs daily.

So I look at Esipisu’s speech again, especially with regard to the aim of becoming a key financial centre for East Africa’s oil and minerals sector. A friend of mine providing consulting services in the rapidly expanding local Oil and Gas sector told me that there are at least over thirty foreign oil exploration related companies in Kenya closely followed behind by their attendant service providers in aviation, drilling equipment, security and what have you. They are located all over Nairobi as there doesn’t seem to have been foresight at central government level to create a bespoke business district for this critical source of foreign direct investment. Neither have there been any efforts on the immigration side to fast track work permits for the hundreds of specialized professionals that are flying into Kenya to work in the exploration fields. They arrive at JKIA and it takes 3 hours to get from the airport to their hotel rooms because the green city in the sun is actually the gridlocked city in the smog. The average Joe doesn’t want to drive if he can take clean, reliable and decent public transport. But for as long as the city’s transport policy is written by an individual who has a driver waiting for him at his designated parking spot under a cool parking shed, we will struggle to achieve the dream of becoming a financial centre. If goods and services cannot move or be provided freely in Nairobi then providers and consumers of capital, which is a key tenet of a global financial centre, will not come to deliver Esipisu’s dream.

If the Governor’s solution to the endemic traffic jam is to tell Nairobi natives to wake up earlier to get to work, then we’re sunk. Nairobi is not made up office working minions imprisoned on swivel chairs. It’s made up of entrepreneurs who traverse the length and breadth of the metropolitan area buying and selling goods and services. It’s made up of professionals moving from place to place to deliver their professional services as well as their customers coming to them for the same. It’s made up of citizens seeking medical, banking, insurance, education and a whole host of government services between 8 am and 5 pm. Nairobi natives cannot be trusted with the heavy responsibility of choosing the lesser evil between an ex-CEO of a grossly mismanaged corporate versus a stone thrower or, God help us, a bejeweled, money splashing hustler if 2017 rumors are to be believed. In my own view, a college of voters who constitute business owners should elect Nairobi County’s administrative leader. A staggered system of votes, based on number of employees can be designed so that those with more skin in the game have more say. A business owner with 10 employees or less would have one vote, one with 20 employees two votes etcetera.
Only then can we start seeing business minded individuals drive the social and economic agenda of this critical county and lay the groundwork that would help make some of Esipisu’s dreams of a regional financial centre valid.

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Twitter: @carolmusyoka