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IP issues under Open Banking

Open Banking is opening up access to the industry and its data to stimulate innovation and offer customers new services, new opportunities and more choice.

The regime has fundamentally altered the relationship between traditional banks and young fintech companies in order to achieve this, in a way that seeks to overcome some of the biggest barriers to innovation and collaboration from the past. 

Historically, complex IP matters arising from bespoke application development using the bank's customer data have been enough to stymie these relationships. Now though, the requirement for banks to make an API available liberates fintech companies, enabling them to launch services that sit outside those commissioned and controlled specifically by the banks.

The advantage of this approach from a fintech's point of view is that it can now develop these applications knowing that it owns all of the intellectual property. This may also stimulate further investment in the fintech market, because intellectual property is where a lot of the value in these companies exists. In addition, with the UK leading the way in fintech innovation globally, that technology could end up being licensed into different territories.

Meanwhile, banks can be confident that their customers are being offered the latest and best looking account management tools via third party applications and hardware devices and that the fintech industry is keeping up with the latest consumer and technology trends.

Open Banking is however likely to create some new IP challenges for fintech companies. These will need to be borne in mind before they even register their company name and start developing their "next big thing". 

A minefield of patent filings

With companies racing to protect their investment in innovation, there is a risk that a proliferation of patent filings could create a minefield for new entrants that are all focusing on a relatively narrow field. For example, a search for published patents under the title "mobile payments" delivers more than 2,000 results. 

A similar phenomenon occurred during the rapid development of mobile phone technology, drawing most of the major players into costly litigation that was only resolved through a series of complex cross licensing arrangements. One important difference between the fintech companies and the mobile phone giants is that a high proportion of fintech innovation connected to Open Banking will relate to the analysis and presentation of data, and is likely therefore to fall outside the scope of patent protection.

I expect to see a further increase in the number of fintech related patent applications being filed around payment services and the use of block chain technology in particular, in the race to carve out a differentiated offering.

Aggregated and anonymised data

Although the bank's customer will retain ownership of their individual account information, fintech businesses will be seeking to create and own a new IP asset comprised of aggregated and anonymised data relating to spending patterns and trends. That data will be become very valuable for understanding spending, saving and lending risks, for example. 

For years, the credit reference agencies such as Equifax, Experian and Callcredit have had a virtual monopoly in providing those services by reason of their exclusive access to large volumes of customer data. As well as providing individual credit reports, they have been able to map patterns of spending to help businesses target their customers with relevant offers. It seems likely that successful fintech companies will find themselves owning a very valuable data resource, which they will no doubt look to licence to third parties. 

Fintech companies will be reviewing their obligations under the new General Data Protection Regulation (which increases an individual's control over how their data is used) alongside their terms and conditions with customers, to see how to maximise opportunities to create a new IP asset from that data.

Algorithms, app icons and product names

Companies that are involved in the aggregation and analysis of customer data will want to keep their algorithms close to their chests, and are one of the company's most valuable assets. They will need to ensure that this is adequately protected under intellectual property law. 

There will also be a raft of new company and product names in this sector, and application icons that companies will need to do their due diligence on and have the necessary trade mark registrations in place to protect. 

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at November 2018. Specific advice should be sought for specific cases. For more information see our terms & conditions.

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