1. Eversheds Digital Banking Seminar
30 September 2015
Matthew Gough
Partner, Head of Digital banking

2. Matthew Gough, Partner, Eversheds
Matthew leads our digital banking team
Advises financial institutions on products terms and conditions and on technology contracts
Heads our Consumer Law Team
Matthew has advised clients on internet banking since 1997

3. Today’s programme 09:30 Welcome and introduction – Matthew Gough
09:35 Digital banking and the customer journey – Matthew Gough
09:55 Open banking – Daryl Wilkinson
10:25 The digital agenda for payment services – Nilixa Devlukia
10:55 Break
11:15 Digital banking and data protection – Paula Barrett
11:35 Obtaining the right technology – Eve England
11:55 Combatting Cybercrime: Risks, Consequences and Mitigation – Polly Sprenger
12:15 Delivering compliant digital products – Clare Hughes
12:40 Networking lunch

4. What are we looking to achieve from today?
Raise and summarise the key legal issues involved with Digital Banking
Provide the regulator’s view point
Provide an innovator’s perspective
This is the first in a series of events and briefings, your feedback is important to help us provide future events
Provide an opportunity for everyone here to network within this legal area

5. A brief history of internet and digital banking
Home Banking
New York Banks
1981
Nottingham Building Society
1983
First UK online account
1997
EGG is Founded
1998
First banking app developed
2010
£2.9 billion transferred weekly by apps in the UK
2015

6. Digital banking in the UK
Two recent publications by the BBA summarises digital banking in the UK
Digital disruption: UK Banking report, March 2015 (BBA and Accenture)
The Way We Bank Now: World of Change, Summer 2015 (BBA and EY)

7. Digital banking in the UK
Some interesting figures from the BBA:
One in five of a bank’s customers only use mobile banking
167,000 of one bank’s customers use mobile banking between 7:00 am and 8:00 am each week day
33% of one bank’s loan applications are processed and approved entirely online
10.5 million banking apps logins each day in the UK
In 2010 Metro Bank was first bank to receive a UK banking licence in 100 years, in firms applied for a licence

8. How does this affect the UK Banking Industry?
Number of branches
Investment in new technology
Recruiting different people
New entrants to the market

9. How are we approaching digital banking and legal advice?
Commercial law
Consumer law
Privacy
Cyber crime
Financial Disputes
Payments
Regulatory
We have been advising financial institutions on the key issues raised by Internet and Digital Banking for many years
We have a holistic approach with our digital banking team coming from across the relevant specialisms
We will now look at the first item on today’s programme
GOUGHM

10. Digital banking and the customer journey
Topics to be covered:
Contracting with customers online
Digital Banking products and the Consumer Rights Act 2015 (The ‘CRA’)
Social media and Digital Banking

11. Contracting with customers online
What services and products are involved?
Accessing information online and digitally for example personal and business current accounts
Online and mobile payments e.g. Faster Payments, Paym, Apple Pay
Applying for new products online e.g. bank accounts, unsecured loans and mortgages
Where a wet signature is required the process cannot be completed on-line, for example, mortgages
What technology is involved?
PCs, tablets, smartphones, watches, and wristbands

12. Contracting with customers online (cont’d)
There are a number of key issues applying to online contracts:
Product specific requirements, for example the CCA, Payment Services Regulations
Durable medium
Data Protection and privacy
Financial promotions
Distance marketing
E-Commerce regulations – I will look at this in more detail
Electronic signatures and digital signatures
Incorporating the contract terms and concluding the contract – I will look at this in more detail

13. Contracting with customers online (cont’d)
The Electronic Commerce (EC Directive)Regulations 2002
Applies to services provided online including financial services
An additional layer of regulation and compliance
A number of information requirements in a manner which is easily, directly and permanently accessible
Requirements for the formation of contracts and the technical steps to conclude the contract
Prices to be indicated clearly and unambiguously

14. Contracting with customers online (cont’d)
Incorporating the contract terms and concluding the contract
Application of contract law – most of these principles apply to B2B and B2C
Making the customer aware of the terms
The use of user-friendly methods
Various terms and conditions may apply to the relationship – need for careful wording in case of conflict of terms
“Prominent and transparent” from 1 October 2015 – Section 64 of the CRA – a challenge with smartphones and watches
Obtaining the customer’s agreement to the terms and conditions – click and accept?
B2B customers and online contracts
Cooling off periods
Varying the contract
GOUGHM

15. Digital banking products and the CRA 2015
The legal position changes at midnight today
Digital content under the CRA is data which are produced and supplied in a digital form
Digital content will then be treated as similar to goods where required to by the CRA
Section 33 of the CRA means the new laws applying to digital content will apply to:
Paid for digital content; or
Digital content supplied free with goods or services or other digital content that is paid for
This means paid for online banking services and apps will be treated as digital content
UK Government endorsed guidance suggests the CRA will not apply to “free” online bank accounts despite the wording of Section 33 – the Trading Standard Institute’s Business Companion Guide : Digital Content, March 2015
GOUGHM

16. Digital banking products and the CRA 2015 (cont’d)
Where a digital banking product is digital content a careful approach is required:
Different standards apply – compliance with description, fitness for purpose and satisfactory quality
Different statutory remedies are required – repair or replacement remedies apply
Appropriate terms and conditions will need to be used reflecting this
Care not to mislead the consumer by suggesting services are supplied
Need to review how digital content is provided to consumers and the effect of the CRA

17. Digital banking products and the CRA 2015 (cont’d)
Whether or not Section 33 applies, banks need to be aware of Section 46 of the CRA.
Under Section 46 of the CRA:
A business is liable where digital content is provided under a contract (for example a free app) and cause damage to a device or other digital content
Required to repair the damage and bear any costs
A business can show it has exercised reasonable care and skill
Need to flow down this new liability to consumers in your technology supply chain
You can consider your potential liability and your use of “reasonable care and skill”

18. Social media and digital banking
Some Examples:
Facebook
Twitter
Linkedin
YouTube

19. Social media and digital banking
What are the legal issues?
Financial promotions - FCA Guidance 2015, FG15/4 Social Media and Customer Communications
Consumer protection from Unfair Trading Regulations 2008
CAP Code
Free prize draws/promotions - Gambling Act 2005 and the applicable social media rules
Defamation and your liability for employees
Reputation and managing criticism/attacks on the business
GOUGHM

20. Social media and digital banking (cont’d)
Social media and good practice
Accountability within your business for the use and interaction with social media
Monitoring third party content on your websites/blogs/social media and your potential risk of liability
Internal social media policies – managing business sections and individual employees
External social media policies – contributors and customers
GOUGHM

21. Questions?

22. Partner
Matthew Gough
Company Commercial
Eversheds
1 Callaghan Square
Cardiff
CF10 5BT