19 October 2017
SIBOS day 3 – How API’s can be the game changer for the financial industry
The panel discussion on the third day of SIBOS revolved around open banking and API’s. It was titled as ‘Disruptive threat or innovative opportunity’. The panel was formed by Jonathan Davey (Executive General Manager, NAB Labs & NAB Ventures at National Australia Bank), Erik Zingmark (Co-Head of Transaction Banking at Nordea), Louise Beaumont (Strategic Advisor, Open Bank at Publicis.Sapient), Carolyn Burke (Enterprise Payments at RBC) and Michael Tang (Global Financial Services Digital Transformation Leader at Deloitte) moderated the session.
The panel session started with a question about the promise of open banking. Beaumont (Publicis.Sapient) kicked off by explaining the four drivers behind open banking: regulation, consumer behavior, technology and competition. In her eyes, open banking should be about the promise to the consumer: “In the future you should be able to use services based on what you are willing to share.” Burke (RBC) was convinced that, with all these new players and developments, everything is fine until something goes wrong. People then know where to find the banks.
Banks as guardians of the data
Who is responsible to educate the public about the implications of regulations like PSD2 and GDPR? Beaumont (Publicis.Sapient) found it too simplistic to make only banks responsible for this. “The government clearly has a role too. Consumers need to understand it’s their data. They often tell researchers that they don’t share their date, but in fact they are doing it on a massive scale.” Davey (National Australian Bank): “We will learn and adapt over time, but with the current pace of change it is difficult to be proactive here.” Burke (RBC) stated that banks are the guardians of the data. “PSD2 will create ambiguity on roles and responsibilities related to the protection of consumer data.”
The combination of regulations and technology
The responsibilities of banks working with consumer data was a good point for discussion. “If we treat open banking as a true opportunity, then how are we going to manage the data? It becomes a business problem and not purely a regulatory item,” added Davey (National Australian Bank). Zingmark (Nordea): “Technology in itself only goes so far and the same goes for regulations, but the combination of technology and regulations will go a long way. You can either decide to fight it or embrace it.” This is difficult, because consumers expect lower prices, but banks and other businesses also expect to make money. We should not forget that banks are expected to make the necessary investments for that.
Retain customer relevancy
Will this development mean that the future position of the banks is changing? Beaumont (Publicis.Sapient) explained that banks need to make some very strategic decisions and consider what it means to be in financial services and how they want to remain relevant. “As a base infrastructure holding money, banks will likely end up in the B2B domain with limited relevance for the end customers. If you want to retain customer relevancy, how will you do that? There are huge unmet customer needs which banks could address.” Davey (National Australian Bank) added that there are different models, but that it is all about meeting the customer needs, which is important to add real value.
In bed with the devil
The panel discussion then focused on collaborating with tech giants and their strong brands. These giants are a threat for bank’s revenues. Davey (National Australian Bank) was asked to comment on his quote “Should we get in bed with the devil”. Tech giants are in contact with customers of banks on a daily basis, what will that mean for the relationship between banks and customers? For banks it is therefore important to think about the collaboration with these giants: do they want a difficult head-on competition with the tech giants or do they want to collaborate? And if they want to collaborate, it is key to determine what they bring to the partnership.
Two types of trust
Zingmark (Nordea) already saw that the devil’s bed was quite full, taking ApplePay as an example. According to him, the tech companies will not want to take over all financial services from banks, but it is going to be a difficult competition when tech companies target the profitable aspects of financial services. Banks should harvest the trust relation they still have with customers. Beaumont (Publicis.Sapient) added that there are two types of trust: rational trust and emotional trust. Banks score high on rational trust and tech companies on emotional trust. “Banks must consider if they only want to build on rational trust or also create emotional trust the same way tech companies do.”
Predictions for 2018
Zingmark (Nordea) said that 2018 is going to be a very interesting year for three reasons. “There will be transparency on all issues and unclarities. Banks will struggle to be both compliant and support the free market at the same time. And we will see fraud attempts.” Beaumont (Publicis.Sapient) also expects fraud attempts and added that the consent and liability mechanisms will go through a live fire exercise. PSD2 is going through the normal unknown, denial and acceptance lifecycle, said Davey (National Australian Bank). “Customer expectation will also evolve further and we will see tangible outcomes in the next year.”
Mentality is more important than speed
The moderator asked if banks will be obsolete in ten years? Beaumont (Publicis.Sapient): “There are many, many banks and some will do great while others fail.” Davey (National Australian Bank) added: “Many banks have been slow but many of them will survive.” Burke (RBC) agreed and said that mentality is more important than speed to survive in the next decade: “For banks, it is therefore important to pilot and be agile.”