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The next chapter of Open Banking

Edward van Dooren

Strategic Advisor

29 June 2021

The next chapter of Open Banking

Open Banking was initiated to bring more innovation and competition into financial services. It has been fuelled by customer expectations as a result of technological advancements by the digitization of customer propositions – accelerated because of the COVID pandemic. The initial chapter has very much been around putting the foundation in place for Open Banking. It is now time to see what lies ahead in the next chapter of Open Banking.

On the first day of EBAday 2021, this question and the below sub questions were at the centre of the panel discussion, featuring various experts from the financial world.
 

1. What is the expected return on investment of Open Banking?

The panel discussion was moderated by Vincent Brennan, Payments and Operational Continuity Advisor. He kicked off with what the panellists believe could be one of the most important questions: about Open Banking’s return on investment (ROI). According to Giancarlo Esposito, Head of Payments, Cash Management and Open Banking at Intesa Sanpaolo, it is hard to find a direct revenue model for Open Banking. Talking about regulation, PSD2 can be seen as a positive development for Open Banking. “We moved from an approach of huge portals with multiple functionalities to single services that are designed to solve exploited problems”, Esposito continues.

Marcello Ronco, Head of Global Transaction Banking Digital Platforms and Ecosystems at UniCredit, fully agreed. “This market is just at the beginning. We must increase the customer’s awareness first in order to fund innovative use cases and to generate the ROI on Open Banking.”
 

2. What is the most critical design principle for a bank to transform into a digital-ready bank?

One of the things that we have seen during the pandemic is the ability to be agile, as new situations came up almost every day. According to Michael Engel, Managing Director and Vice President Banking Software at Diebold Nixdorf, being able to respond to new circumstances, new business opportunities and to business challenges, is therefore key. “We have seen that organisations that can adapt to these changes thrive best”.

According to the audience, to transform into digital-ready banks, banks must meet three requirements: be focused on their customers, be agile and able to react with speed to changes in their environment, and become enabled, rather than constrained, by technology. The panel agreed, as do I, that digital-ready banks must perform across all of those areas.
 

3. What do banks, corporates and businesses need the most help with when navigating Open Banking?

Financial institutions are all asking for help in navigating Open Banking and there is clearly a lot of work going on in the industry, as is always the case with topics such as standards. According to Jim Wadsworth, Senior Vice President, Open Banking at Mastercard, an important part of the journey is partnering. “We see a lot of partnering between individual banks and individual fintechs. This is something banks need to get increasingly comfortable with. Returning to the earlier points about the speed at which customer expectations are changing and the speed at which banks need to respond, harnessing the capabilities of some of these more flexible fintechs must be part of the story.” The second important issue is the prevention of fraud and the protection of consumers. Wadsworth added: "In this area, too, we need more cooperation across the sector."

Panel member Engel couldn't agree more. "For end users, payment services must meet two requirements: it must be super easy to consume, and it must be perceived as really secure." And that is not yet the case. "Many of the existing solutions are super secure, but therefore not easy to use or vice versa. As an industry, we can do more with the legacy infrastructure we've been carrying for decades to bring that level of innovation to consumers."

If there is one thing to conclude from this session, it is that we are still at the beginning of a long journey. It is an area with huge potential, even though Open Banking has been around for a while.