Eyal Nachum of Bruc Bond to Banks – Embrace Openness
Eyal Nachum, Bruc Bond’s fintech guru and board member , features a message to banks: it’s time to embrace open banking and also the cooperation it may bring. The advantages of working together with alternative providers far outweigh the potential risks of loosening control, according to him.
The movement to your more open and interconnected financial world has already begun, with clear steps taken both in the European Union as well as in Asian markets towards this goal. Europe’s Payment Services Directive (now in the second iteration, the PSD2) served as the kickoff shot about the continent. It opened up the banking system for the entry of so-called non-bank loan companies (NBFI) , who have taken on large chunks from the labour previously created by banks. Rather than hurting banks, NBFIs have reduced banks’ workload while introducing additional revenue streams, providing a much-needed buoyancy float with a sector struggling with downsizing pressures.
However, integration might be taken much further, says Eyal Nachum . If we go through the Chinese giants Tencent and Alibaba, we percieve a model banks may wish to imitate to some degree. The two companies operate Super Apps, WeChat and Alipay, respectively, are much more than payment services. These are so-called “lifestyle apps” , that allow users to complete anything from ordering taxis, through making interpersonal money transfers, to, in a few Chinese provinces, paying electric bills and more. It’s simple to imagine the convenience that such centralisation brings.
According to Eyal Nachum , you don’t have to consolidate everything under one roof, but tighter integration can be done and desirable. If we look to Singapore , we percieve the likes of DBS, one with the country’s leading banks, launching a unique car marketplace in partnership with sgCarMart and Carro. UOB , another leading Singaporean bank, recently launched a unique travel marketplace. These imaginative pursuits is usually a lighthouse to European banks, who should employ whatever possible way to learn using their Asian counterparts, by way of example by means from the UK’s fintech bridges, which Mr Nachum recently discussed with all the Sunday Times.
Under the PSD2, European banks and banking institutions are mandated to provide application programming interfaces (API) , through which other banking institutions (like, for example, Bruc Bond ) can access data and issue authorised instructions on customers’ behalf. Sadly, a lot of banks in Europe have inked only the least to conform to regulatory requirements for open banking, rather than explore how such initiatives might be incorporated into banks’ strategic plans. This is a short-sighted mistake, says Eyal Nachum .
Banks are losing an opportunity to deliver their clients and customers having a service that will actually get people enthusiastic about banking. This is for their detriment and endangers their long-term prospects. To be competitive in 2020 and beyond, banks must accept the platformification of economic services. Users will quickly come to expect it, and poorly prepared banks will be affected as a result.
There are numerous paths to a open banking future, every individual lender will need to decide upon itself which path will lead on the greatest prosperity. Some things, however, are clear. Trying to imitate the Chinese types of Tencent and Alibaba would be foolish. The regulatory infrastructure is defined against it. Instead, we at Bruc Bond think that close, tight-knit cooperation between finance institutions, service providers, local authorities and business can offer the right path with a bright future .
Such integration provides solutions for the many woes gone through medium and small-sized businesses (SMEs) due the upheavals within the European banking industry, which Mr Nachum recently wrote about in a article to the Global Banking & Finance Review .
To reach utopia, however, we’ve got to build trust. Trust, we mean, between customers and institutions, and between institutions themselves. This can basically be achieved by true, sustained openness. Regulators can help, by mandating information sharing, but the onus is around the actors in the markets themselves to develop frameworks that encourage cooperation . These may be limited schemes firstly, that grow deeper as trust develops. Doubtless, this would require some feats from the imagination, however when some of the brightest minds engage with these issues, they are able to, we’re confident, produce some creative solutions to the issues that vex bankers . The next banking revolutions demands it.
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