Eyal Nachum of Bruc Bond to Banks::Embrace Openness
Eyal Nachum, Bruc Bond’s fintech guru and board member , carries a message to banks: it’s time and energy to embrace open banking as well as the cooperation it might bring. The advantages of working together with alternative providers far outweigh the risks of loosening control, he states.
The movement to some more open and interconnected financial world has already begun, with clear steps taken in the European Union as well as in Asian markets towards this goal. Europe’s Payment Services Directive (now rolling around in its second iteration, the PSD2) served because the kickoff shot for the continent. It showed the banking system on the entry of so-called non-bank loan companies (NBFI), that have taken on large chunks of the labour previously done 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 being affected by downsizing pressures.
However, integration could be taken much further, says Eyal Nachum . If we look at the Chinese giants Tencent and Alibaba, we percieve a model banks might 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 perform anything from ordering a taxi, through making interpersonal money transfers, to, in a few Chinese provinces, paying electric bills and more. It’s an easy task to imagine the convenience that such centralisation brings.
According to Eyal Nachum , you shouldn’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 in the country’s leading banks, launching its very own car marketplace in partnership with sgCarMart and Carro. UOB , another leading Singaporean bank, recently launched its own travel marketplace. These imaginative pursuits can be a lighthouse to European banks, who should employ whatever way possible to learn off their Asian counterparts, for example by means of the UK’s fintech bridges, which Mr Nachum recently discussed with all the Sunday Times.
Under the PSD2, European banks and financial institutions are mandated to deliver application programming interfaces (API) , in which other financial institutions (like, for instance, Bruc Bond ) can access data and issue authorised instructions on customers’ behalf. Sadly, a majority of banks in Europe did only the smallest amount to adhere to regulatory requirements for open banking, rather than explore how such initiatives could be incorporated into banks’ strategic plans. This is a short-sighted mistake, says Eyal Nachum .
Banks are missing an opportunity to offer their clients and customers with a service that may actually get people pumped up about banking. This is to their detriment and endangers their long-term prospects. To be competitive in 2020 and beyond, banks must accept the platformification of economic services. Users has decided to come to expect it, and poorly prepared banks will suffer as a result.
There are numerous paths for an open banking future, and each individual traditional bank will need to decide for itself which path will lead towards the greatest prosperity. Some things, however, are evident. Trying to imitate the Chinese types of Tencent and Alibaba could be foolish. The regulatory infrastructure is set against it. Instead, we at Bruc Bond believe that close, tight-knit cooperation between financial institutions, companies, local authorities and business can offer the right path with a bright future .
Such integration gives solutions to the many woes felt by medium and small-sized businesses (SMEs) due the upheavals inside the European banking industry, which Mr Nachum recently wrote about in an article for your 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 may help, by mandating information sharing, however the onus is about the actors in the markets themselves to develop frameworks that encourage cooperation . These could possibly be limited schemes in the first place, that grow deeper as trust develops. Doubtless, this may require some feats from the imagination, however when some from the brightest minds engage with these issues, they might, we’re confident, come on top of some creative solutions towards the issues that vex bankers . The next banking revolutions demands it.
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