Eyal Nachum of Bruc Bond to Banks: Embrace Openness
Eyal Nachum, Bruc Bond ’s fintech guru and board member, has a message to banks: it’s time and energy to embrace open banking and also the cooperation it can bring. The advantages of working together with alternative providers far outweigh the potential for loss of loosening control, he states.
The movement with a more open and interconnected financial world has recently begun, with clear steps taken in the European Union along with Asian markets towards this goal. Europe’s Payment Services Directive (now in the second iteration, the PSD2) served because the kickoff shot on the continent. It exposed the banking system to the entry of so-called non-bank financial institutions (NBFI), who may have taken on large chunks of the labour previously made by banks. Rather than hurting banks, NBFIs have reduced banks’ workload while introducing additional revenue streams, providing a much-needed buoyancy float to your sector experiencing downsizing pressures.
However, integration could possibly be taken much further, says Eyal Nachum. If we go through the Chinese giants Tencent and Alibaba, we percieve a model banks might wish to imitate to a 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 do anything from ordering taxis, through making interpersonal money transfers, to, in certain Chinese provinces, paying utility bills and more. It’s easy 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 for Singapore, we have seen the likes of DBS, one with the country’s leading banks, launching its 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, as an example by means of the UK’s fintech bridges, which Mr Nachum recently discussed with the Sunday Times.
Under the PSD2, European banks and finance institutions are mandated to provide application programming interfaces (API) , where other finance institutions (like, for example, Bruc Bond) can access data and issue authorised instructions on customers’ behalf. Sadly, most banks in Europe have inked only the bare minimum to adhere to regulatory requirements for open banking, instead of explore how such initiatives could be incorporated into banks’ strategic plans. This is a short-sighted mistake, says Eyal Nachum.
Banks are passing up on an opportunity to provide their clients and customers having a service that will actually get people enthusiastic 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 monetary services. Users will soon come to expect it, and poorly prepared banks are affected as a result.
There are lots of paths to an open banking future, and each individual financial institution will need to go for itself which path will lead on the greatest prosperity. Some things, however, are evident. Trying to imitate the Chinese examples of Tencent and Alibaba would be foolish. The regulatory infrastructure is placed against it. Instead, we at Bruc Bond think that close, tight-knit cooperation between loan companies, service providers, local authorities and business can offer the right path to your bright future.
Such integration offers solutions to the many woes gone through by medium and small-sized businesses (SMEs) due the upheavals within the European banking industry, which Mr Nachum recently wrote about in a article for the Global Banking & Finance Review.
To reach utopia, however, we have to build trust. Trust, we mean, between customers and institutions, and between institutions themselves. This can basically be achieved by true, sustained openness. Regulators will help, by mandating information sharing, however the onus is on the actors inside markets themselves to develop frameworks that encourage cooperation. These might be limited schemes to begin with, that grow deeper as trust develops. Doubtless, this could require some feats with the imagination, however when some of the brightest minds build relationships these issues, they are able to, were confident, think of some creative solutions to the issues that vex bankers. The next banking revolutions demands it.
The Journaling of Adams 338 