It’s not just technology that moves the world. Culture plays a huge role — as well as the sparks that often come from the tension when cultures clash. That promises to be the case going forward with Open Banking, as financial institutions (FIs) pick partners and proof of concepts.
Open Banking is a global effort that resets the relationships FIs have with FinTech firms, payment providers and financial service providers. To better understand the evolving landscape, PYMNTS caught up with Anabel Pérez, CEO and president of NovoPayment.
“For us,” Pérez told Karen Webster, “Open Banking means collaboration between different parties.”
Like any global, ongoing change (especially one that involves major economic players, and promises to alter the daily financial lives of consumers), Open Banking can still cause confusion and anxiety.
Open Banking Promise
The promise of Open Banking seems clear enough. Individual consumers will have greater control over how and where their financial and banking data is used, by whom and when. New technology — and partnerships based on that technology and data — will spark innovation in financial and payment services.
Open Banking, which launched in the U.K., depends on open application programming interfaces (APIs), which allow trusted third-party developers to build services for FIs. The APIs are used to share bank data among various financial industry players, and should, ultimately, spur competition and new product development that benefits the end user.
That’s where the culture clash can come in. Traditional FIs — the long-standing custodians of their customers’ funds — are to work with startups and other companies to develop these new products, and otherwise satisfy the desires of consumers who have grown accustomed to using mobile and online technologies to access, move and manage their money.
Banks need to play their part in “building new value” for consumers and FI clients, Pérez told Webster during the PYMNTS discussion. That means collaboration — lots and lots of collaboration. A collaborative relationship under Open Banking, she said, might include, say, a retailer, a bank and an insurance company, all of them providing a kind of cross-discipline value to consumers that will make for more efficient commerce, payments, disbursements or other transactions.
Role Of APIs
The facilitator of that new value, she noted (the matchmaker, perhaps), is the API. Under Open Banking, the APIs help with the job of essentially aggregating and creating new services.
However, with traditional FIs being traditional FIs (long-standing businesses that have very specific jobs, and have worked over years to win customer trust and loyalty), there is a legitimate concern on their part about so much data sharing — and, potentially, about consumers. Not only that, she said, “but some banks don’t seem to clearly understand what they are trying to do.” To drive home that point, she compared some banks to an ostrich with its head in the sand, avoiding action.
Resistance to Open Banking, at least in her view, is coming from a variety of places, including the U.S. “The decision process could be faster,” she said, underscoring how Open Banking is also about making choices — such as what innovations to pursue, what partners to seek out and accommodate, and what technologies to focus on.
Despite the Open Banking anniversary, and the progress made so far in Europe, “decision-makers in many banks are really uninformed about it,” Pérez said. “Banks forgot the agenda of going global, and are now having to rethink that agenda because they can create” innovative, consistent products and services across markets via APIs.
Ahead Of The Curve
Not all players in financial services and payments are so reluctant about Open Banking, though, she said. The big, global payment card networks seem to be keeping up.
Indeed, earlier this week (June 4), Mastercard launched its latest initiative centered around the changes, a program called Open Banking Solutions. The new Mastercard offering is designed to support Open Banking efforts in four areas: connectivity, security and compliance, dispute resolution and consulting services. The service is, for now, focused on the U.K. and Poland (underscoring how Europe and its regulators led the push for Open Banking, and the associated PSD2 regulatory regime).
In addition, according to Pérez, Latin American banks seem to be relatively ahead of the game when it comes to Open Banking. “Maybe that’s because of the influence of Spanish banks there,” she told Webster.
Yet, what Pérez doesn’t see yet when it comes to Open Banking — at least, in general — is “clarification of the concept” among stakeholders, which can influence how regulators treat this emerging space of payments and financial services innovation. That clarification will have to come, in large part, via consumer buy-in to the concept, which depends on innovation products and services, and making that happen will require the sharing of relevant data.
For all this to occur, banks must assess this new world — the new relationships, and the new culture of innovation under Open Banking — and, basically, loosen up. That seems a big part of it, at least in hearing Pérez talk about the Open Banking landscape. After all, the promise is not only new products and services, but the ability for consumers to “immediately connect” with all their financial and payment services, with much less friction than is the case now.