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Treasurers Begin Exploring New Open Banking Opportunities (And Risks)

Open Banking regulations have gotten FinTech innovators’ brains churning over how to take advantage of the troves of data that traditional banks have typically kept locked away. With regulations like PSD2 and Open Banking emerging as ways to boost financial services competition, the bank-FinTech relationship has taken center stage.

However, though it is certainly a major use case within Open Banking initiatives for FinTech firms to integrate into bank data streams via application programming interface (API), it’s not the only one.

Large corporations are often home to their own troves of valuable — yet difficult to reach — data, thanks to a back-office landscape of multiple ERPs, accounting systems, treasury management and cash management platforms. Solutions are a mix of in-house or cloud tools, purchased from a vendor and offered through an as-a-Service model.

SkySparc Head of Product Management Marcus Gullers said this is an emerging use case for Open Banking initiatives, as corporate treasurers look for ways to streamline not only their ability to connect to data within their financial service providers’ systems, but to consolidate and analyze data across their own siloed platforms.

“It’s not uncommon [for corporates to] have dozens of different systems, all containing data that’s relevant,” Gullers told PYMNTS in a recent interview. “They want a way of being able to see all of that data in one place — perhaps for a reason as simple as reconciling data between different system.”

The same bank account information may be stored in four different systems, he continued, but treasurers often have to go into those systems to manually check that the information — like account balances, for instance — matches up.

As corporate treasurers gradually adopt cloud-based solutions and upgrade legacy systems, they struggle to manage the mix of cloud and in-house tools offered by a range of vendors. They need access to the data held within those portals, as well as data held by their banks and other financial service providers. This is where Open Banking initiatives come in, Gullers said: Financial institutions (FIs) can find better ways to connect their treasury clients into their own systems and provide more efficient, real-time access to the information those treasurers need to operate.

According to Gullers, treasurers typically access that data via the SWIFT network. Indeed, many corporates find that this strategy works just fine. Others, though, see Open Banking initiatives as a way to further their digitization efforts.

“They might still be actually having back-office staff logging into bank websites and downloading a file, or receiving bank account statements via email that they need to manually code in the system,” he said.

Gullers added that, for these treasurers, Open Banking is viewed as a positive development, but some banks have understandably approached the regulation with skepticism. The popular use case of Open Banking — facilitating data sharing for FinTech firms to more adequately compete in the market — may not immediately seem like a positive development for the banks. However, Gullers explained that other use cases for Open Banking, particularly when it comes to corporate treasury, allow FIs to develop new business opportunities, if they embrace these market shifts.

“There are some [banks] that understand this is an opportunity,” he said. “They said, ‘We have all of this data in our systems, [so] let’s build applications and services around it using APIs.’”

With Open Banking and PSD2 less than a year old, not all banks have taken the opportunity to run with the possibilities of data sharing. Indeed, some do the bare minimum to remain compliant, said Gullers. However, as financial service providers become more comfortable exploring the Open Banking opportunities, he expects more solutions to address the pain points of treasury access to bank data, as well as intercompany data consolidation and analysis, for smoother data flows.

As the market approaches that point, though, there are key questions — one of the biggest being cybersecurity. Gullers noted that corporate treasurers have been forced to face issues of data security head-on, particularly following the 2016 $81 million heist from Bangladesh’s central bank, made possible by hackers who found their way into the bank’s SWIFT network. Since then, experts have warned that cyberattackers are using SWIFT to commit other financial crimes, too.

“On the SWIFT side, treasurers have definitely learned a lesson,” Gullers said. “They’re much more aware of security around the SWIFT network, and the damage [a cyber event] can do. They realize SWIFT is not foolproof.”

Yet, so far, development of solutions among treasurers and banks is limited. Earlier this year, research suggested that European corporate treasurers largely find PSD2 “irrelevant.”

Furthermore, because Open Banking remains new for treasurers and banks alike, though there remains major opportunities, some in the market believe a major Open Banking-related data breach is inevitable, particularly as players introduce new use cases and proprietary solutions as a result of Open Banking regulations.

“As soon as we start to see more adoption of using these types of Open Banking solutions, who knows?” Gullers said. “I’m sure there will be concern about how to keep data secure because it’s definitely critical information, and you can do a lot of nasty things with these integrations if you’re compromised.”

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