B2B Payments

Open Banking’s Mixed B2B Bag

Open banking didn’t just kick off via PSD2 regulations across Europe and the U.K. Rather, banks around the globe began to understand the potential value in opening up customer data to third-party players, and with more bank APIs emerging in 2018, the year saw a surge in data sharing.

It’s not a trend reserved for consumers, either. As PYMNTS looks back at the biggest stories of 2018, open banking and APIs became a central focus of the payments and financial services industry in areas like corporate treasury and small business banking.

But the open banking wave also introduced a number of new challenges for the financial services industry: namely, awareness of regulations, willingness for corporate customers to share their data, and novel hurdles in management and protection of the data that moves.

Finserv Embraces The API

“I think for our industry, APIs are a very positive innovation,” said Hubert J.P. Jolly, head of finance and channels global transaction services at Bank of America Merrill Lynch in an interview with PYMNTS for a previous edition of the PYMNTS.com B2B API Tracker. “It just makes it so much easier for clients to connect to their bank, while also giving them the ability to transact or pull information on a real-time basis.”

Bank of America was one of the banks that saw value in open banking initiatives for the corporate banking space. The FI launched its API gateway to integrate into its CashPro corporate cash management platform late last year, and has since continued to invest in API technology to enable corporate clients to more easily obtain their data, funnel it into the right systems, and more easily analyze it.

“In the past, clients would have to manually download the same data every day and rearrange it so they could track in it whichever format they typically use,” Jolly said in another interview with PYMNTS. “Now, they can just call upon those APIs and download the data in whatever format they want to use. That’s a better service experience for our clients.”

Beyond the world’s biggest multinational banks, other regional and smaller banks have also taken measures to embrace open banking for their business customers.

Earlier this month Nordic financial services firm Nordea introduced what it said was its first commercially viable open banking solution for businesses, introducing the Instant Reporting tool that links third-party solutions to corporate financial data in real time.

Of course, the FinTechs are eager to welcome corporate bank data into their own platforms to augment services for businesses, too. They include companies like Trovata, which spoke with PYMNTS earlier this month about the ability for open banking initiatives to facilitate data sharing between banks and company ERP and treasury management systems to automate processes and enhance business intelligence.

“Customers are demanding something that’s much more interactive and more integrated, and more visual and BI [business intelligence]-like,” said Trovata founder and CEO Brett Turner in an interview. “That’s not necessarily in a bank’s DNA to build out those kind of next-gen, product-orientated pieces of their online banking tools.”

Challenges Surface

Some analysts have considered banks’ lack of capacity to handle the sheer number of startups that now want to integrate into the data once locked behind banks’ digital walls.

“You would think, with these regulations coming out, it would make it easier for banks. What is happening is it has made the space more crowded,” said one U.K.-based banking analyst in August. “Startups are not standing out from the crowd.”

Another hurdle to emerge? Small businesses aren’t necessarily convinced of the benefits that open banking promises.

While 90 percent of large FIs surveyed by Accenture earlier this year plan to introduce open banking services for their commercial clients, small to medium-size businesses (SMBs) are less eager to embrace the industry change. Separate data from KPMG and 3GEM found one-quarter of U.K. SMBs are absolutely against allowing the sharing of their financial data under any circumstance.

One of the biggest hurdles to open banking that will continue to emerge in 2019 is data security. While regulations like PSD2 and Open Banking place data security at center-stage, there will be new questions coming to fruition as more companies get their hands on this data, and whether data sharing was actually authorized by the end-user.

Plus, API connectivities now present a multitude of more avenues through which cyber thieves can attempt to penetrate banks’ data troves.

“If I can’t attack the banks’ front doors, maybe I can pose as a small developer and find an alternative side door that still gets me through to the bank, one way or another,” said Sumit Agarwal, VP of product management and co-founder at cybersecurity firm Shape Security, in an interview with PYMNTS earlier this year.



The pressure on banks to modernize their payments capabilities to support initiatives such as ISO 20022 and instant/real time payments has been exacerbated by the emergence of COVID-19 and the compelling need to quickly scale operations due to the rapid growth of contactless payments, and subsequent increase in digitization. Given this new normal, the need for agility and optimization across the payments processing value chain is imperative.