Leveraging Open Banking To Build The New Trust Ecosystem

Everyone wants to build a smoother, faster and more efficient financial services journey — that isn’t a point of disagreement or friction.

Few are investing energy in building taller silos for their data, bumpier and more friction-filled experiences for their customers, or slower and more opaque payments processes.

And yet, look around the consumer and business-to-business (B2B) ecosystem, and it’s easy to find examples of impregnable-looking data silos, messy customer journeys and payments processes best described with the term “black box,” VoPay CEO and Founder Hamed Arbabi noted in a conversation with both PYMNTS and Fiserv Vice President of Digital Payments and Data Aggregation Paul Diegelman. And this is particularly notable in B2B payments, VoPay’s area of specialty.

“The biggest challenge we see B2B payments experiencing is in the traceability of the transactions, which definitely affects a company’s cash flow,” Arbabi said. “What we’re trying to do is leverage open banking to replicate a FedEx or Amazon experience where businesses know where their payment is at any given point of time, so they have real-time cash flow positioning.”

Being able to track the flow of funds and correctly auto-post those funds to an invoice-level based accounts receivable (AR) system, said Diegelman, can be difficult. It’s solvable with data and process, he said, noting VoPay approaches that solution specifically by inserting a layer of technology designed to reduce silos and track transactional paths across them. As a result, a number of disconnected data streams become a single thread that is the payment’s life history from point A to point B.

And, Diegelman said, that sort of financial data portability and ability to use technology to collate data into a single comprehensible, trackable stream is applicable to consumer transactions — albeit in a somewhat different type of use case.

Consumer payments, he noted, often don’t require the final step that B2B payments have around invoice true-up in AR software, which makes business-to-consumer (B2C) payments comparatively simpler and therefore good candidates for rapid innovation. But consumers living financial lives spread across providers can find unexpected and irritating roadblocks popping up if they can’t access and move their data between parties as easily as they want to.

“For an example that is very contemporary right now, there are a lot of people who are refinancing their mortgages because of the recent change in mortgage rates,” he said. “Instead of asking customers to gather and provide a few months’ worth of bank statements, mortgage originators can provide a data aggregation tool that can automatically consolidate information from the customer’s various accounts into the mortgage originator’s platform, which saves an awful lot of time.”

He noted that with rates being as volatile as they’ve been of late, time in this instance is literally money for consumers, possibly quite a lot of it. Being able to access data that was once siloed and immediately port it over to a mortgage origination platform is, in fact, a major upgrade in a time when every dollar really counts for consumers.

But opening up the benefits of open banking and data moving freely between an increased number of starting and ending points must be considered on balance with concerns about data privacy and security, both Diegelman and Arbabi agreed. Obviously, they said, customers as a whole don’t want their data falling into the wrong hands or being used in ways that they didn’t agree to. And the world of financial services is built on trust.

Traditional players enter the field with what Arbabi called “stability trust,” the built-in belief that banks are consistent, circumspect and wired to protect both security and privacy because of the regulatory structure under which they operate. That is a powerful offering.

“But trust can also be created by innovating new solutions that quickly solve a problem and meet a need of a business or customer,” Arabi said. “This ‘technology trust’ is something that FinTech companies can deliver.”

The future of financial services, Diegelman noted, isn’t an either/or proposition with traditional players and FinTechs squaring off against each other. Instead, collaboration and connectivity enabled by an open banking approach will be key. To that end, Fiserv has spent the last several years building and strengthening a payments infrastructure that connects financial institutions, businesses, FinTechs and consumers, creating the ubiquity required for in-demand capabilities such as faster payments.

As Diegelman noted, there is a world of improvements, upgrades and innovations available today that weren’t possible even a decade ago. Every day, developers and tech firms create exciting experiences to make it easier for people to pay bills, understand their financial wellness, monitor their invoices, pay their suppliers or split the check at dinner.

“There is a tremendous amount of opportunity to bring new technology to different demographics to solve different problems that they may have,” he said.

The solution to unlocking all that potential, he said, is in working to open the doors of the data silos, in a reasonably secure and controlled way — and let the expanded field of information guide better innovation.