Eyal Nachum of Bruc Bond to Banks: Embrace Openness
Eyal Nachum, Bruc Bond’s fintech guru and board member, includes a message to banks: it’s time to embrace open banking and also the cooperation it can bring. The advantages of using the services of alternative providers far outweigh the potential for loss of loosening control, he says.
The movement to some more open and interconnected financial world has already begun, with clear steps taken in the the European Union along with Asian markets towards this goal. Europe’s Payment Services Directive (now rolling around in its second iteration, the PSD2) served since the kickoff shot around the continent. It showed the banking system towards the entry of so-called non-bank loan companies (NBFI) , who may have taken on large chunks with 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 struggling with downsizing pressures.
However, integration could be taken much further, says Eyal Nachum . If we look at the Chinese giants Tencent and Alibaba, we have seen a model banks might wish to imitate to your degree. The two companies operate Super Apps, WeChat and Alipay, respectively, tend to be more than payment services. These are so-called “lifestyle apps”, which allow users to do anything from ordering taxis, through making interpersonal money transfers, to, in a few Chinese provinces, paying electric bills and more. It’s an easy task to imagine the convenience that such centralisation brings.
According to Eyal Nachum, you don’t have to consolidate everything under one roof, but tighter integration may be possible and desirable. If we look to Singapore, we percieve the likes of DBS, one of the country’s leading banks, launching a unique car marketplace in partnership with sgCarMart and Carro. UOB, another leading Singaporean bank, recently launched its travel marketplace. These imaginative pursuits can be quite a lighthouse to European banks, who should employ whatever way you can to learn from their Asian counterparts, by way of example by means from the UK’s fintech bridges, which Mr Nachum recently discussed with all the Sunday Times.
Under the PSD2, European banks and financial institutions are mandated to provide application programming interfaces (API), through which other finance institutions (like, for example, Bruc Bond) can access data and issue authorised instructions on customers’ behalf. Sadly, most banks in Europe did only the bare minimum to abide by regulatory requirements for open banking, in lieu of explore how such initiatives may be incorporated into banks’ strategic plans. This is a short-sighted mistake, says Eyal Nachum.
Banks are missing out on an opportunity to provide their clients and customers having a service that can actually get people excited about banking. This is with their detriment and endangers their long-term prospects. To be competitive in 2020 and beyond, banks must accept the platformification of economic services. Users has decided to come to expect it, and poorly prepared banks are affected as a result.
There a wide range of paths to an open banking future, each individual standard bank will need to go for itself which path will lead to the greatest prosperity. Some things, however, are evident. Trying to imitate the Chinese types of Tencent and Alibaba would be foolish. The regulatory infrastructure is scheduled against it. Instead, we at Bruc Bond believe close, tight-knit cooperation between banking institutions, providers, local authorities and business provides the right path to some bright future.
Such integration provides solutions to the many woes experienced medium and small-sized businesses (SMEs) due the upheavals within the European banking industry, which Mr Nachum recently wrote about in the article for the Global Banking & Finance Review.
To reach utopia, however, we’ve got to build trust. Trust, we mean, between customers and institutions, and between institutions themselves. This can just be achieved by true, sustained openness. Regulators might help, by mandating information sharing, though the onus is on the actors inside the markets themselves to formulate frameworks that encourage cooperation. These could be limited schemes to start with, that grow deeper as trust develops. Doubtless, this may require some feats in the imagination, when some in the brightest minds build relationships with these issues, they are able to, we’re confident, produce some creative solutions on the issues that vex bankers. The next banking revolutions demands it.