Eyal Nachum of Bruc Bond to Banks: Embrace Openness
Eyal Nachum, Bruc Bond’s fintech guru and board member, features a message to banks: it’s time for you to embrace open banking along with the cooperation it might bring. The advantages of using the services of alternative providers far outweigh the hazards of loosening control, he states.
The movement to a more open and interconnected financial world has already begun, with clear steps taken both in the European Union along with Asian markets towards this goal. Europe’s Payment Services Directive (now in their second iteration, the PSD2) served since the kickoff shot on the continent. It opened up the banking system for the entry of so-called non-bank banking institutions (NBFI) , who have taken on large chunks in 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 some sector struggling with downsizing pressures.
However, integration could possibly be taken much further, says Eyal Nachum. If we glance at the Chinese giants Tencent and Alibaba, we percieve a model banks may wish to imitate to your degree. The two companies operate Super Apps, WeChat and Alipay, respectively, less complicated more than payment services. These are so-called “lifestyle apps”, that allow users to complete anything from ordering a taxi cab, through making interpersonal money transfers, to, in most Chinese provinces, paying power bills and more. It’s simple to imagine the convenience that such centralisation brings.
According to Eyal Nachum, there is no need to consolidate everything in one location, but tighter integration may be possible and desirable. If we turn to Singapore, we view the likes of DBS, one from the country’s leading banks, launching its car marketplace in partnership with sgCarMart and Carro. UOB, another leading Singaporean bank, recently launched a unique travel marketplace. These imaginative pursuits can be a lighthouse to European banks, who should employ whatever way possible to learn using their Asian counterparts, by way of example by means of the UK’s fintech bridges, which Mr Nachum recently discussed while using Sunday Times.
Under the PSD2, European banks and financial institutions are mandated to provide application programming interfaces (API), where other finance institutions (like, for instance, Bruc Bond ) can access data and issue authorised instructions on customers’ behalf. Sadly, a majority of banks in Europe have inked only the least to comply with regulatory requirements for open banking, as opposed to explore how such initiatives may be incorporated into banks’ strategic plans. This is a short-sighted mistake, says Eyal Nachum.
Banks are losing an opportunity to deliver their clients and customers which has a service that could actually get people pumped up about banking. This is on their detriment and endangers their long-term prospects. To be competitive in 2020 and beyond, banks must accept the platformification of financial services. Users has decided to come to expect it, and poorly prepared banks will suffer as a result.
There are numerous paths with an open banking future, every individual financial institution will need to decide for itself which path will lead to the greatest prosperity. Some things, however, do understand. Trying to imitate the Chinese examples of Tencent and Alibaba can be foolish. The regulatory infrastructure is defined against it. Instead, we at Bruc Bond believe that close, tight-knit cooperation between banking institutions, companies, local authorities and business can offer the right path with a bright future.
Such integration provides solutions on the many woes felt by medium and small-sized businesses (SMEs) due the upheavals inside European banking industry, which Mr Nachum recently wrote about in the article for the Global Banking & Finance Review.
To reach utopia, however, we should build trust. Trust, we mean, between customers and institutions, and between institutions themselves. This can just be achieved by true, sustained openness. Regulators will help, by mandating information sharing, however the onus is around the actors inside the markets themselves to produce frameworks that encourage cooperation. These could possibly be limited schemes to begin with, that grow deeper as trust develops. Doubtless, this could require some feats in the imagination, when some with the brightest minds engage with these issues, they can, were confident, come up with some creative solutions on the issues that vex bankers. The next banking revolutions demands it.