Eyal Nachum of Bruc Bond to Banks: Embrace Openness
Eyal Nachum, Bruc Bond’s fintech guru and board member, has a message to banks: it’s time and energy to embrace open banking along with the cooperation it might bring. The advantages of working together with alternative providers far outweigh the risks of loosening control, according to him.
The movement to your more open and interconnected financial world has begun, with clear steps taken in the the European Union along with Asian markets towards this goal. Europe’s Payment Services Directive (now in their second iteration, the PSD2) served as the kickoff shot for the continent. It showed the banking system on the entry of so-called non-bank loan companies (NBFI) , who may have taken on large chunks of the labour previously produced by banks. Rather than hurting banks, NBFIs have reduced banks’ workload while introducing additional revenue streams, providing a much-needed buoyancy float to a sector experiencing downsizing pressures.
However, integration could be taken much further, says Eyal Nachum. If we glance at the Chinese giants Tencent and Alibaba, we view a model banks may decide to imitate to a 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 accomplish 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, you don’t have to consolidate everything in one location, but tighter integration can be done and desirable. If we check out Singapore, we percieve the likes of DBS, one with the country’s leading banks, launching its own car marketplace in partnership with sgCarMart and Carro. UOB, another leading Singaporean bank, recently launched its very own travel marketplace. These imaginative pursuits is usually a lighthouse to European banks, who should employ whatever way possible to learn off their Asian counterparts, by way of example by means from the UK’s fintech bridges, which Mr Nachum recently discussed using the Sunday Times.
Under the PSD2, European banks and finance institutions are mandated to supply application programming interfaces (API), where other loan companies (like, as an example, Bruc Bond ) can access data and issue authorised instructions on customers’ behalf. Sadly, most banks in Europe did only the least to adhere to regulatory requirements for open banking, as opposed to explore how such initiatives might be incorporated into banks’ strategic plans. This is a short-sighted mistake, says Eyal Nachum.
Banks are losing an opportunity to provide their clients and customers having a service that could actually get people looking forward to banking. This is to their detriment and endangers their long-term prospects. To be competitive in 2020 and beyond, banks must accept the platformification of monetary services. Users will soon come to expect it, and poorly prepared banks will suffer as a result.
There are lots of paths for an open banking future, and every individual lender will need to decide for itself which path will lead for the greatest prosperity. Some things, however, do understand. Trying to imitate the Chinese types of Tencent and Alibaba could be foolish. The regulatory infrastructure is defined against it. Instead, we at Bruc Bond believe that close, tight-knit cooperation between banking institutions, service providers, local authorities and business offers the right path to a bright future.
Such integration would provide solutions to the many woes gone through medium and small-sized businesses (SMEs) due the upheavals inside European banking industry, which Mr Nachum recently wrote about within an article for that 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 basically be achieved by true, sustained openness. Regulators will help, by mandating information sharing, however the onus is about the actors inside the markets themselves to develop frameworks that encourage cooperation. These could be limited schemes to start with, that grow deeper as trust develops. Doubtless, this may require some feats from the imagination, however, if some with the brightest minds engage these issues, they could, we are confident, produce some creative solutions to the issues that vex bankers. The next banking revolutions demands it.
