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 for you to embrace open banking along with the cooperation it could bring. The advantages of using the services of alternative providers far outweigh the hazards of loosening control, according to him.
The movement to some more open and interconnected financial world has recently begun, with clear steps taken both in the European Union as well as in Asian markets towards this goal. Europe’s Payment Services Directive (now rolling around in its second iteration, the PSD2) served as the kickoff shot around the continent. It opened the banking system to the entry of so-called non-bank financial institutions (NBFI) , that have taken on large chunks from 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 with a sector being affected by downsizing pressures.
However, integration could be taken much further, says Eyal Nachum. If we consider the Chinese giants Tencent and Alibaba, we see a model banks may decide to imitate with 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”, that allow users to do anything from ordering taxis, through making interpersonal money transfers, to, in some Chinese provinces, paying 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 in one location, but tighter integration may be possible and desirable. If we turn to Singapore, we percieve the likes of DBS, one with the country’s leading banks, launching its very own 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, as an example by means in the UK’s fintech bridges, which Mr Nachum recently discussed with the Sunday Times.
Under the PSD2, European banks and loan companies are mandated to offer application programming interfaces (API), by which other finance institutions (like, by way of example, Bruc Bond) can access data and issue authorised instructions on customers’ behalf. Sadly, a majority of banks in Europe have done only the smallest amount 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 missing an opportunity to offer their clients and customers with a service that will actually get people enthusiastic about 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 with an open banking future, and every individual financial institution will need to decide for itself which path will lead to the greatest prosperity. Some things, however, are evident. Trying to imitate the Chinese samples of Tencent and Alibaba will be foolish. The regulatory infrastructure is set against it. Instead, we at Bruc Bond think that close, tight-knit cooperation between banking institutions, providers, local authorities and business can offer the right path with a bright future.
Such integration would provide solutions towards the many woes felt by medium and small-sized businesses (SMEs) due the upheavals inside the European banking industry, which Mr Nachum recently wrote about within an article for that Global Banking & Finance Review.
To reach utopia, however, we have to 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 around the actors within the markets themselves to develop frameworks that encourage cooperation. These might be limited schemes firstly, that grow deeper as trust develops. Doubtless, this could require some feats in the imagination, when some in the brightest minds engage with these issues, they could, we are confident, come up with some creative solutions for the issues that vex bankers. The next banking revolutions demands it.
