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 and energy to embrace open banking as well as the cooperation it could bring. The advantages of working together with alternative providers far outweigh the potential for loss of loosening control, he states.
The movement with a more open and interconnected financial world has already begun, with clear steps taken in the the European Union plus Asian markets towards this goal. Europe’s Payment Services Directive (now in the second iteration, the PSD2) served as the kickoff shot about the continent. It showed the banking system to the entry of so-called non-bank loan companies (NBFI) , who may 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 struggling with downsizing pressures.
However, integration may be taken much further, says Eyal Nachum. If we consider the Chinese giants Tencent and Alibaba, we have seen a model banks may wish to imitate with a degree. The two companies operate Super Apps, WeChat and Alipay, respectively, less difficult more than payment services. These are so-called “lifestyle apps”, which permit users to complete anything from ordering a taxi, through making interpersonal money transfers, to, in most Chinese provinces, paying utility bills and more. It’s all to easy to imagine the convenience that such centralisation brings.
According to Eyal Nachum, there’s no need to consolidate everything in one location, but tighter integration is achievable and desirable. If we look to Singapore, we view the likes of DBS, one of the country’s leading banks, launching its car marketplace in partnership with sgCarMart and Carro. UOB, another leading Singaporean bank, recently launched its very own travel marketplace. These imaginative pursuits can be quite a lighthouse to European banks, who should employ whatever possible way to learn using their Asian counterparts, by way of example by means with 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 provide application programming interfaces (API), by which other loan companies (like, as an example, Bruc Bond) can access data and issue authorised instructions on customers’ behalf. Sadly, most banks in Europe have done only the least to adhere to regulatory requirements for open banking, as opposed to explore how such initiatives could be incorporated into banks’ strategic plans. This is a short-sighted mistake, says Eyal Nachum.
Banks are passing up on an opportunity to deliver their clients and customers which has a service that will actually get people looking forward to 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 will quickly 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 standard bank will need to decide for itself which path will lead towards 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 scheduled against it. Instead, we at Bruc Bond believe close, tight-knit cooperation between finance institutions, companies, local authorities and business offers the right path to your bright future.
Such integration gives 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 in an 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 basically be achieved by true, sustained openness. Regulators might help, by mandating information sharing, though the onus is around the actors within the markets themselves to produce frameworks that encourage cooperation. These may be limited schemes firstly, that grow deeper as trust develops. Doubtless, this might require some feats from the imagination, however, if some from the brightest minds build relationships these issues, they might, we have been confident, come up with some creative solutions towards the issues that vex bankers. The next banking revolutions demands it.
