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 and the cooperation it can bring. The advantages of working with alternative providers far outweigh the potential risks of loosening control, according to him.
The movement to a more open and interconnected financial world has begun, with clear steps taken in the European Union plus Asian markets towards this goal. Europe’s Payment Services Directive (now rolling around in its second iteration, the PSD2) served because kickoff shot about the continent. It opened up the banking system towards the entry of so-called non-bank banking institutions (NBFI) , who have taken on large chunks of 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 might be taken much further, says Eyal Nachum. If we consider 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 some Chinese provinces, paying bills and more. It’s easy to imagine the convenience that such centralisation brings.
According to Eyal Nachum, there’s no need to consolidate everything in one place, but tighter integration is possible and desirable. If we look for Singapore, we see the likes of DBS, one from the country’s leading banks, launching its very own car marketplace in partnership with sgCarMart and Carro. UOB, another leading Singaporean bank, recently launched its very own travel marketplace. These imaginative pursuits could be a lighthouse to European banks, who should employ whatever possible way to learn from other Asian counterparts, for example by means with the UK’s fintech bridges, which Mr Nachum recently discussed with all the Sunday Times.
Under the PSD2, European banks and banking institutions are mandated to offer 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 lot of banks in Europe have done only the smallest amount to adhere to regulatory requirements for open banking, in lieu of explore how such initiatives might be incorporated into banks’ strategic plans. This is a short-sighted mistake, says Eyal Nachum.
Banks are missing out on an opportunity to offer their clients and customers using a service that will actually get people pumped up about banking. This is for their detriment and endangers their long-term prospects. To be competitive in 2020 and beyond, banks must accept the platformification of economic services. Users will soon come to expect it, and poorly prepared banks will be affected as a result.
There are lots of paths for an open banking future, each individual standard bank will need to decide upon itself which path will lead on the greatest prosperity. Some things, however, are evident. Trying to imitate the Chinese instances of Tencent and Alibaba could be foolish. The regulatory infrastructure is scheduled against it. Instead, we at Bruc Bond feel that close, tight-knit cooperation between banking institutions, providers, local authorities and business can provide the right path with a bright future.
Such integration would provide solutions to the many woes gone through medium and small-sized businesses (SMEs) due the upheavals in the European banking industry, which Mr Nachum recently wrote about within an article to the 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 only 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 build up frameworks that encourage cooperation. These might be limited schemes to start with, that grow deeper as trust develops. Doubtless, this could require some feats in the imagination, when some in the brightest minds build relationships with these issues, they are able to, we have been confident, produce some creative solutions towards the issues that vex bankers. The next banking revolutions demands it.
