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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 and the cooperation it might bring. The advantages of working with alternative providers far outweigh the 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 along with Asian markets towards this goal. Europe’s Payment Services Directive (now in its second iteration, the PSD2) served because kickoff shot about the continent. It exposed the banking system for 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 fighting downsizing pressures.
However, integration could be taken much further, says Eyal Nachum. If we go through the Chinese giants Tencent and Alibaba, we see a model banks may wish to imitate to some 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 permit users to perform anything from ordering a taxi, through making interpersonal money transfers, to, in some Chinese provinces, paying utility 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 location, but tighter integration may be possible and desirable. If we look for Singapore, we have seen the likes of DBS, one in 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 is usually a lighthouse to European banks, who should employ whatever possible way to learn from their Asian counterparts, as an example by means of the UK’s fintech bridges, which Mr Nachum recently discussed using the Sunday Times.
Under the PSD2, European banks and financial institutions are mandated to provide application programming interfaces (API), through which other loan companies (like, by way of example, Bruc Bond) can access data and issue authorised instructions on customers’ behalf. Sadly, most banks in Europe did only the least to abide by 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 offer their clients and customers with a service that could 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 quickly come to expect it, and poorly prepared banks will be affected as a result.
There are lots of paths to an open banking future, each individual lender will need to decide upon itself which path will lead to the greatest prosperity. Some things, however, are evident. Trying to imitate the Chinese samples of Tencent and Alibaba can be foolish. The regulatory infrastructure is placed against it. Instead, we at Bruc Bond think that close, tight-knit cooperation between financial institutions, agencies, local authorities and business provides the right path to your bright future.
Such integration provides solutions on the many woes gone through medium and small-sized businesses (SMEs) due the upheavals inside the European banking industry, which Mr Nachum recently wrote about in an article for your 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 simply be achieved by true, sustained openness. Regulators might help, by mandating information sharing, but the onus is about the actors inside markets themselves to build up frameworks that encourage cooperation. These may be limited schemes to begin with, that grow deeper as trust develops. Doubtless, this might require some feats in the imagination, however, if some with the brightest minds build relationships these issues, they are able to, we are confident, produce some creative solutions to the issues that vex bankers. The next banking revolutions demands it.