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 it to embrace open banking along with the cooperation it might bring. The advantages of working with alternative providers far outweigh the risks of loosening control, he says.
The movement with a more open and interconnected financial world has recently begun, with clear steps taken at the European Union along with Asian markets towards this goal. Europe’s Payment Services Directive (now in the second iteration, the PSD2) served because kickoff shot on the continent. It opened up the banking system for the entry of so-called non-bank banking institutions (NBFI) , who’ve taken on large chunks in the labour previously created 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 possibly be taken much further, says Eyal Nachum. If we consider the Chinese giants Tencent and Alibaba, we have seen a model banks might wish to imitate with a degree. The two companies operate Super Apps, WeChat and Alipay, respectively, less complicated more than payment services. These are so-called “lifestyle apps”, which permit users to complete anything from ordering a taxi cab, 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, you don’t have to consolidate everything under one roof, but tighter integration can be done and desirable. If we look to Singapore, we see 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 can be a lighthouse to European banks, who should employ whatever possible way to learn using their Asian counterparts, for instance by means in the UK’s fintech bridges, which Mr Nachum recently discussed with all the Sunday Times.
Under the PSD2, European banks and loan companies are mandated to provide application programming interfaces (API), where other banking institutions (like, as an example, Bruc Bond) can access data and issue authorised instructions on customers’ behalf. Sadly, a majority of banks in Europe did only the least to adhere to regulatory requirements for open banking, as opposed to explore how such initiatives can be incorporated into banks’ strategic plans. This is a short-sighted mistake, says Eyal Nachum .
Banks are missing out on an opportunity to deliver their clients and customers with a service that may 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 economic services. Users will quickly come to expect it, and poorly prepared banks are affected as a result.
There are numerous paths for an open banking future, each individual traditional bank will need to go for itself which path will lead towards the greatest prosperity. Some things, however, do understand. Trying to imitate the Chinese samples of Tencent and Alibaba would be foolish. The regulatory infrastructure is placed against it. Instead, we at Bruc Bond feel that close, tight-knit cooperation between financial institutions, companies, local authorities and business provides the right path to a bright future.
Such integration gives solutions towards the many woes experienced medium and small-sized businesses (SMEs) due the upheavals inside the European banking industry, which Mr Nachum recently wrote about in a article for that Global Banking & Finance Review.
To reach utopia, however, we must build trust. Trust, we mean, between customers and institutions, and between institutions themselves. This can simply be achieved by true, sustained openness. Regulators may help, by mandating information sharing, but the onus is about the actors inside the markets themselves to develop frameworks that encourage cooperation. These could possibly be limited schemes firstly, that grow deeper as trust develops. Doubtless, this might require some feats from the imagination, when some with the brightest minds engage with these issues, they might, we are confident, produce some creative solutions for the issues that vex bankers. The next banking revolutions demands it.
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