Eyal Nachum of Bruc Bond to Banks: Embrace Openness

Eyal Nachum, Bruc Bond’s fintech guru and board member, includes a message to banks: it’s time for you to embrace open banking and also the cooperation it may bring. The advantages of cooperating with alternative providers far outweigh the hazards of loosening control, according to him.
The movement to a more open and interconnected financial world has recently begun, with clear steps taken in the the European Union and in Asian markets towards this goal. Europe’s Payment Services Directive (now in their second iteration, the PSD2) served because the kickoff shot for the continent. It showed the banking system for the entry of so-called non-bank financial institutions (NBFI) , that have taken on large chunks in the labour previously produced by banks. Rather than hurting banks, NBFIs have reduced banks’ workload while introducing additional revenue streams, providing a much-needed buoyancy float to your sector struggling with downsizing pressures.
However, integration could possibly be taken much further, says Eyal Nachum. If we go through the Chinese giants Tencent and Alibaba, we have seen a model banks might 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”, that allow users to do anything from ordering a taxi, through making interpersonal money transfers, to, in certain 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 turn to Singapore, we percieve the likes of DBS, one with the country’s leading banks, launching its car marketplace in partnership with sgCarMart and Carro. UOB, another leading Singaporean bank, recently launched its travel marketplace. These imaginative pursuits can be a lighthouse to European banks, who should employ whatever possible way to learn off their Asian counterparts, for instance by means with the UK’s fintech bridges, which Mr Nachum recently discussed with all the Sunday Times.
Under the PSD2, European banks and finance institutions are mandated to provide application programming interfaces (API), by which other financial institutions (like, for instance, Bruc Bond) can access data and issue authorised instructions on customers’ behalf. Sadly, a lot of banks in Europe did only the bare minimum to comply with 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 missing out on an opportunity to deliver their clients and customers with a service that will actually get people pumped up about banking. This is with 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 are affected as a result.
There a wide range of paths to an open banking future, every individual traditional bank will need to decide upon itself which path will lead on the greatest prosperity. Some things, however, are clear. Trying to imitate the Chinese types of Tencent and Alibaba could be foolish. The regulatory infrastructure is scheduled against it. Instead, we at Bruc Bond think that close, tight-knit cooperation between banking institutions, providers, local authorities and business offers the right path to some bright future.
Such integration offers solutions to the many woes gone through medium and small-sized businesses (SMEs) due the upheavals within the European banking industry, which Mr Nachum recently wrote about in the article for your 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 will help, by mandating information sharing, nevertheless the onus is for the actors inside the markets themselves to build up frameworks that encourage cooperation. These may be limited schemes firstly, that grow deeper as trust develops. Doubtless, this might require some feats in the imagination, however when some from the brightest minds build relationships these issues, they can, we are confident, develop some creative solutions on the issues that vex bankers. The next banking revolutions demands it.