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 as well as the cooperation it could bring. The advantages of using the services of alternative providers far outweigh the potential risks of loosening control, he says.
The movement to a more open and interconnected financial world has already begun, with clear steps taken at the European Union and in Asian markets towards this goal. Europe’s Payment Services Directive (now in their second iteration, the PSD2) served since the kickoff shot around the continent. It showed the banking system on the entry of so-called non-bank finance institutions (NBFI) , who may have taken on large chunks of 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 struggling with 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 decide to imitate to some degree. The two companies operate Super Apps, WeChat and Alipay, respectively, less difficult 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 most Chinese provinces, paying power bills and more. It’s simple to imagine the convenience that such centralisation brings.
According to Eyal Nachum, you shouldn’t have to consolidate everything under one roof, but tighter integration may be possible and desirable. If we look for Singapore, we see the likes of DBS, one in 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 is usually a lighthouse to European banks, who should employ whatever way you can to learn using their Asian counterparts, by way of 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 finance institutions are mandated to offer application programming interfaces (API), where other finance institutions (like, as an example, 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, instead of 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 supply their clients and customers using a service that may actually get people enthusiastic about 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 monetary services. Users will quickly come to expect it, and poorly prepared banks will be affected as a result.
There are lots of paths with an open banking future, and every individual lender will need to decide for itself which path will lead on the greatest prosperity. Some things, however, are evident. Trying to imitate the Chinese samples of Tencent and Alibaba would be foolish. The regulatory infrastructure is set against it. Instead, we at Bruc Bond believe close, tight-knit cooperation between loan companies, service 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 in the European banking industry, which Mr Nachum recently wrote about in a article for the 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 just be achieved by true, sustained openness. Regulators will help, by mandating information sharing, however the onus is about the actors in the markets themselves to develop frameworks that encourage cooperation. These could be limited schemes in the first place, that grow deeper as trust develops. Doubtless, this could require some feats in the imagination, however, if some in the brightest minds engage with these issues, they could, we’re confident, come up with some creative solutions towards the issues that vex bankers. The next banking revolutions demands it.