Eyal Nachum of Bruc Bond to Banks: Embrace Openness

Eyal Nachum, Bruc Bond ’s fintech guru and board member, carries a message to banks: it’s time for you to embrace open banking and the cooperation it may bring. The advantages of working together with alternative providers far outweigh the hazards of loosening control, according to him.
The movement with a more open and interconnected financial world has recently begun, with clear steps taken both in the European Union and in Asian markets towards this goal. Europe’s Payment Services Directive (now in its second iteration, the PSD2) served as the kickoff shot on the continent. It opened up the banking system for the entry of so-called non-bank financial institutions (NBFI), who may have taken on large chunks with 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 experiencing downsizing pressures.
However, integration might be taken much further, says Eyal Nachum. If we glance at the Chinese giants Tencent and Alibaba, we have seen a model banks may decide to imitate to a degree. The two companies operate Super Apps, WeChat and Alipay, respectively, are much more than payment services. These are so-called “lifestyle apps”, which allow users to complete anything from ordering a taxi, through making interpersonal money transfers, to, in certain Chinese provinces, paying utility bills and more. It’s simple to imagine the convenience that such centralization 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 view 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 can be quite a lighthouse to European banks, who should employ whatever possible way to learn off their Asian counterparts, by way of example by means from the UK’s fintech bridges, which Mr Nachum recently discussed with the Sunday Times.
Under the PSD2, European banks and loan companies are mandated to provide application programming interfaces (API), where other loan companies (like, for instance, Bruc Bond) can access data and issue authorised instructions on customers’ behalf. Sadly, most banks in Europe did only the smallest amount to abide by regulatory requirements for open banking, rather than explore how such initiatives can be incorporated into banks’ strategic plans. This is a short-sighted mistake, says Eyal Nachum.
Banks are passing up on an opportunity to offer their clients and customers using a service that could actually get people pumped up about banking. This is for their detriment and endangers their long-term prospects. To remain competitive in 2020 and beyond, banks must accept the platformification of monetary services. Users will soon come to expect it, and poorly prepared banks are affected as a result.
There are many paths for an open banking future, and every individual standard bank will need to go for itself which path will lead for the greatest prosperity. Some things, however, are clear. Trying to imitate the Chinese examples of Tencent and Alibaba would be foolish. The regulatory infrastructure is scheduled against it. Instead, we at Bruc Bond believe close, tight-knit cooperation between financial institutions, agencies, local authorities and business can offer the right path to a bright future.
Such integration gives solutions on 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 have to build trust. Trust, we mean, between customers and institutions, and between institutions themselves. This can just be achieved by true, sustained openness. Regulators can help, by mandating information sharing, but the onus is around the actors within the markets themselves to formulate frameworks that encourage cooperation. These could possibly be limited schemes to begin with, that grow deeper as trust develops. Doubtless, this could require some feats from the imagination, but when some in the brightest minds engage these issues, they are able to, we have been confident, produce some creative solutions for the issues that vex bankers. The next banking revolutions demands it.