The advent of Open Banking is expected to provide one of the dominant themes at SIBOS. As bankers, corporates and fintech’s gather in Toronto for this year’s event, the adoption of open Application Programming Interfaces (APIs) across the financial services industry will be a major talking point. There will likely be many questions regarding how Open Banking will impact businesses, regulators and the financial industry.
Application Programming Interfaces, or APIs, is the technology which enables different platforms, apps and systems to simply connect and share data. The Open Banking regulatory initiative seeks to stimulate greater innovation and competition across the financial services sector, compelling banks to create open APIs into their previously locked customer accounts and payment systems.
While other regulatory initiatives have been received begrudgingly among traditional banks, Open Banking is widely considered to represent a vital opportunity to create new partnerships and collaborations. Open Banking will benefit not only the customer, but will enable progressive banks and businesses to share significant quantities of data allowing them to become more intelligent about the services they build and sell.
Financial decision makers need to become quickly accustomed to the benefits of Open Banking, recognising the right questions to ask their respective banks and the right questions to ask their internal operations. Many banks are working ahead of schedule to be ready and financial technology companies are developing market-ready innovations to benefit businesses. The race is on for banks and fintech firms to win the presentation layer for customers that embrace the incoming payments processes and discover new, innovative ways to capture their long term loyalty.
From the Lloyds’ insurance market to the Senior Manager’s Regime, the UK has long had a history of creating agenda-setting financial services initiatives. Open Banking will be no exception. We can expect the UK to have a considerable influence on PSD2 (the EU directive equivalent to the UK’s Open Banking) and other countries’ regulators that are keeping a watchful eye on how Open Banking unfolds.
The UK standards for Open Banking have the potential to be adopted way beyond UK borders, creating a more user- friendly environment of interoperability. For example, the standardisation of the API specification is a winning formula from the Open Banking model. Banks elsewhere are voluntarily endorsing the era of open APIs and pre-empting new regulations which will likely follow in a number of advanced economies.
The drive towards real-time payments is another theme which will be heavily discussed at SIBOS. Open Banking will make it easier than before to use Faster Payments in the UK, on a multi-banked basis. Furthermore, the New Payment Architecture (NPA) – a UK proposed infrastructure under modernised technology – is currently being designed to compete globally, following hot on the heels of Open Banking, all of which will make Faster Payments even more valuable.
As real-time payments continue to become the new norm, it is also important that financial institutions and corporates continue to invest in their compliance and fraud systems. This means not only automated monitoring and alerting of anomalous transactions, but also a rigorous check up on user behaviour to identify and prevent potential fraudulent activity from within the organisation.
Open Banking will allow billions of transactions to occur in an open financial marketplace with increased competition across financial services. This will in turn lead to greater innovation as both banks and financial technology firms look to become more customer-centric and own the presentation interface with the end customer.
Written by Ed Adshead-Grant, General Manager, Payments at Bottomline Technologies.