Open Banking – Seize available opportunities in a post-PSD2 world

Customer demands that have been pushing for Open Banking are in no respect new – especially corporations and e-merchants, even with their close relationship to banks, have long been asking for efficient payment and liquidity solutions even in a multi banking relationship. Neither is Open Banking only a PSD2-based European phenomenon. Rather, it is quite the opposite; this phenomenon is truly global. In the US and Asia, it is driven by market pressure, while in Europe it is driven by regulatory compliance.

And although PSD2 is aimed solely at consumers, the best opportunities for banks to leverage are not in the consumer space. For banks, corporations have always been the main contributors to revenues. Hence, it is now time to focus on them.

However, compliance and innovation don’t always go well hand in hand. In Europe, banks have done everything necessary to be compliant, but have not done much more. Now is the time for banks to apply innovation and take the necessary next steps towards implementing Open Banking for corporations and e-merchants in order to leverage the opportunities that Open Banking provides.

Until now, information has been the property of the banks. Payments services have also been in the hands of the banks who, through their discretion, develop and provide services to the market.

Open Banking and new legislation on data security through the General Data Protection Regulation (GDPR), turn the relationship between banks and corporations upside down. Previously, banks were in charge of the relationship; now corporations hold that position. Supported by companies like Virtusa, corporations will have the capacity to be the new FinTechs. With corporate APIs, where services like lending, saving, F/X and trade finance might be included, corporations will be able to integrate directly into their ERP and treasury systems. This, in combination with owning their own data, will create value for corporations such as:

  • Simplicity (e.g no need to connect to all internet banks)
  • Lower cost (e.g more efficient solutions)
  • Minimized need for credit and loans due to the ability to net internally by using real-time payments and account information
  • Ease of changing banks
  • Integrated e-merchant platforms
  • One-stop check out and various payment solutions to provide to web customers

There is, however, still one piece of the puzzle missing to make all this possible. Corporations need a solution that simplifies access to APIs across all banks. Instead of individually connecting to each bank’s APIs there should be a hub for APIs to connect to. For example, banks and corporations would see a lot of value through Virtusa’s Open Banking API, which would help circumvent quite a few technological and cost challenges.

Banks also have a lot to gain in this new world. By delivering what corporations are asking for and providing additional innovative services, they will increase business value and customer satisfaction. This new structure also opens the possibility of vertical integration between banks and corporates, making it possible to deliver partner solutions to the market. Banks, however, should not focus on technical challenges, but should instead leverage what is already provided in the market by IT and technical providers. Virtusa, as one, can provide API portals and developer tools to explore, publish, and integrate new APIs – and can also implement other innovative offerings. This will allow the banks to provide value-added services to their customers faster.

Time to market is essential here. If banks do not act now, then other players will take the opportunity and will bypass the relationships banks hold with their corporate customers.

Banks are in a very good position. They only need to grasp the opportunity to be first on the ball. Sitting back and waiting will be costly – meaning lost business and less new possibilities. To achieve the potential that these opportunities provides, banks need to be proactive and engage in their own disruption. Internet banks that are the primary, or only, channel to corporate customers do not provide the solution corporations are asking for – Open Banking does!

Christina Friberg

Christina Friberg has almost 30 years’ experience within the payments industry and has a great passion for this area. Christina has deep knowledge and experience from banks, clearing houses and corporations in Sweden and globally. She has been responsible for maintenance and processing, development and innovation on SME and managerial levels. Christina is now heading the Payment Practice for Virtusa in the Nordics.

More Posts