22 October 2018
SIBOS day 1 – Open Banking requires radical changes
Banks should start from scratch when creating new business models rather than creating them step-by-step on top of their current business. Besides that, it is currently trendy to look at possibilities in the field of business to consumer, but especially in the field of corporate banking there is great potential. These were just a few interesting insights that were discussed during the packed panel session about the role of banks in the Open Banking era on the first day of Sibos 2018.
Focus on three main questions
What I heard during the session was a combination of new insights and things I already knew. Although it was no surprise, it was good to hear again that one of the most important assets banks can offer customers is trust and reliability. This is a belief that we at equensWorldline strongly recognize. Banks have built that trust and reputation over decades. Fintechs logically cannot compete with banks in this respect, as they simply haven’t been around as long to prove themselves.
The session, which was so packed that visitors had to stand because there were not enough seats, focused on three main questions: what drives Open Banking? What assets and liabilities do banks have? What does it take to win in an open banking environment? The audience could answer these questions via their mobile phones, which added an interactive slant to the session. Below are the most important conclusions per question.
What drives Open Banking?
The rules change and that is why banks have to change their business models, according to Thomas Nielsen, Chief Digital Officer, Global Transaction Banking at Deutsche Bank. According to him, the rules change not only in the digital field, but also in people's way of thinking. Nielsen: “In the past, your parents taught you not to get into a car with strangers, but now everyone uses Uber.” He wants to indicate that banks should look at the world in a completely different way.
Nielsen: “Look at Nokia in the past, it was a very dominant player in the field of mobile. Then came Apple, who changed the rules and moved away from the traditional business model completely. Apple turned the mobile phone into a platform on which you can store apps”, says Nielsen about the downfall of telephone giant Nokia. His point: sometimes customers do not know that they want something until the product or service is actually there. “Look at the iPad”, adds Fabrice Denele, Senior Vice President, Partnerships & Interbank Relationships and Head of Consumer Solutions at Natixis. “Until then, there was no demand for these types of devices, but after that, everyone wanted one.”
Nielsen emphasized that there is currently an enormous focus on the consumer side when it comes to Open Banking. “People focus on business to consumer, but just as important, or even more important, is a focus on business to business. I have high expectations for corporate banking.”
What assets and liabilities do banks have
Customer relationships and customer data are the most important assets that banks have, but as mentioned earlier, trust also plays an essential role. The panel talked about the difference between banks and fintechs, noting that fintechs have an easy existence. Many fintechs don't have a lot of clients (yet), so they are more flexible and agile, while banks always have to take their clients into account and have to keep up with their legacy as a trusted, stable enterprise. Every service or innovation a bank launches must be able to scale, work immediately and meet the compliance requirements. Fintechs work very differently; they have much more space to experiment, trial and error-style.
The panelists also talked about how important data are, but that we should not forget that this data is in fact a by-product. In addition, Banks could play an important role in the field of GDPR, the privacy legislation that is intended to protect the privacy of the European public. With this law, the government gives its citizens control over their own data, so they can decide for themselves which companies they want to give access to which information. But how do you, as a bank or fintech, deal with this consciously? Banks could take on the role of adviser. They can educate customers and explain how they can deal with their own data in the best possible way.
Mallika Sathi, Vice President Security Solutions at Mastercard, also explained that banks can play an important role in creating a secure and frictionless environment. Digital identity can contribute to that security and can reduce friction. This is fully in line with what Michael Salmony of equensWorldline believes, as he says we need to review existing online identification methods. In order to maintain customers’ trust during the era of Open Banking where digital services and innovation are at the forefront, online security is crucial. All parties that handle consumers’ data have to protect their identities, so combining a smooth customer experience with security, is key. Banks could take the lead in this process.
What does it take to win in an open banking environment?
According to Nielsen, it's all about creating new business models. “Banks should not just implement new developments, they should be open to start from scratch”, he added. Nielsen gave Netflix as an example. Netflix used to focus solely on online DVD rentals, but at some point, they couldn't survive anymore. “After that, they set up a new company, moved to another building and recruited new people. Very radical, but I am convinced that this is the way forward.”