18 June 2019
EBAday Day 1: The appeal for collaboration between banks
During the first morning of EBAday one key message has been vocalized multiple times by different market leaders and it was loud and clear: in order to survive in this era of Open Banking, it is crucial for banks to collaborate.
Appeal for collaboration
Wolfgang Ehrmann, Chairman of the Board of the Euro Banking Association, opened EBAday with his plenary welcoming speech. He identified the most important themes of the banking industry and asked very relevant questions, including how banks stay relevant in a time of Open Banking, what the industry is undertaking against cybersecurity and why banks struggle to employ skilled staff for further innovation. Ehrmann completed his speech with a clear appeal for cooperation. He urged that banks should work together to build an ecosystem, in order to stay relevant in an industry that is welcoming more and more players and even disruptors.
Paula da Silva, Head of Transaction Services at Swedish bank SEB, continued where Ehrmann stopped. The video of tons of starlings flying together in the sky at the start of her presentation beautifully symbolized the way banks should cooperate. The resistance or direction may not be predetermined, but as long as the starlings move together, they can fly steadily. She referred to how the Nordics already make a great example of such collaboration: after Silicon Valley and Bejing, the Nordics are considered the most innovative region globally.
Breaking up a system of silos
The most prevalent reason for this appeal for cooperation? That would be breaking up a system that is currently built on silos. There are still 6.250 banks in Europe, all innovating at their own pace, deploying their own payment- and service solutions. This obstructs the rate of innovation, especially in comparison to BigTech’s such as Apple, Alibaba and Google. As Da Silva put it: "Banks are inventing the wheel over and over again". It’s the least productive way to compete with challenging players in the payments market.
The silos are very visible, even at EBAday. It’s interesting to see here, as I visited some of the stands, that although collaboration is the key topic for banks, little on this topic is seen. Banks seem to still be focused on their own solutions and product range, rather than announce partnerships or collaborations. It doesn’t mean that they aren’t there, they are just not showing on the outside.
A coalition of the willing
As I joined the panel discussion of J.P. Morgan and Deutsche Bank, the ‘how’ of this appeal was the main topic. The answer was fairly simple according to John Hunter, Head of Clearing at J.P. Morgan: "Collaborations on a larger scale should start with a coalition of the willing". With ‘the willing’, Hunter refers to the banks that are not afraid of leading innovation and are willing to invest in collaboration, innovations and solutions. I believe there is a truth in that, although it may be complicated to foresee the governance side to such high-scale collaborations. Who does it lie with? Deutsche Bank also asked this question, which still remains to be answered.
Change is necessary
The question that arises for me, is what these collaborations will look like? I acknowledge that banks should indeed collaborate; the shocking number of banks in Europe (6.250) is probably too many to survive. I even believe that collation is necessary for banks to stay relevant and offer sufficient competition against BigTech’s. During his challenge speech, Stéphane Garelli, Founder of the IMD World Competitiveness Center, zoomed in on how collaboration and collation works within all industries. When we look at BigTechs, for example, we see that smaller tech companies can grow to a certain extent, before they are acquired by or merged with the BigTech’s of this world. So, my thinking is, that if the same happens to banks, distinctions should be made, so that there will always be specialised banks available. Collaboration can also involve smaller banks and be expressed through innovative solutions.
I’m interested to see how this appeal for collaboration will be discussed during the next sessions here in Stockholm. I will join sessions that revolve around PSD2-compliancy and the cashless society; two (potentially) major challenges for banks. I will look out for examples of how banks are collaborating to prepare for such disruptive trends, so hopefully that will be touched upon throughout EBAday.