Reviewing open banking opportunities and enhancing customer experience through APIs
The views and opinions expressed in this article are those of the thought leader as an individual, and are not attributed to CeFPro or any particular organization.
Tibor Bartels, Head of Transaction Services Americas, ING
What are some of the challenges of connecting financial service provider through open banking?
In Europe regulated Financial Service Providers (or Third Party Providers (TPPs) as they are defined in the regulation) can connect to PSD2 APIs from European banks using their EIDAS certificate. The majority of EU banks have implemented a registration process for TPPs to connect to PSD2 services, a process which requires TPPs to go to developer portals, register and sign a form to make use of their APIs. ING implemented a different connection pattern which is less challenging as TPPs can automatically use PSD2 APIs using their EIDAS certificate and customer consent. No need for registration. Besides different onboarding patterns the fragmentation of API standards in Europe can become challenging for clients and TPPs.
Moreover TPPs are a new segment to banks as the relationship is different (e.g. majority of TPPs are unknown to banks). Still they make use of PSD2 APIs and as such require servicing. Interestingly what we see in the market is that TPPs can become partners and possibly even clients as the relationship matures.
In what ways can open banking enhance customer experience?
Open Banking is all about serving clients better digitally and about becoming part of the journeys of clients, partners & platforms. As these solutions are powered by API technology, solutions can provide instant, integrated, cheaper and personal services to consumers and businesses. Currently we do this via API banking, Embedded Finance, Banking as a Service and consume third party APIs to enhance our clients’ experience in all of our segments Across the board we see a strong demand for Open Banking services:
- Retail / Private individual:Main usage today is driven by regulation and centered around PSD2. Number of TPPs offering consumer solutions is healthy as it still rises on a month-on-month basis. Mainly solutions for Personal Finance Management, Money Management, Payment services, credit scoring, and lending
- Business Banking:Focusing on ease of accounting (E2E), ease of access of data and products, integrated into accounting platforms (some of them act as certified TPPs)
- Corporate Clients:Corporate clients and treasurers need real time bank information (e.g. real time treasury).
Why is it important to develop clear guidelines on data ownership?
This is very important and already in place in the EU as we have clear regulations such as PSD2 and GDPR. In the US, a legal framework such as PSD2 is missing, which has led to more industry-led initiatives compared to regulatory-led initiatives in EU. Within the EU there is a clear regulatory trend towards more data portability and more data sharing cross sector/industry. Under the Digital Markets Act (DMA), Big Techs will be required to facilitate data portability as well and we expect the future Open Finance proposal to establish PSD2-like data portability. These regulations accelerate innovation as it establishes a cross country framework while creating a level playing field between industry players, from start-up to incumbent bank and bigtech.
How is privacy legislation impacting open banking opportunities?
Customers trust us with their money and their data so safeguarding customer data and data privacy are responsibilities we take very seriously. Open Banking solutions are enabled through data sharing and the majority requires explicit customer consent. Moreover, as Open Banking related regulation matures and develops (e.g. PSD3, Open Finance, DMA) so does the complexity as cross sector and cross country interconnectedness between parties increases. Market participants shouldn’t treat customer consent as a hurdle but rather an opportunity to educate and make customers aware why, what, and how his/her (personal) data is used for.
How do you see open banking developing over the next 18 months?
In the next 18 months we will see tangible use cases which delivers real client value in all segments. Open Banking APIs which go beyond the regulation will bring solutions for existing challenges and new needs as digital transformation is required in all industries. INGs Open Banking vision is to expose our products via APIs so that our clients benefit from API characteristics (API Banking) and become part of the journeys of our customers and our partners with banking and ‘beyond banking’ propositions (Embedded Finance). Additionally, there are opportunities for Banking-as-a-Service (BaaS), which allows banks to provide complete banking processes through a secure and regulated infrastructure. Also we’ll expect future regulation to become more clear as market consultations are in progress or already finished for several of these upcoming regulations.