Cross-sectoral collaboration and vertical integration hold the key to Open Banking success

Anna Maj, Fintech Leader at PwC: Open Banking is about connecting the dots in terms of integrating different verticals and sectors

You’ve had an impressive professional journey, gathering knowledge from influential consultancies, organisations, including one of the Big Four. Could you please tell us a bit about your background, and what are you most passionate about when it comes to fintech and payments?

I’ve been in payments for 20 years, having started at Citibank. I have always been dealing with innovation . In 2020 I celebrate the 20th anniversary of my professional career. Currently I'm a FinTech Leader at PwC, driving the entire fintech agenda. As part of the Financial Services Advisory I support consulting projects when it comes to innovative financial solutions and technologies. 

I am also building cooperation models between banks and and fintechs. We are running our own accelerator, PwC Startup Collider aimed at scaling innovative tech companies primarily in the CEE region and helping them develop in new markets, internationally.

With 20 years of experience in banking, having worked for the local leaders as well as international corporations (Citigroup, T-Mobile, mBank, PayTel) I have been witnessing most of changes in financial technologies. and I gained a versatile perspective. 

I`ve always had a great passion for innovation in financial services. Being at the heart of this dynamic, fast-paced changing environment, with all the technological and product developments, is something that I truly enjoy.

Open Banking and instant payments are the two major drivers of innovation. What do you consider to be the most relevant business opportunities stemming from the confluence of these two areas?

The Payment Initiation function within Open Banking is just the beginning of the entire digital journey. We are moving towards seamless frictionless experience and towards invisible payments, in a quicker and more efficient manner, so instant payments can definitely enhance this experience.

Open Banking prompts a paradigm shift, moving from card-based services (for both online and offline) to the account-to-account payments.

We will be witnessing this gradual shift from card-based payments to account-to-account payments, covering also hybrid card-to-account payments models. Within Open Banking paradigm, you can imagine that subscriptions, currently done via cards, will be replaced by recurring transactions initiated from a bank account.

Instant payments are a gateway to other (instant) services – such as for example instant crediting. So, if you pay instantly, you can integrate with a credit facility, or you can also integrate into deposits. - you can pay bills, installments, subscriptions as well as save money.

In the post-PSD2 deadline, what are the main things keeping banks up at night? What’s the biggest danger to their business model?

If we look at PSD2, from a purely compliance point of view, banks are donors of data and they are obliged to open up their interfaces and provide the data to other players, such as TPPs (third-party providers): fintech companies, neo-banks, tech companies or other incumbents.

I look at the API (Banking) phenomenon from the perspective of not only providing data, but also consuming data. Apart from compliance, there`s also a business opportunity –banks are not only giving access to their data, but they also consume APIs from other banks as well as other parties involved.

Banks have client base and trust so they can become the first choice providers not only of banking services. If banks address this opportunity timely and rightly, they can build powerful platforms linked with other verticals and different service providers. They become so-called “one-stop shops” for all payments or other services, not even limited to financial activities. Banks will also create seamless end-to-end digital journeys for their customers.

I believe that new entrants, especially tech companies, are the ones to pose a threat to the incumbent banks, as they use the opportunity of accessing banking data to the full extent. I am watching the big tech companies, Google, Amazon, Alipay or WeChat. They have both massive customer base and distribution ready and are able to seamlessly integrate their retail and/or social services with banking and payments.

The key strategy for banks is to leverage their existing resources and capabilities as well as enhance them with the value proposition provided by  new players. Bank-fintech partnerships can be definitely an answer to that, as “win-win” scenarios.

To assess the value of Open Banking, OBIE conducted a study using data from 13,000 respondents, including both individuals and SMEs; only about 25% of the population are aware of the new legislation. Do you think this prevents the success of PSD2? And what would be the best ways to address consumer education? What are the benefits to consumers?

Indeed, not many end-users are aware of “Open Banking”. Greater consumer awareness would be obviously a good thing, especially if end users are educated about their rights and responsibilities around safeguarding private data. However, the crucial thing is that consumers know the benefits of the Open Banking- the customer value proposition - what Open Banking as a concept of opening up and integrating the entire financial ecosystem practically means for them.

It is important for users to know how they access their financial data, what they can do with the data, what kind of personalised services they can use, how they can pay quicker, how they pay (to) multiple parties, what kind of new services they can benefit from ( subscriptions, FX or cross-border, instant crediting that we have already mentioned) how they can be integrated into their lives.

There are different ways and use cases for banks to enhance customer experience as well as boost their engagement, besides instant crediting or personal finance management. Banks should connect to other verticals like insurance, automotive , real estate or travel.

Bank PKO BP, in their recently announced strategy, is planning to build a car marketplace to meet the needs of both dealers and buyers. Not only they are going to connect car buyers with car dealers, but they will also offer car financing (products) via one-stop platform. This is just one of the examples how incumbent banks can build cross-sectoral collaboration and integrate vertically.

What do you consider as key trends in Open Banking and fintech in 2020 and beyond?

Account aggregation and payment initiation are the most obvious and widely considered functions enabled by the PSD2. However, they do not constitute the use cases yet. There are the building blocks for the API Banking, but it is just the beginning of the Open Banking journey.

I'm an advocate of connecting the dots in terms of integrating different verticals and sectors: insurance, entertainment, travel, health and education (just to name a few) and all activities related to the customer’s life(style) in frame of the Opening Banking.

I really believe in the cross-sectoral approach, building the entire ecosystem around customer’s needs and expectations, integrating it into his or her daily life routine, and creating a personalised digital journey. 

If we look at big tech companies, most of them put their “core” services, enhanced and enriched with data on top of the payment layer. WeChat(Pay), for example, has all banking-related services (such as P2P payments, subscriptions, credits, etc) under one roof; within the wallet-based umbrella platform, seamlessly integrated with all retail and lifestyle services (e.g. gaming) , thus keeping consumers’ shopping attention and their social activities awake all day long… and night . Literally being at the center of their (digital) life.

Conversational AI, especially voice-based, is an example of the customer-centric interface driven by tech giants that the industry also needs to take notice of. This will be a game-changing factor for payments and for the entire banking sector.

How do you expect the B2B payments industry will change over the next five years? What technologies/trends do you foresee to be the next big disrupters and why?

B2B payments are an underserved segment, especially still the SMEs. 

Deutsche Bank teamed up with the International Air Transport Association (IATA) to develop a new payment platform enabling paying for flights tickets from a bank account. It is a good example of the uses cases created by the new API-enabled realm in the B2B2C area. I am convinced we will see more examples in the commercial payments segment as well.