Interview

Key elements to be addressed for a richer payments ecosystem – interview with Nilixa Devlukia

Monday 16 November 2020 10:03 CET | Editor: Oana Ifrim | Interview

The Paypers interviews Nilixa Devlukia, founder and CEO of Payments Solved, to learn more about payments and the journey from Open Banking to Open Finance

How would you describe the journey to Open Banking and Open Finance? 

Think about Open Banking as an IT project, for a single organisation, such a project would be difficult and challenging. Now put that in a context in which the entire banking industry across Europe is asked to take forward the same IT project, in the same timeframe, and to the same delivery date! The journey to Open Banking has been challenging, layer on top all the diverse regulatory issues. In that context the industry has done well to deliver a working API infrastructure.

However, Open Banking is still fragmented, lacking standardisation, and still waiting to realise its full potential. Open Finance will build on the Open Banking principles. I believe that it is only going to reach its potential if there are regulatory principles in place to help shape the desired outcomes. I also take the view that we need a better regulatory framework on availability and performance of APIs.

The risk and challenges associated with Open Finance are similar to those of Open Banking but with a great focus on data access, the misuse of data, appropriate consumer protections, and a growing need to building trust with users, as consumers don’t have a good understanding of how their data is used and what the benefits of Open Banking and Open Finance are. 

 

I firmly believe that data access should be a regulated activity with attention given to onward data sharing; checks and balances are needed to make consumers feel comfortable with using data sharing services. 

What infrastructure and standards are needed to support Open Finance? 

The UK Finance Open Banking Future State Report outlines recommendations for a proposed model to support the future provision of Open Banking services. It is definitely timely to start the industry debate on the future use of this infrastructure and how it brings value to a wider ecosystem. One of the fundamental questions to be addressed very early on in that conversation is ‘How is this new ecosystem, this Nirvana of open finance and open everything, going to be funded?’ 

Early consideration needs to be given to the funding model as we move forward into Open Finance to ensure that the needs of the emerging ecosystem and all stakeholders within the ecosystem are appropriately meet.

Fragmentation, is in my view, a barrier to entry and so it is important that there to be a common framework and a common set of standards in the UK and also across Europe that mitigates this issue; a regulatory framework is probably the best method to achieve this goal. The regulator has a crucial role to play; a vital success factor for Open Banking has been strong impetus from the regulator and a suitable framework for Open Finance will support industry to create standards and the infrastructure that will drive innovation and competition. 

It is also vital to continue the collaboration between banks, fintechs, regulators, consumer business organisations to help promote a vibrant Open Finance ecosystem.

How is the payments evolution going to impact the way Open Finance is going forward? 

Customer protection and customer choice are key elements to be addressed for a richer payments’ ecosystem together with a greater focus on consumer protections in data sharing; this is key to building confidence in the new ecosystem and new services. 

For payments we have the Direct Debit Guarantee and for card payments we have section 75 and chargebacks. For Payment Initiation Service (PIS), we only have the mandate regarding misdirected payments, there is no guarantee or consumer protection that brings the same level of comfort as for the other payment mechanisms. Now is the time to holistically consider what is the right payment protection for PISP payments. 

Secondly, we must have the functionality of all payment methods in all channels, customers need choice and the flexibility of variable recurring payments. PISP payments are basically single immediate payments and that takes the richness out of the Open Banking/ Open Finance ecosystem because we do a lot more than just make single immediate payments. 

How is Covid-19 impacting Open Banking payments? 

There has been a massive uptake in digital financial services and an increase in the use of electronic payments. 

I believe that interaction with financial services in a digital format is going to be supportive of Open Banking services because consumers and businesses have become more comfortable using and interacting with financial services in that way. 

Over the last few months, companies have launched new initiatives to support the challenges that we’ve seen in society by using and leveraging Open Banking services for consumers and SMEs, services that allows a relative, friend, or neighbour to send a ‘request-to-pay’ to someone else to help them shopping for groceries, supplies, and services that help vulnerable people better understand their finances. 

Furthermore, alternative lenders helped by delivering funding to the SME sector as part of the government support schemes, with Open Banking data playing an essential role in the analysis of the lending decisions for these companies. 

Despite all the challenges that the pandemic has brought, we noticed an increasing use of technology and industry collaboration for that greater good and that will, I hope, continue as we move to Open Finance.

About Nilixa Devlukia

Nilixa is a former regulator and an experienced regulatory expert and lawyer with a Masters in European Competition Law. Nilixa works with industry, regulators, and legislators to drive forward changes for a payments and open banking landscape that is secure, transparent, and inclusive. 



About Payments Solved

Payments Solved offers strategic advice on regulatory and policy issues. We advise firms and business leaders on how the law, regulation and the decisions and approaches of governments and regulators can impact their strategies. 

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Keywords: Nilixa Devlukia, Payments Solved, Open Banking, Open Finance, data, payments, consumer education, security, customer protection, interview
Categories: Banking & Fintech | Payments General
Countries: United Kingdom
This article is part of category

Banking & Fintech