Open Banking - creating opportunities for everyone - an interview with Bank of America

The Paypers speaks with Ad van der Poel, Co-head of Product Management for GTS EMEA at Bank of America, about the Open Banking and Open Finance opportunities for consumers, corporates, and SMEs

What are the benefits of Open Banking for consumers, corporates, and SMEs?

From a corporate perspective, the main opportunity is connecting with the bank directly, as an alternative channel, or connecting with the bank via a third party in the context of consumers and SMEs. Other opportunities are increased operational efficiency, transparency, improved user experience, and the ability to combine data from different bank accounts in one place.

Corporates have benefited from the deployment of API technology to create a direct connection as an alternative channel, but they do not necessarily leverage third parties to connect to their banking environment. We expect corporates to leverage third parties as well, the difference being that in the corporate world, we would be talking mainly about ERP systems or treasury management software providers.

As a result, corporates could initiate an invoice payment directly through an ERP system or an accounts payable system and no longer have to use a bank’s online banking platform or host to host connections. This will result in a more integrated way of working together and we are continuously supporting our clients’ needs through Open Banking in areas such as payments and collection.

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

Open Banking, primarily through payments and bank accounts statement information, is moving to Open Finance as it aims to extend the scope of data sharing to include savings, investments, insurance, or pensions. This shift will give broader visibility of financial products and enable functionalities such as total wealth dashboards, while providing greater actionable insight, comparison of products and analytics not only for consumers and SMEs but also for corporates.

For example, if you compare insurance contracts, you will have to compare apples to apples, and you need to find a way to make that work. On the other hand, we have pension structures which are complex data sets that need to be presented and interpreted accurately. This could be challenging, however we are now reimagining how we look at data to allow us to better serve our clients. Overall, despite the great demand for data, it is the analysis, the recommendation, and the insight that is unlocked from the data which will bring the real benefits to the clients.

For instance, corporate clients talk about cash flow forecasting and identifying certain trends, especially now with the impact of the global health crisis; supply chains are one good area to analyse to help identify these impacts more quickly.

Another challenge is represented by cybersecurity, the risk of fraud, and how the industry and the ecosystem will adapt to it. Tokenisation is also important – in Open Banking we might end up talking about tokenisation of the bank account number which will create a higher level of security.

What are the perspectives for Open Banking in the US? What are the drivers but also the challenges in adopting Open Banking in the US?

Open Banking in Europe is driven by regulation, while the US market is driven through competition with fintechs, and both incumbent and challenger banks.

In the US, people are culturally more comfortable with sharing their credit card number than they are with sharing their bank account details, while in certain countries in Western Europe it’s the other way around. Even though corporates or merchants may prefer Open Banking, the consumer may not, preferring to use a credit card instead.

Data protection is a potential issue that needs to be overcome. In Europe there is the GDPR regulation that protects consumers, while in the US, the GDPR equivalent is on a state by state basis. Only a few states currently have data privacy laws and that may lead to a different customer experience depending on the region.

Even though everywhere in the world we see digital and contactless payments increasing, in the US, checks are still widely used, although this has become less prevalent during the global health crisis.

What is your vision for Open Banking in the future?

Open Banking presents a choice for clients on how they want to do their payments, their finance, how they want to initiate payments, to get their information, and how they would like their information to be presented, and with whom they would like to do it. The key thing is that clients have a choice and therefore, we as a bank need to make sure we facilitate all these options. While one country might do this quicker than another, if we look 15-20 years from now, Open Banking and the use of APIs will be embedded in many countries globally.

We see a number of regions outside of Europe and the US adopting Open Banking concepts: in LATAM, with Brazil and Mexico; in Asia and Australia, all with different approaches. Hong Kong and Japan provide guidelines to facilitate market implementation, while Singapore and China are more competition driven.

This suggests that there is no solution that fits all, depending on the country, its culture, parameters, or the traditional use of payments. In the end, all are moving in the same direction. From our perspective, that direction is the one where we provide the best service possible to our clients and continue to innovate – it’s about integrating into the core processes and behaviour.

The interview was originally published in Global Open Banking Report 2020, which follows the journey from Open Banking to Open Finance and Open Data Economy and provides key insights about the benefits of Open Finance for different areas of financial service.

About Ad van der Poel

Ad van der Poel is the Co-head of Product Management, Global Transaction Services for Europe, the Middle East, and Africa. In this role he is responsible for the development and deployment of payments, receivables, FX, liquidity, channels, and information services for both corporate and FI clients across the region.

About Bank of America

Bank of America is one of the world’s leading financial institutions, serving consumers, small and middle-market businesses, and large corporations with a range of banking, investing, asset management, and other financial and risk management products and services. Bank of America Corporation stock is listed on the New York Stock Exchange.