The path from Open Banking to Open Finance - interview with Andréa Toucinho, Partelya Consulting

European institutions have identified open finance as the next step for Open Banking. But how are European countries embarking on this journey?

At the beginning of June 2021, Andréa Toucinho, Director at Partelya Consulting, published a white paper called ‘Open banking: quelle structuration du marché des paiements?’. The white paper is a collection of studies and interviews with French and European professionals on the evolution of Open Banking, not only in Europe but across the globe.

To stir up readers’ interest and share some highlights from the book, Andréa shared with us who are the countries more opened to the concept of open finance, who are more reluctant, what is happening across the ocean, and what role do European Payments Initiative (EPI), Central Bank Digital Currencies (CBDC) and EC’s trusted and secure Digital Identity project play.

How does Open Banking look like in Europe? What are the countries that are proactively embracing this concept and which ones are more reluctant?

In Europe, Open Banking is seen above all as a regulatory evolution linked with PSD2. As a consequence, many European countries began to work on this topic as a compliance evolution. Nevertheless, we observe today a more ‘opportunist’ approach, since many countries aim, nowadays, at working on the benefits of Open Banking for the evolution of services, models, and the relation between banks and other stakeholders of the market, and above all the consumer. It is important to remind that some European professionals see Open Banking as an asset that fosters the place for European actors in the context of competition coming from international companies, above all Internet giants. This is a key trend in Europe.

But there is another key issue linked with our region: despite the goal of harmonization, reflected by PSD2, for instance, Open Banking has been seen in different ways in Europe and today we observe a real diversity in the field of strategies. Thus, some countries have been very proactive about Open Banking. It is for instance the case of the UK, which has, according to some professionals from this country, an advance of 5 years in the field of Open Banking, in comparison with continental Europe. This situation is linked with the works of the UK in the field of fintech and the opening of the market. Other proactive countries are in the Nordic area, like Sweden, that are very linked with digital, or even Spain, with major banks (Santander, La Caixa, BBVA…) that have embraced Open Banking very early, by launching their APIs, and also Luxembourg, with the initiative Luxhub. Concerning the countries that have adopted Open Banking with a little more reluctancy, we can mention France, which is concerned with security issues and systemic questions linked with this evolution, and Eastern European counties that have not the same maturity on these topics despite a real ambition to embrace the new framework of payments: the case of Poland, that has recently joined the EPI project, testifies to this reality.

Narrowing down the discussion to France – could you please briefly present what are both the drives and hurdles to Open Banking in France? When it comes to use cases, where has Open Banking been more successful, in the B2B sector or B2C?

In France, Open Banking issues are linked above all to security. It is important to remind that this country has a strong culture of security in the field of payments with an efficient framework based above all on cards, and an image of confidence and trust for banking actors. Hence a certain reluctance to modify this model, that has shown its force. French banks aimed at working about Open Banking first of all to ensure the security of the process (definition of API…). Another strong question linked with Open Banking was the systemic angle of security: as a new way to reinforce the opening of the market, Open Banking was seen as a way to modify existing models and to bring new risks in the market. Despite this situation, the French banking sector has evolved and is now working on the opportunities of Open Banking, both for B2C and B2B sectors. Thus, it is important to remind that if Open Banking has been treated above all as an evolution for end-users, it has nowadays also been seen as a strong opportunity for corporates, for instance, to boost the digitalisation of transactions and the equipment of companies with electronic tools. And this situation is very clear in France where corporates and retailers show a huge interest in this new paradigm. This situation allows me to predict that we are about to see very interesting evolutions in the field of Open Banking in this country.

An important use case of open banking is Account-to-Account/ Open Banking payments, which provide a similar level of fraud protection that SCA is driving towards. Have the French retailers tapped into this potential? What is their view on SCA?

Although according to PSD2 regulation, SCA is above all an evolution managed by the banking sector, French retailers have been very proactive in France in this field. The cause of this engagement of demand actors is the necessity to develop frictionless experiences in this new security context. French retailers wanted to be integrated into the working group and to sit at the table to debate with regulators and banking actors about this evolution towards SCA. This approach has been very successful and shows the necessity to evolve, today, towards a real collaboration between all the stakeholders of the market to manage the strong transformations in the payments market.

Now going across the ocean, what can you tell us about Open Banking in the US and Brazil? What are the main forces that foster Open Banking in these regions?

If in Europe, Open Banking is seen as an evolution linked with regulation, in the other parts of the world, this transformation is already a reality linked with the new ways to do finance. It is the case in the US, where Open Banking evolutions are linked with operational strategies stimulated by the market. Brazil is also an interesting country in this field: Open Banking, which has been launched very recently (in 2020), is seen as a way to modernise the sector of finance and to facilitate the entrance of new actors. It is important to mention that, in Brazil, the launch of Open Banking will be finalised thanks to several steps and is managed by the national regulator Banco Central do Brasil, testifying to a real goal to foster new finance in the country.

Overall, even if it will be difficult to see a harmonization in the field of Open Banking at an international level and to observe a real global approach on this topic, all these initiatives participate in the evolution of finance, towards a more decentralised and opened model, in the world.

One of the main goals of Open Banking is to go beyond the concept/regulation phase and evolve towards an open finance framework. How can initiatives like EPI, CBDCs, and EC’s Digital Identity project be inserted within this framework?

As a regulatory evolution, in Europe, Open Banking is seen as a specific topic, different from EPI or even CBDC that are more operational projects. Nevertheless, European professionals converge in the fact that the combination between all these works will participate in the reinforcement of Europe of Payments. Still, one condition remains: the creation of a real European vision and strategy in the field of Open Banking, which is also a condition for the success of the next step identified by the European Commission: open finance.

Thank you, Andréa, for this educational and insightful discussion. Could you please share with our readers where they can find out more about the white paper?

This white paper aims to share some key points and recommendations that ensure the efficiency of the next steps of Open Banking. It is for instance necessary to work about the quality and the standardisation of API, at a European level, and to address the end-user, consumer or company, with specific communications and information tools. This is a strong condition to enable the adoption of Open Banking by end-users, above all in certain countries where consumers are more linked with traditional networks.

The goal of this book is also to analyse the next step: Open Finance that, even if it is already identified by European institutions as a great evolution (Open Finance 2024 Plan by EC), is not a clear topic for all the actors. Hence the necessity to foster information and communication in the field of payments, to raise awareness that the evolution towards Open Finance will imply many works in the field of technology and regulation to ensure that the evolution towards this new paradigm will be efficient and equitable for all the stakeholders of the market.

About Andréa Toucinho

Payments and financial services expert, Andréa Toucinho worked for ten years as Journalist – Editor-in-Chief of Point Banque magazine and Head of ‘PayForum’ and ‘Banque et Innovation’ events. Since 2018, she is working in the consulting area, with activities in Paris as Director of Studies, Prospective and Training of Partelya Consulting, and France’s Ambassador of European Women Payments Network (EWPN). She also developed activities in Portugal and Spain as France Representative of Aefi and Afip Fintech Associations.

About Partelya Consulting

Created in 2008, Partelya Consulting is a French consulting company specialised in means of payment. It works with all actors of the market, from banks to schemes and retailers, on technological and strategic issues. The company works at an international level (France, Europe, Morocco etc) and it is a member of the French Association du Paiement.