Open banking, the steppingstone of open finance

European expert in payments and financial services, Andréa Toucinho, talks about Open Banking - one of the major trends of financial sector in Europe

Linked, in this region, with European regulation PSD2, this concept is already a reality in diverse regions of the world. For instance, in May 2020, Brazil announced a major step in this field.

Different approaches exist in the topic of open banking. At an international level, United-States, Australia or even, more recently, Brazil, developed a real vision of open banking. Launched in May 2020, open banking represents a new step for Brazilian finance. In this country, open banking is a way to improve financial services and customer experience. Among the key products to emerge in the context of open banking: comparison platforms, or even tools of money management. Furthermore, this new approach of financial market will also foster the creation of new business models and the development of new actors in the market. In other words, open banking represents, in Brazil, a real steppingstone for open finance. This position is also observed in other countries, especially in Europe.

Different visions of open banking in Europe

One of the proactive countries in the field of open banking in Europe is the United Kingdom (UK). In the UK, according to a webinar organised by Open Finance Expo in May of 2020, open banking is at the end of the implementation. The versions of API are ready and 99% of the market is based on the use of API. Other countries developed the same proactive vision about open banking: Germany, with the strong action of Berlin Group, or even Portugal with the initiatives of one of the major payments actor of the country called SIBS. Thus, in Portugal, SIBS launched its own API – SIBS API Market – in February 2019. This initiative was realised in relation with a new strategy and a new brand: SIBS aimed at communicating about a more opened approach, above all towards new actors of financial services, like fintechs. In this context, SIBS started to work with some retail partners, like the Portuguese chain of movie theatres Lusomundo, about more personalised services. In this country, open banking is seen not only as a long journey, but as a huge opportunity to gather some data and to evolve towards better products.

Other key European country in the development of open banking is Spain, where major banking actors early adopted a real strategy in this context, for instance BBVA, Santander and La Caixa, that launched their own API at the beginning of the debates about open banking in Europe. One of the more interesting vision about open banking in this country is the position of Banco Sabadell, that sees this evolution as a major trend and a strong opportunity. This Spanish bank is already working about open data and PSD3 opportunities and sees open banking as a major step to evolve towards ‘bank as a platform’ concept with a strong strategy in the field of partnerships. This position confirms that open banking can be analysed, in Europe, as one of the major solutions to give European financial entities more assets to compete with big techs. Thus, everybody knows that data is one of the key trends of the evolution of financial services and open banking represents a major tool toward the development of personalised services and digital identity. One of the key questions that remain in this context is the information and communication towards consumers about these evolutions linked with open banking and open finance.

Customers empowerment

Thus, it is important to empower customers in order to ensure a real and secure adoption of these innovations. Some countries are aware of this priority, for instance Portugal, that defined information, communication, and digital inclusion as one of the key actions to develop in payments sector, according to Forum para os Sistemas de Pagamento 2020-2022 strategy. In addition, we can mention the actions of Banco de Portugal in communicating about this new context of financial services in newspapers or even in its own website. But it is important to be aware that different approaches remain in Europe about open banking. In France, for instance, banking actors showed some reluctancy about this evolution, above all because of security questions. In fact, French banking and payment ecosystem is well-known for its security and confidence and open banking is sometimes seen as a risky process, in addition to competition considerations linked with this evolution.

The necessity to create a European vision for open banking and open finance

These differences contribute to the reinforcement of another condition to foster the implementation of open banking in Europe: the harmonisation of the different approaches in Europe and the development of a real European vision for open banking. This work has to be done with all actors of the market, including retail, corporate treasurers and even customers, and implies another huge priority already considered by European institutions: the standardisation of APIs at a European level. This evolution is very important if we consider that open banking is the steppingstone of the evolution towards open finance at an international level, in the context of globalisation. A recent study published by Finastra shows that a major part of the banks across the world are working on API to reinforce their capacities in the field of open banking over the next twelve months. Undoubtedly, this concept will represent one of the major contributions to the definition of the future models of finance in a globalised economy.

About Andréa Toucinho

European expert in payments and financial services, Andréa Toucinho is Director of Studies, Prospective and Training of Partelya Consulting and Country Ambassador for France of European Women Payments Network (EWPN). France Representative of national fintech associations of Spain and Portugal (Aefi Spain and Afip Portugal), she realised two books about payments in 2018 and 2019 and is one of the co-authors of the international PAYTech Book published in January 2020 by Wiley.