Eyal Nachum of Bruc Bond to Banks: Embrace Openness

Eyal Nachum, Bruc Bond’s fintech guru and board member, features a message to banks: it’s time and energy to embrace open banking along with the cooperation it could bring. The advantages of working with alternative providers far outweigh the potential risks of loosening control, he states.
The movement to some more open and interconnected financial world has already begun, with clear steps taken both in the European Union as well as in Asian markets towards this goal. Europe’s Payment Services Directive (now in its second iteration, the PSD2) served since the kickoff shot about the continent. It opened up the banking system towards the entry of so-called non-bank banking institutions (NBFI) , that have taken on large chunks from the labour previously produced by banks. Rather than hurting banks, NBFIs have reduced banks’ workload while introducing additional revenue streams, providing a much-needed buoyancy float with a sector being affected by downsizing pressures.
However, integration might be taken much further, says Eyal Nachum. If we consider the Chinese giants Tencent and Alibaba, we percieve a model banks might wish to imitate to some degree. The two companies operate Super Apps, WeChat and Alipay, respectively, tend to be more than payment services. These are so-called “lifestyle apps”, that allow users to perform anything from ordering taxis, through making interpersonal money transfers, to, in some Chinese provinces, paying bills and more. It’s all to easy to imagine the convenience that such centralisation brings.
According to Eyal Nachum, there’s no need to consolidate everything in one place, but tighter integration may be possible and desirable. If we look to Singapore, we percieve the likes of DBS, one of the country’s leading banks, launching its own car marketplace in partnership with sgCarMart and Carro. UOB, another leading Singaporean bank, recently launched its own travel marketplace. These imaginative pursuits can be a lighthouse to European banks, who should employ whatever way you can to learn from their Asian counterparts, for example by means in the UK’s fintech bridges, which Mr Nachum recently discussed using the Sunday Times.
Under the PSD2, European banks and finance institutions are mandated to provide application programming interfaces (API), where other financial institutions (like, by way of example, Bruc Bond) can access data and issue authorised instructions on customers’ behalf. Sadly, a lot of banks in Europe have done only the least to abide by regulatory requirements for open banking, in lieu of explore how such initiatives can be incorporated into banks’ strategic plans. This is a short-sighted mistake, says Eyal Nachum .
Banks are passing up on an opportunity to deliver their clients and customers using a service that will actually get people pumped up about banking. This is for their detriment and endangers their long-term prospects. To be competitive in 2020 and beyond, banks must accept the platformification of financial services. Users will quickly come to expect it, and poorly prepared banks are affected as a result.
There are lots of paths to an open banking future, and every individual standard bank will need to go for itself which path will lead on the greatest prosperity. Some things, however, are clear. Trying to imitate the Chinese instances of Tencent and Alibaba can be foolish. The regulatory infrastructure is defined against it. Instead, we at Bruc Bond think that close, tight-knit cooperation between finance institutions, service providers, local authorities and business can provide the right path to your bright future.
Such integration offers solutions to the many woes experienced medium and small-sized businesses (SMEs) due the upheavals in the European banking industry, which Mr Nachum recently wrote about in the article for the Global Banking & Finance Review.
To reach utopia, however, we must build trust. Trust, we mean, between customers and institutions, and between institutions themselves. This can just be achieved by true, sustained openness. Regulators can help, by mandating information sharing, though the onus is around the actors within the markets themselves to formulate frameworks that encourage cooperation. These could possibly be limited schemes in the first place, that grow deeper as trust develops. Doubtless, this may require some feats of the imagination, however, if some of the brightest minds build relationships these issues, they can, we’re confident, develop some creative solutions on the issues that vex bankers. The next banking revolutions demands it.