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 to embrace open banking as well as the cooperation it might bring. The advantages of working together with alternative providers far outweigh the risks of loosening control, he says.
The movement to some more open and interconnected financial world has already begun, with clear steps taken in the European Union along with Asian markets towards this goal. Europe’s Payment Services Directive (now in their second iteration, the PSD2) served because kickoff shot around the continent. It showed the banking system towards the entry of so-called non-bank finance institutions (NBFI) , who’ve taken on large chunks with the labour previously made 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 fighting downsizing pressures.
However, integration could be taken much further, says Eyal Nachum. If we glance at the Chinese giants Tencent and Alibaba, we see a model banks may want to imitate to a degree. The two companies operate Super Apps, WeChat and Alipay, respectively, tend to be more than payment services. These are so-called “lifestyle apps” , which allow users to perform anything from ordering taxis, through making interpersonal money transfers, to, in some Chinese provinces, paying utility bills and more. It’s all to easy to imagine the convenience that such centralisation brings.
According to Eyal Nachum, there is no need to consolidate everything in one location, but tighter integration is possible and desirable. If we turn to Singapore, we see the likes of DBS, one of the country’s leading banks, launching a unique car marketplace in partnership with sgCarMart and Carro. UOB, another leading Singaporean bank, recently launched a unique travel marketplace. These imaginative pursuits can be quite a lighthouse to European banks, who should employ whatever way possible to learn from their Asian counterparts, for example by means of the UK’s fintech bridges, which Mr Nachum recently discussed while using Sunday Times.
Under the PSD2, European banks and finance institutions are mandated to offer application programming interfaces (API), in which other financial institutions (like, for instance, Bruc Bond ) can access data and issue authorised instructions on customers’ behalf. Sadly, most of banks in Europe have inked only the smallest amount to comply with regulatory requirements for open banking, in lieu of explore how such initiatives might be incorporated into banks’ strategic plans. This is a short-sighted mistake, says Eyal Nachum.
Banks are missing out on an opportunity to provide their clients and customers using a service that will actually get people enthusiastic 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 economic services. Users will quickly come to expect it, and poorly prepared banks will suffer as a result.
There a wide range of paths for an open banking future, every individual lender will need to go for itself which path will lead towards the greatest prosperity. Some things, however, do understand. Trying to imitate the Chinese types of Tencent and Alibaba can be foolish. The regulatory infrastructure is set against it. Instead, we at Bruc Bond feel that close, tight-knit cooperation between loan companies, companies, local authorities and business offers the right path to some bright future.
Such integration gives solutions for the many woes felt by medium and small-sized businesses (SMEs) due the upheavals within the European banking industry, which Mr Nachum recently wrote about in the article for that Global Banking & Finance Review.
To reach utopia, however, we have to build trust. Trust, we mean, between customers and institutions, and between institutions themselves. This can basically be achieved by true, sustained openness. Regulators might help, by mandating information sharing, nevertheless the onus is for the actors in the markets themselves to formulate frameworks that encourage cooperation. These might be limited schemes in the first place, that grow deeper as trust develops. Doubtless, this could require some feats of the imagination, when some from the brightest minds engage these issues, they are able to, we have been confident, think of some creative solutions on the issues that vex bankers. The next banking revolutions demands it.