Eyal Nachum of Bruc Bond to Banks: Embrace Openness

Eyal Nachum, Bruc Bond’s fintech guru and board member, has a message to banks: it’s time to embrace open banking along with the cooperation it might bring. The advantages of working together with alternative providers far outweigh the risks of loosening control, according to him.
The movement to your more open and interconnected financial world has already begun, with clear steps taken at the European Union as well as in Asian markets towards this goal. Europe’s Payment Services Directive (now in the second iteration, the PSD2) served as the kickoff shot about the continent. It opened up the banking system for the entry of so-called non-bank banking institutions (NBFI) , who’ve taken on large chunks with the labour previously created by banks. Rather than hurting banks, NBFIs have reduced banks’ workload while introducing additional revenue streams, providing a much-needed buoyancy float to some sector experiencing downsizing pressures.
However, integration could possibly be taken much further, says Eyal Nachum. If we go through the Chinese giants Tencent and Alibaba, we view a model banks may decide 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”, which allow users to accomplish anything from ordering a taxi cab, through making interpersonal money transfers, to, in a few Chinese provinces, paying electric bills and more. It’s easy to imagine the convenience that such centralisation brings.
According to Eyal Nachum, you don’t have to consolidate everything under one roof, but tighter integration may be possible and desirable. If we look to Singapore, we view the likes of DBS, one in the country’s leading banks, launching its own car marketplace in partnership with sgCarMart and Carro. UOB, another leading Singaporean bank, recently launched a unique travel marketplace. These imaginative pursuits is usually a lighthouse to European banks, who should employ whatever possible way to learn from other Asian counterparts, for example by means from the UK’s fintech bridges, which Mr Nachum recently discussed with the Sunday Times.
Under the PSD2, European banks and banking institutions are mandated to offer application programming interfaces (API), through which other financial institutions (like, as an example, Bruc Bond) can access data and issue authorised instructions on customers’ behalf. Sadly, a lot of banks in Europe have done only the bare minimum to comply with regulatory requirements for open banking, in lieu of explore how such initiatives could 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 which has a service that may actually get people enthusiastic about banking. This is with 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 soon come to expect it, and poorly prepared banks will be affected as a result.
There a wide range of paths to a open banking future, each individual financial institution will need to decide upon itself which path will lead for the greatest prosperity. Some things, however, are clear. Trying to imitate the Chinese instances of Tencent and Alibaba could be foolish. The regulatory infrastructure is defined against it. Instead, we at Bruc Bond believe close, tight-knit cooperation between loan companies, companies, local authorities and business provides the right path to some bright future.
Such integration gives solutions on 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 to the Global Banking & Finance Review.
To reach utopia, however, we’ve got to build trust. Trust, we mean, between customers and institutions, and between institutions themselves. This can only be achieved by true, sustained openness. Regulators might help, by mandating information sharing, though the onus is about the actors inside the markets themselves to produce frameworks that encourage cooperation. These might be limited schemes firstly, that grow deeper as trust develops. Doubtless, this could require some feats of the imagination, however, if some in the brightest minds build relationships these issues, they might, we have been confident, produce some creative solutions to the issues that vex bankers. The next banking revolutions demands it.