Insight: Bringing a service model to Open Banking

Open Banking Expo caught up with Bottomline’s General Manager & Director, Payments, Ed Adshead-Grant ahead of Open Banking Expo on 4th November.

At this year’s Open Banking Expo it’s doubtful that any attendees need to be schooled on the basics. The pandemic has spiked its usage by consumers and business and accelerated use cases in the banking industry. As Experian reported earlier this year, it tracked more than 188 million data sharing requests (indicative of Open Banking) in the UK during February 2021. In February 2020, before COVID wreaked its early havoc, that number stood at just 44 million.

As one panel suggests, Open Banking is an “unstoppable force.” That may be the case, but to sustain the new way of working for banks, fintechs and customers, there’s work to be done. Open Banking is an enabler of innovation and introduces realtime aspects into any operation. The mastery of APIs is key as the foundation to open banking but the use cases need to be developed and implemented to prove out the power of the new open era paradigm. At Bottomline, the portfolio is growing under the OBaaS banner – Open Banking as a Service.

UK FIs need to embrace Open Banking as an opportunity set that addresses customer issues. OBaaS considers some of those customer issues presented by Open Banking and solves them. For example, look at what problems we can solve with straight through processing and the real-time payment and settlement that is now upon us.  The need to wait on card acquiring cycles that provide T+2 or T+3 cycles are under pressure to compete.  The power of SaaS economics and in an API economy, needs to be on the roadmap for any financial institutions as they look to align their efforts for the best impact in an open ecosystem.

OBaaS solutions focus on the interoperability between Open Banking systems and APIs that can be verticalised for customers. Whether Open Banking is mandated or driven by market conditions, banks often need a simple, smart and secure entry into that ecosystem to modernise their operations and stay competitive.

It’s worth mentioning here that Open Banking does not come without its pain points. Example: Suppose a savings bank is seeing applications drop off due to consumers opening accounts at competing fintechs or retail banks. And what if they find that when existing customers use those other FIs or want to access information at them, the customer experience takes a hit. Add the fact that the bank lacks real-time payments capability. That all becomes a recipe for customer attrition. But the solution is simple, Open Banking APIs provide real-time data, real-time payments, visibility and interoperability to other banking relationships all available 24×7.

Let’s go one level further to understand OBaaS. A reputable partner will bundle what is called “read and write” APIs. The “reading” role is filled by an Account Information Service Provider (AISP). AISPs are the interfaces through which third-party businesses ask permission to connect to a bank account. They can only “read” the information, which results in transaction display and reconciliation, faster application processes and the secure sharing of contact details. AISPs do not move money. The “write” function is executed by Payment Initiation Service Providers (PISPs) and here the action of moving money is enabled or new instructions are created to make changes to the account. PISPs can appear at POS payments, scheduled payments, refunds, business to business payments and more. Verticals like the foreign exchange players (FX) can use this “read write” combination to load accounts in real time, reconcile trades in real-time, reduce the FX exposure through real time again – the operational improvements are significant.

Open Banking will always require a partner-friendly approach. The days of working in isolation are gone. Partnerships can be hard and of course banks need to invest time and effort to make sure the chemistry is good. You might have to fail together and then pick up and get on to the next project, so it’s quite a journey but you can’t start soon enough. In terms of finding those complimentary areas to work on and taking Open Banking to market, bringing those talent teams together creates a huge potential for taking Open Banking to the next level.

You can catch Ed on the Payments Stage at Open Banking Expo at 2pm: ‘Open Banking – Cash is King but connectivity is Queen’