SIBOS 2018: Open bank­ing - What role for banks?

Banking Frontiers - - Special Report - [email protected]­ingfron­tiers.com

Mal­lika Sathi, VP Se­cu­rity So­lu­tions, Master­card:

Old, New: Banks do com­pli­ance, risk man­age­ment and trea­sury very well. While data has al­ways ex­isted, they are now ex­plor­ing the op­por­tu­ni­ties, in ways such as bet­ter cus­tomer tar­get­ing, im­prov­ing per­son­al­iza­tion, drive costs down, etc.

API: Open bank­ing is about trust and clear au­then­ti­ca­tion mech­a­nisms. That is where we are em­bed­ding our­selves into. Google Maps is a great ex­am­ple of open­ness. Google pub­lished its maps API and that cre­ated a new in­dus­try via the tech­nique of col­lab­o­ra­tion. Most banks are op­ti­mistic about the fu­ture and the op­por­tu­ni­ties that open bank­ing will pro­vide.

Pric­ing: As re­gards pric­ing for pay­ments, cus­tomers want con­tent and are will­ing to pay for it, and hence tel­cos are ex­plor­ing those part­ner­ships. Like­wise, banks will have to see what cus­tomers want and are will­ing to pay for.

Part­ner­ships: Banks are part­ner­ing with fin­techs and set­ting up pure dig­i­tal banks and tar­get­ing new cus­tomer seg­ments. There is a ben­e­fit in us­ing a fin­tech to tar­get a dif­fer­ent cus­tomer seg­ment.

Misc: We are tar­get­ing chil­dren, and in par­tic­u­lar girls, to be in­ter­ested in AI, cryp­tog­ra­phy, etc.

Thomas Nielsen, CDO, Deutsche Bank:

Dis­rup­tion: PSD2 was not a choice for us. We are learn­ing as we go. Se­cu­rity and reg­u­la­tions have been de­signed from the be­gin­ning. One day, some­one will come and not play by the rules, eg what has been done by Uber.

Data: While data is said to be the new oil, there is a big ques­tion of who owns the data. Data for most of us is an ex­haust prod­uct, ie it comes out of our prod­ucts.

Iden­tity: It is easy to do an in-coun­try so­lu­tion, but not across bor­ders. Imag­ine a com­pany with 500 ac­counts across dif­fer­ent coun­tries. The is­sue is about clar­i­fy­ing the iden­tity of a cor­po­ra­tion.

Sys­tems: I don’t think our sys­tems are more ro­bust than many other in­dus­tries. Twit­ter, Face­book, etc have much bet­ter re­li­a­bil­ity than any fi­nan­cial in­sti­tu­tion. Banks know how to do busi­ness in mul­ti­ple re­gions in a trust­wor­thy way.

Cost: I be­lieve that the cost of pay­ment will go to zero, for the cus­tomer.

Legacy: Hav­ing a legacy is not a bad thing. It means you have made it. Get­ting off is not a tech­nol­ogy thing, but a cul­ture thing. New tech­nol­ogy will prob­a­bly save cost for sure, but not sure it will def­i­nitely cre­ate value. Big or­ga­ni­za­tions don’t have the lux­ury of do­ing in­cre­men­tal in­no­va­tion.

Tal­ent: Young­sters have a big choice about where they want to join. So com­pa­nies like Deutsche Bank have to make our­selves at­trac­tive to them.

Sur­vival: I think about half the banks will not sur­vive.

Fab­ric Denele, Se­nior VP, Natixis:

Reg­u­la­tion: At the very be­gin­ning of PSD2, there are a lot of third par­ties that were not reg­u­lated. We lob­bied against that. We also lob­bied for stronger se­cu­rity, eg not al­low­ing screen scrap­ping.

Apps: Banks are mak­ing huge in­vest­ments in API and open bank­ing. The new gen­er­a­tion of bank­ing apps is not very dif­fer­ent from what new banks of­fer­ing.

USP of Banks: Banks have al­ways had data but rarely ex­ploited it. We have mil­lions of cus­tomers and this also cre­ates con­straints. We can­not go as new fin­techs. When we launch a new prod­uct or ser­vice, it has to be re­li­able and it has to scal­able and it has to work ev­ery day. The hid­den as­sets of a bank and re­li­a­bil­ity and ro­bust­ness of the bank­ing sys­tem as a whole. A startup does not have back­ground of ex­per­tise and se­cu­rity. So, one role of banks is to bring the cul­ture of ro­bust­ness and re­li­a­bil­ity.

Part­ner­ship: Bank­ing is not easy. It is about hazy reg­u­la­tion. Fin­techs pre­fer to part­ner with banks rather than build banks. Banks are ex­perts in com­pli­ance. In the old world, each bank owned the en­tire so­lu­tion. Now banks are go­ing for part­ner­ship model…..and also they are ex­plor­ing what they are good at. These part­ner­ships cre­ate new mod­els and new wealth.

Cost Com­pe­ti­tion: The world of plas­tic cards will have to evolve to the new ways of the dig­i­tal world. 15 years ago, com­pe­ti­tion and reg­u­la­tion made mer­chant ac­quir­ing busi­ness less prof­itable. So third par­ties came in and since they were less reg­u­lated, they could raise prices. Same could hap­pen on the is­su­ing side.

Fore­cast: Lots of con­sol­i­da­tion will take place in pay­ments space, less in bank­ing space.

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