SIBOS 2018: Open banking - What role for banks?
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.