In conversation with Hesus Inoma, Head of Digital and Fintech at Grant Thornton Ireland, Adrian explores how the evolution of Open Banking is paving the way for new players in the Open Finance game
Open Banking demonstrates the potential for new innovators to provide modern and exciting ways to manage money with the latest technology. While still in its early stages, it’s enabled third parties across Europe to access payment account information and make payments on the customer’s behalf for the first time, mandated by the revised Payment Services Directive (PSD2).
Under Open Banking, application programming interfaces (APIs) allow third parties to access financial information more efficiently, enabling the development of transformative new apps and services. This has paved the way for Open Finance, a complete mobile and digital experience for all consumers with a full suite of financial services.
We’ve joined forces with Hesus Inoma, Head of Digital and Fintech at Grant Thornton Ireland, to discuss this evolution from Open Banking to Open Finance. Hesus joins us with specialist knowledge on the Open Finance business models required to address the huge technology challenges for major players in the banking industry and how this will pave the way for new and exciting consumer-facing financial services.
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What sorts of services will Open Finance make possible for consumers?
“Open Finance services will span insurance, funds and asset management. A new European regulation called the Pan European Pension Product is an interesting example. Its goal is to remove the barriers to customers by moving their pension to any European provider, bringing a traditional service into the modern world via digital solutions.
“Open Finance will also foster services that help both consumers and businesses better manage their finances. These Services can facilitate much easier switching of products and transferring of funds seamlessly, maximising the amount of interest being paid. Another interesting service could be e-mail or text warnings advising a customer making a purchase of its impact on their finances. It should really give financial services customers a clearer picture of their financial standing.”
This sounds great for consumers, but why are financial services players embracing Open Finance?
“Open Banking was a trigger. That’s when providers first started leveraging the power of APIs and the data economy. They’ve become digitally savvy due to the advancement of data ownership, increased connectivity, accelerated technological development, a maturing API infrastructure and the introduction of supportive legislations. All this has helped them to appreciate just what they can achieve in service provision.
What impact do you think Open Finance’s focus on services could have on the financial services industry?
“It will lead to a complete overhaul of how providers develop services. Financial services organisations are getting used to the idea that they no longer ‘own’ their customers, because as digital natives they can switch effortlessly to other products and providers. Instead, organisations will need to rely on the deep customer insights that Open Finance provides.
Who else are you expecting to get involved in Open Finance?
“The big technology players, such as Google and Amazon, will help to make Open Finance a success, by partnering with financial services organisations. That said, just about any business with a pool of transactional data could be involved. Organisations simply need to layer lifestyle data on top of transactional insights and interrogate the output to develop new value-based service offerings. Without interconnection, this will be tricky for any player in the financial services industry. The more connected endpoints there are, the more opportunity there is to gather insights from consumers and to then personalise Open Finance services accordingly. The richer the data, the more effective new services will be.”
What else will drive Open Finance?
“Technology is going to be vital. Beacons and 5G will be important to connect endpoints, while machine learning and AI must be in place to provide the accurate prediction of consumer behaviour. Big data platforms will also be required to harvest insight and IoT platforms will be needed to analyse the context of data in real time.
But innovation is just as important as technology. Industry bodies and governments have a role to play in enabling industry players to experiment, but all stakeholders will need to collaborate, embrace new mindsets, unravel established processes, reinvent models and perhaps even cannibalise parts of their own business.”
Are there any other key success factors for Open Finance?
“Fintechs focus on creating new ecosystems to make the industry more sustainable can help drive Open Finance forward. Another contributing factor to the success of Open Finance are the adjacent verticals, in which consumers share a lot of data. For example, telcos, energy companies or retailers have huge pools of customers, providing more customer data, supporting the development of insight-driven, revenue generating, new services.
Retailers, in particular, are businesses to watch. Some of these companies have a huge amount of transactional and customer data – a strong proposition for building Open Finance services. It’s very exciting.”
Open Finance is part of a cultural shift whereby digital experiences are becoming increasingly instant, open and available everywhere. This is making it more important than ever before for organisations to be able to access different ecosystems and partners quickly and efficiently. Here at Equinix we’re supporting this step-change by enabling payment and commerce companies to interconnect, transforming payments with integrated cloud services to successfully collaborate securely at the digital edge. If you want to learn more about this, read our whitepaper “Payment and Commerce – Digital Edge Playbook”.