"Financial Industry Meets BigTech": On the 25th of August 2022, the third Open Banking Summit opened its doors in the Google event rooms in Zurich. The large auditorium and the excellent speakers provided the perfect setting to discuss the future of Open Banking in Switzerland with the guests. The program’s overall topic was about international developments and, in addition to varied presentations, included a panel discussion followed by an aperitif. Oscar Neira, Sales & Marketing, Incentage, skilfully moderated the evening.
To welcome the guests, host Roi Tavor (Managing Director Google Cloud Austria & Switzerland) spoke introductory words about the relevance of open banking for the global technology group. The goal that the company is pursuing with its data-driven business model should also apply to the financial industry. Putting the customer at the center of service delivery and creating the best possible customer experience.
Thomas Zerndt (CEO, Business Engineering Institute St. Gallen) also tied in with this understanding in his presentation of the OpenBankingProject.ch. According to its definition, the open banking concept enables end customers to make their personal financial data accessible to various banks, financial service providers or FinTechs via open interfaces. It facilitates the creation of digital ecosystems in order to get closer to the customer and to open up new business models.
The OpenBankingProject.ch also follows this conviction to promote the usability of standards with its members and to lay the technical building blocks for cross-industry cooperation. Since opening up a system does not serve an end in itself, it must rather be placed in a context. In this context, reference was made to two use cases that are currently being developed by the members. One is a proof of concept in the area of inheritance distribution, the other is collaborative processing in the area of A2A payment.
Marie Walker (Co-founder & Head of Content Open Future World) then gave us an insight into the worldwide developments in open banking, especially from the UK, Australia and the USA.
In summary, a trend towards opening up the financial industry can be observed. However, the concept is developed differently in the various countries. The understanding is often extended beyond Open Banking. A shift towards Open Finance and Open Data is discernible. Not only a regulatory or technical approach should be pursued, but a customer-centric and cross-industry approach. The Swiss financial center in particular can act as a "smart mover" here, as it can benefit from the experiences of other countries in the area of Open Wealth.
The example of the UK shows the integration of Open Banking in the HRMC as a success case with growing user numbers. Australia is pursuing a cross-sectoral approach in various markets, such as the Open Energy Initiative, and the US stands out as an innovation driver, e.g. in Payroll APIs, despite the lack of regulation.
After an overview of the most interesting use cases, such as account aggregation, cash flow management and invoicing for SMEs, Marie presented us her summary. Open Banking is not a short-term phenomenon and is here to stay in the medium term. It opens up new opportunities and ultimately, as with any other innovation, is a learning process. Companies should therefore be clear about their positioning sooner rather than later.
The next speaker was Ana Climente (Head of Open Banking Spain, BBVA), who shared her experience from five years of Open Banking at BBVA. The starting point of the effort was the growing customer demands and new user needs. Real-time financial services from anywhere, interactions across multiple channels, and end-to-end digitalised customer experiences are just some of the challenges that banks need to respond to.
This trend is reflected in the exponential growth of open banking services in Europe. While just 24 banks launched such offerings in 2018, the number of institutions doubled in 2020. Today, more than 300 banks offer open banking services. On one hand, the development can be attributed to PSD2, but on the other hand, the services have functionalities that go far beyond payments. The best-known use cases include account aggregation and personal finance management.
BBVA wants to be where the customer is. This includes building digital ecosystems. "When you design a home financing service, you should take into account that the customer doesn't want to spend a lot of time thinking about the mortgage, they actually just want to live in their new home." One building block for this are cooperations, such as with the ride service provider Uber. A win-win situation to simplify money transfers and give the gig economy access to BBVA banking services.
But is there one strategy for successful open banking? "You should be a first mover, basically dare and be willing to learn” Ana tells us. You learn from the customer and build strong relationships with partners. Combined with an API-first mindset, not from a technical but from a strategic perspective, and a focus on collaboration, sustainable value can be created.
In the next presentation, Oliver Dlugosch (CEO and Co-Founder, ndgit) shared his experiences in working with the different players from the perspective of an API platform provider.
He demonstrated the relevance of APIs for service delivery by the strong and almost exponential growth of the last three years. The desire to enable customers to let others access their data and the associated demand for services is what he sees as a key driver. He sees the reluctance in this area as unfounded and refers to a survey. More than half of the users are willing to share their data if the added value for the customer can be clearly communicated.
Furthermore, two areas for revenue potential can be observed through Open Banking: Infrastructure or products in the form of a banking-as-a-service approach, such as Solaris Bank, and the development of digital banking ecosystems with individual customers at the center of the service design. But what is the concrete implementation?
The security design is important, as one ultimately enters into third-party relationships. The bank must be able to recognise who this third party is. Finally, Oliver illustrated the functioning of this infrastructure in the area of access rights management in a current proof of concept with the aim of making it available to all players in a simplified way.
In the last presentation before the panel discussion, Thomas Zerndt presented selected results and conclusions from the survey "Open Banking in Switzerland", which will be published as a study in September. There is a basic conviction of what should be achieved with Open Banking. There is however no single right way.
The survey is intended to show the relevance of Open Banking in Switzerland and can provide an initial orientation on current developments. With more than 180 responses from banks, technology providers, fintechs and consultancies, the representative results were then deepened in selected expert interviews.
First, the understanding of the concept was examined. The focus is on simplifying collaborations between banks and third-party providers. Although Open Banking can also be understood as a regulatory-driven opening (e.g. PSD2) of the banks, the focus is on the end customers' self-determined use of data and the associated innovation. All target groups, fintech, bank customers, providers and banks can benefit from each other. But which use case has the greatest potential?
The high and overarching approval from the initiation of payments to Open Wealth to the conclusion of a mortgage implies that there will not be one use case. Nevertheless, the use of identity and basic data can be seen here as a preferable case and basis for many use cases. Some success factors for implementation could also be identified. Standardised APIs accepted by all and cooperation between the regulator and the market are crucial here.
With these results, we then moved on to the last item on the evening's program, which provided very exciting impulses, suggestions and food for thought. Dr Stefanie Auge-Dickhut (Head Competence Center Ecosystems, Business Engineering Institute St. Gallen), Manuel Kunzelmann (CEO, Migros Bank), Roi Tavor and Ana Climente delved into the topic of the current status quo in a varied discussion moderated by Oscar Neira.
Stefanie Auge-Dickhut kicked off the discussion by once again emphasising the relevance of the end customer: "Customers don't want products, they want integrated services. You have to open up, banks have a lot of potential, you've only just started". Ana Climente added that customers have fundamentally changed their behaviour and the evolution is inevitable for banks. Nevertheless, debates should take into account that Open Banking is only a means to an end.
Manuel Kunzelmann explained that data protection is a driving element. But in the whole API discussion, one should not lose sight of profitability. Standardisation is a means here to reduce process costs, for example. Roi Tavor emphasises thinking from the customer's perspective. Open Banking is not relevant as long as you can't show a customer its benefit and while the monetisation is missing.
Switzerland is a market that should build on existing standards instead of its own. Only the same ones need to be used. Open Wealth in particular can act as a driver that can yield a margin for those involved. Market-driven discussions are very important. Potential is also seen in the mortgage sector, explains Stefanie Auge-Dickhut. "What do people want from open banking and what contribution can be made by the players?".
In the final round, it becomes clear that the Swiss financial market is in a very good position. The basis and the understanding have been created. From here on, one should look at other markets and benefit from the experiences of others. A regulated approach should not be the only way, and collaboration between all players should be pursued.
These and many other discussions were continued at the subsequent aperitif in the relaxed atmosphere of the location. Many thanks to all invited guests for the great evening and the exchange, especially to the speakers, moderators and organisers. We are already looking forward to our next event!