Laurent van Huffel, senior vice president, financial services and Open Banking, North America at Axway, tells Open Banking Expo why it “makes sense” for Canada to adopt the FDX standard and the distinction between ‘data in’ and ‘data out’.
1. Can you start by telling us more about your role at Axway – what it involves and your background in Open Banking?
My background is in banking and payments. I’ve been with Axway for eight years. I manage the financial services organisation, and also the Open Banking and fintech partnerships, for North America, based in Washington DC.
We have a very large customer base in financial services. Most of the largest banks in the world are our customers, as well as many small banks and credit unions (CUs). We have over 1,400 banks/CUs as customers in the US alone. If you add up the total amount of money moved by all our customers each day globally, our products move about 40% of US GDP – or $10 trillion, alone. We are a very mission critical part of the financial ecosystem at large.
Our purpose is to remove all the integration obstacles that prevent our customers from accelerating their transformations. If you listen to what CIOs say, the number one obstacle in their digital transformation journey is integration. Axway is one of the APIM leaders, so it was a natural extension to bring the API technology and verticalize it for Open Banking.
2. Given your customers are of varying sizes, where are they on their Open Banking journey?
Open Banking started in Europe with PSD and PSD2 and, interestingly enough, it was not successful everywhere in the region at the beginning. The UK is the country in Europe where Open Banking has had the highest adoption, and the Nordic countries as well, to some respect. Because it was regulation driven, many banks in Europe did it just to check the box and comply.
Now that the landscape has changed, four or five years later, the banks that took advantage of this are getting the rewards. That’s moving into a second phase, if you will. Brazil, for instance, is one country where we have a good customer base and Open Banking is regulation driven. But, there are countries, like the US, where it is market driven and there is no regulation yet. I believe that because of this, specifically in the US, there will be more innovation in Open Banking than not, even with the recent Consumer Financial Protection Bureau (CFPB) announcement.
Regulations have been announced in October 2022 by the CFPB here [in the US] and are coming up. Last year we spoke to a lot of banks that had never heard of Open Banking or what the CFPB was going to do. Now that has changed, many are aware of it, they know it’s coming and they know they’re going to have to do something about it, specifically around the removal of screen scraping, which is the first step to Open Banking.
Within the top 10 banks in the US, several have already built it on their own and they started a couple of years ago, but they are the exception. The vast majority of the market in the US and Canada is still asking, is this regulation really coming up? Or should we get a head start and do something about it?
We’re not the only ones to preach Open Banking in the market. Account aggregators, like MX, Plaid, Envestnet and access providers like Akoya are trying to move those banking communities away from screen scraping ahead of the CFPB regulation, and for them it’s a matter of existence, because the business model of account aggregators is to resell the actionable intelligence gathered from all these consumer accounts. The only way for them to access that today is through screen scraping, and they do it without the consent of the banks.
If you remove that access to the account aggregators, then they have no more business. So, it will be to their detriment if banks do not adopt Open Banking via the FDX API. FDX makes the most sense because it is becoming the de facto standard in the US and, pretty much, in Canada as well. The right way of doing it is to adopt this standard, and this is one of the key characteristics of what Open Banking is about – it’s the ability to use a common, open and shared standard.
3. Although there is no roadmap just yet for Canada’s Open Banking implementation, the direction of travel is only one way. Given the US has forged ahead, how has Axway been able to help those in Canada best prepare, amid the unknowns?
Canada was ahead of the US, as far as Open Banking, so there were high expectations from the banking community in Canada to get very clear directions from the regulator. Today, the banks and CUs we are talking to in Canada are at a standstill. Some banks – the largest banks – are not waiting, but they are the exception. Many ecosystem participants are waiting to hear from the government.
There’s a wish list – to me, it would make sense that if we are talking about a standard, then Canada and the US should adopt the exact same one and it should be FDX. There are already over 53 million consumer accounts using FDX in the US and growing very rapidly. A good number of banks have already started to implement the FDX APIs and I don’t see the US or Canada going against the tide. Then, you have the flows of consent, which are going to be different from the US. I think Canada will have a very specific, deeper description of those flows and consent, but the API standard should be the same because – from a digital standpoint between Canada and the US – it will make the exchange easier.
It is important to make the distinction between what people call ‘data in’ and ‘data out’.
When it comes to ending screen scraping and then providing access to fintechs and account aggregators, that’s called ‘data out’. That’s what we do – we enable banks to be an API Open Banking provider, meaning that they are going to publish FDX-based API products based on a standard for the purpose of being consumed by someone else, whether that’s an account aggregator, a fintech or a banking app.
‘Data in’ is the integration of this actionable intelligence provided by the account aggregators into the bank. These are two different types of solutions, which is one of the reasons why we partner with Envestnet | Yodlee, for instance. If our customers are asking for data in, then we will recommend our partners. But, also, because we enable the banks to be an Open Banking API provider, you need to have someone else to consume the data, or there is no value.
Envestnet can access this data and then provide use cases back to the banks. The two most popular use cases in Open Banking are for account aggregation and personal financial management (PFM), and Envestnet is very strong in PFM.
4. We have seen Open Banking/Open Finance reach its full potential when ecosystem participants have collaborated, such as bank and fintech partnerships. How can the industry in Canada work together to ensure the best outcomes possible for consumers and SMBs?
There has been almost an explosion of fintechs in the past five years in Canada, and in the rest of the world, for that matter. Partnerships depend on the culture of the bank and its objectives. If your goal is to attract new deposits, new customers, that’s one thing, and if your goal is to cross-sell and upsell to your existing customer base with other products, that’s another thing. You’re going to select fintech differently based on those goals.
Partnering with an account aggregator, like Envestnet, can offer access to actionable intelligence, so that you can define a digital profile of your customers, understanding how they bank outside of your bank, and then upsell and cross-sell to those customers.
The approach in the US has lent itself to innovation. The two most successful use cases are still account aggregation and PFM, but there has also been some innovation around what is called subscription management. It’s not going to make you, as a bank, richer but these are the kind of convenient tools you can provide to customers to lure them to join your bank. I think we’re going to see a lot more of these innovative, convenient apps.
I think there is going to be a lot of revolution in payments. All fintechs took about 10% of revenue away from the banks and payment is the lifeblood of every bank. When you look at what’s going on with real-time payments, competition on the commercial banking side, there are a lot of regulations and changes that make a lot of banks uneasy. You can wire with fintechs at a much lower cost, do currency exchange and so on. These are the types of convenience that fintechs are bringing, so that’s a big area of change both in retail and commercial banking.
5. What would you like to see in Canada come September?
What I’d like to see is a clear selection of the standard, and that should be FDX. That will remove some of the fog. Also, in terms of consent, a clear definition of consent flows.
Finally, when it comes to screen scraping in Canada, there’s no mandate but there’s been a clear recommendation for banks to remove screen scraping. Some of the largest banks have done it already or are in the process of doing it, but it would be great to mandate it because that will trigger the Open Banking movement.
Once you eliminate screen scraping, you’re ready to take advantage of Open Banking.