Mauricio Deutsch, banking and capital markets leader at GFT Canada, explains what Canadian banks can expect to gain from offering Open Banking-enabled products and services, and what the consequences will be if banks and fintechs don’t continue to partner in 2023.
1. For those of our readers not familiar with GFT Canada, can you explain your offering to the banking industry?
As a digital transformation leader with a passion for technology and innovation, GFT Canada provides sustainable solutions through IT engineering and technology consulting. We have the technology expertise to lead the transformation to cloud computing and more. Our world-class partner network enables us to provide innovative solutions to business challenges in the banking, financial services and insurance sectors. GFT has a global presence in 15 markets, over 10,000 dedicated employees and more than 35 years of experience.
We are GFT Canada, where Open Banking, cloud computing, digital implementation, data migration and artificial intelligence are the future for the world, but our present.
Our offering is divided into two main groups: The transformational side and the innovation side.
On the transformational side, we help our clients go through their transformation journeys, considering all the different aspects that require this evolution. This includes making sure that the business and IT is aligned in terms of focus and ambition, and the vision they want to achieve.
In terms of the innovation side, that is about collaboration – helping our clients to integrate with the ecosystem, internally and externally.
2. Alongside your colleague Sailesh Panchal, retail finance subject leader, you spoke at Open Banking Expo Canada on 17 November, 2022, about how banks can benefit from Open Banking. What do banks stand to gain from offering Open Banking-enabled services?
Open Banking products/services can make an enormous difference in benefiting banks’ top and bottom lines, by reducing operational costs, and enabling them to better react to clients’ current and future needs.
But the devil is in the details: Banks must be aware that there are regulatory, procedural and technology enhancements that need to be taken into consideration to fully leverage Open Banking. As well as this, there are data security aspects that must be in place to make sure clients’ data is safe. Security, transparency, and convenience are the ingredients, and, at GFT, we show our clients how to combine them.
We know that there are different approaches. In other geographies, Open Banking was not created to increase profitability for the banks, but to increase availability of the products and services to many segments of the population.
It is also the case in Canada, although there is also the objective to make it profitable. Among the benefits it will bring is the ability to meet clients’ new and ever-changing expectations; flexibility and personalized offerings; operational cost reductions; increasing the portfolio of products and services through partnering with fintechs; cross-selling opportunities; and use of internal and external data for customer insights.
3. In the UK, the incumbent banks expressed concerns prior to its implementation that Open Banking might threaten their business model. How do Canadian banks view the introduction of Open Banking?
There is a clear concern about the disruption that this may cause, but not in a negative way. On the contrary, the ecosystem is looking forward to this happening as quickly as possible, because they see a growth opportunity they want to leverage.
Of course, there are some challenges to get to the finish line. The current challenges may be more related to creating the regulatory and standards/protocols to have an efficient, secure, and transparent ecosystem. After this is finalized, the next hurdles might be more technology oriented, to be able to leverage the current technologies to be able to integrate the systems and integrate with the outside world.
And let us not forget this a disruptive new way of conducting business. So, the challenge here is to change the mindset of the people inside the FIs, to be open to change what has traditionally been successful.
4. Bank and fintech partnerships are beginning to emerge in Canada. Will we see more of these in 2023 and, if so, what will be the main driver?
From my perspective, if these partnerships don’t happen, then there will be a lack of diversified portfolio of services and products. Fintechs are specialized, slimmer and faster, and if banks want to do everything by themselves, instead of joining forces, it will take too long for this to really happen, and the cost would be much bigger.
So, long story short, the signs are positive that the partnerships path is the one that everyone wants to walk, and if not in 2023, in the following years, it will explode.
5. At Open Banking Expo Canada in Toronto, you also moderated a panel session about Open Banking being a global phenomenon. What can Canada learn from the global Open Finance movement? What were the main points to come out of that discussion?
One of the things that was mentioned in the panel, and throughout many of the sessions held during the Expo, is that Canada is behind in terms of Open Banking implementation. But that this represents a clear advantage because we can learn from the success and challenges that other jurisdictions have gone through.
For example, whatever standard is defined as our own for data exchange, it will have a very important common ground with global standards, because we are a huge player in the global economy and this phenomenon is part of the globalization we must lead.
There are also different drivers for Open Banking, but the vision of providing a more diverse and secure portfolio of services and products to the clients, prevails everywhere.
One big topic is the main challenges Canada faces in playing catch-up. The most immediate one is setting the basis for the regulatory standpoint, and the standards and protocols that must be in place. The main key success factor here, is that all the stakeholders are represented when these decisions and definitions are being set. Not having the buy-in of everybody is a dealbreaker.
Another discussion point was the market readiness for Open Banking, and there is a mixed opinion here. The customer demands more digital products and services. There are surveys that have as much as 70% of the market demanding this. But on the opposite side, there is a concern about the way that personal information will be managed. So, the FIs have a lot of work to do, in terms of addressing the trust issue.
And finally, we discussed what comes next. It was clear that the first milestone should be to finalize the whole regulatory definition process, so that all the stakeholders can start preparing themselves to leverage Open Banking.
6. Finally, what are GFT’s plans for 2023?
In 2023, we will continue our growth journey globally and locally. We have been helping many customers in different geographies in their Open Banking transformational initiatives and we will bring all that experience, with our experts, frameworks, and accelerators, to help the Canadian market succeed in this initiative.
We are working to enhance our capabilities to serve our clients in different geographies. For example, we’re creating centres of excellence in other geographies for core banking implementation. We are also expanding in the insurance market, with similar ideas.
We will be working on our partnerships, which are a key success factor of our journey. We have partnerships with Axway, an API gateway that is widely used in the Open Banking ecosystem, and with FDX, which is the standard that is also prevailing in Canada. Our work in the cloud, for core banking solutions, will continue and we will provide holistic solutions to our clients.