Building the Open Finance reality

28 May 2020

Open Banking needs to become mainstream in order for Open Finance to become a reality and payments will make this possible, according to a panel of industry experts from across Europe.

In an Open Banking Expo live webcast on 20 May, Imran Gulamhuseinwala, trustee at the Open Banking Implementation Entity, said that it was not a matter of if, but rather “a matter of when we move to Open Finance” and that Open Banking was a “stepping stone”.

Speaking during the webcast, ‘How Open Banking payments can drive Open Finance’, sponsored by Yapily, he said that for Open Finance to work Open Banking needed to be mainstream, adding that “the route to becoming mainstream is through payments”.

“Payments is where we could get many millions of people in the UK using Open Banking to make push payments from their accounts,” Gulamhuseinwala explained.

But several panellists pointed to just how far Open Banking still had to go before it could be considered mainstream. Pedro Pinto Coelho, CEO and chairman of Banco BNI Europa, warned that it would be a “long journey”.

“We have seen quite a strong push from regulators to have banks implementing Open Banking. Effectively the outcome has not been as strong as we would expect,” he said during the debate.

Picking up the discussion, Ali Niknam, CEO of Bunq, said: “I don’t think Open Banking has come a long way yet. To me, that is because instead of driving intrinsic demand from consumers, we are trying to regulate our way out of this which, of course, causes this process to be very slow, cumbersome and often tends to miss out on critical elements that would make such a process successful.”

He asked: “Why not empower the consumer more, so he or she can choose what is important to them?”

Do merchants hold the key?

Consumers increasingly expect more personalised, secure and reliable payment journeys as they are becoming digitally savvy, according to Lana Abdullayeva, non-executive advisor to PAY.UK, independent speaker and director at Lloyds Banking Group. Abdullayeva said payment journeys of the past were “a little bit clunkier”.

Matt Cockayne, chief commercial officer at Yapily, said “ease of journey” would be critical, when asked about driving customer adoption of payments.

The audience agreed with him in one of the polls launched during the webcast which asked, what is most important for using an Open Banking payment journey?

Among audience members who cast a vote, the majority chose ease of customer journey, ahead of account coverage or branded journey and UI.

Cockayne suggested that an Open Banking app-to-app journey would be much smoother than a card payment and therefore the onus was on the merchant to push that as a payment method.

“For them it’s about the fact that it’s quicker than a card payment, they get the money quicker. It’s also cheaper for them,” he explained.

“Merchants are the key to unlocking this as a mainstream thing,” agreed Gulamhuseinwala. “Part of the reason for that is payment is a two-sided market. We need acceptance at the merchant end.”

Navigating a crisis

The discussion turned to how Open Finance would help businesses navigate changing consumer trends in their use of payments during the Covid-19 pandemic and whether it had prompted a move to a ‘cashless society’.

Abdullayeva said that the digital channels are taking a more “dominant part in our lives” and that, with the move towards more digital channels, the payment journeys will become important.

Cockayne acknowledged that there has been much discussion about the move to a cashless society amid Covid-19.

“I think Open Banking payments will definitely accelerate how people use that and once they start to see the ease of using it on a mobile phone as a payment method, that will really accelerate it,” he said.

In a final question to the panel, most agreed that ecommerce would be one of the markets set to benefit most from Open Banking payments, with Pinto Coelho and Gulamhuseinwala citing the lending market where they were seeing some of the biggest applications.

The majority of the audience voted retail ecommerce when the question, where do you think Open Banking payments will see fastest adoption, was put to them in a live poll, above peer-to-peer payments, investments and B2B payments.

They also echoed the panel’s sentiments voting for wealth management and lending as the two sectors next for disruption in Open Finance, ahead of pensions, insurance and utilities.

You can view the live webcast from 20th May HERE