We’ve been discussing the topic of open banking since 2019 when banks in the EU started their preparations to open their APIs due to the PSD2 regulations. Other countries (outside of the EU) one by one are synchronizing their legislation with PSD2 regulations as well. So, we all move towards Open banking and hopefully towards open ecosystems and an open economy.
With PSD2 implementation, banks received a new type of customer – API-customer, and this is time to decide whether banks would like to serve them. Whether they would like to be more than just a data provider, but become the user of data as well (to be both TPP and ASPSP).
Worth mentioning that the market of TPP is increasing every year. Around 350 TPP are registered in EEA every year. In Poland, which in the CEE market has the biggest number of registered TPPs, there are 30 TPPs registered locally, and around 150 can serve customers on passporting rights.
What are the prerequisites for efficient API management in general?
- Developer portal with simple UX
- Testing sandbox
- Up-to-date API documentation
- Use cases approach
- Clear business model
- Dedicated product team
- Performance and monitoring support
- Reliable API infrastructure
Anyways it requires not only building and launching open APIs, but to have 24h support, monitoring and KPIs of availability and effectiveness of your interfaces, and API versioning
If we look at the use cases of Open banking in the region for the segment of SME customers – we can say that this particular customer segment has not benefited much. Based on SME Banking Club studies – only 8 banks in the CEE region implemented Account Aggregation for business customers (at the end of 2022), which is mainly available for sole entrepreneurs, not for companies. Several finetchs – TPPs use AIS in their credit decision processes.
For individual customers, the situation is much better. A lot of banks implemented Account Aggregation in their mobile apps, and some of them – Payment initiation services (PIS). Large Corporates in top banks can connect directly via APIs and receive data on their transactions directly to their ERP systems. While SMEs are out of the scope again.
Which value-added services for SMEs could be created based on the Open Banking services:
- Business finance manager
- Integrated cash management, cash flow forecast
- Automated credit applications, credit scoring
- Identity verification, KYC & AML check, authorisation
- Payment reconciliation and receivables management
- E-invoicing
- Taxes management & accounting
- Smart liquidity check before approving a contract
- AI-supported consulting assistance for insurance & logistics
What is next?
- Expected change in the PSD2 RTS (Regulatory Technical Standards) should smoothen the journey of each user of Account Information Services (AIS), as it will change from the 90-day Strong Customer Authentication (SCA) to 180 days. This means that the overall customer journey will be improved and that friction for those using account information services will be reduced – this was the main obstacle to implementing it massively for business customers that I heard from Polish banks.
- Move towards Open Finance. Open Finance will give both individual and business customers the right to authorize third-party providers (TPPs) to access their data and initiate financial transactions on their behalf, which will apply not only to transactions data and payments, but will apply to most financial services, such as savings, investments, mortgages, and insurances.
It should result in a more integrated financial services ecosystem for customers. It will continue to challenge traditional business models and require new approaches.
The biggest benefit that Open Finance could bring is financial inclusion, especially for the SME segment. And in general, moving towards open banking ecosystems and interoperability will be useful for all parties. When APIs are standardized and open, then all the parties will spend less time on integrations; also exchange of standardized data between will simplify the process and optimize the costs – so all the parties will be able to focus more on the development of their businesses and less on integrations.
All those topics and more I discussed today during a dedicated webinar with my brilliant guests: Olga Levandovska – Product Manager of Open Banking & Open Finance Solutions at GD Next (an open banking provider, a joint Swiss-Ukrainian company), and Joanna Boroń – Open Banking Team Manager at Alior Bank – one of the biggest commercial banks in Poland.
Watch the full recording for more details:
