Open APIs, PSD2, Blockchain and Marmite...The Deliciousness of Payments
As we quickly approach the new year, I thought it prudent to sit down with my esteemed colleague (as well as cyclist, oenophile, Arsenal fan and Kraftwerk fan) Lu Zurawski, who’s been at the forefront of some major industry initiatives that will ripple into 2017 and beyond.
So Lu, which is better? Marmite or peanut butter?
I have nothing against peanut butter, but I have a soft spot for Marmite as it is manufactured not far from my home town of Stafford in the UK. I particularly like that it’s a combination of great practical innovation and marketing genius. It makes good use of stuff left lying around – it was originally a re-purposed waste product of the beer industry. But this legacy of brewing was blended with other ingredients to make an edible final product that precisely only 50% of its target market finds palatable – hence the marketing slogan “love it or hate it”. Marmite is a prototypical digital nourishment; an innovative, yeast-based signal splitter. It’s a shame I find the taste so bloody horrible.
What’s the difference: Open APIs or APIs?
It’s a bit like the difference between Open Marmite and Marmite. If you’ve already decided Marmite is not for you, no marketing genius presenting a newly Open jar of brewer’s byproduct is going to get you to change your mind. Any temptation to give it another go would just fog-over in an doubtful cloud of yeasty-intolerance.
But others may appreciate the extra convenience and accessibility of Open Marmite. Perhaps existing users may be a little fearful of security issues - wouldn’t it be really easy for someone to steal or tamper with my product? Real aficionados could be concerned about denial of service – perhaps too many like-minded consumers will try to spoon around in the jar at the same time. But these fears can be eased once protocols and behaviors are adopted by a wider community of consumers.
“Openness” means something more than just free access to a jar of spread. The benefits of Open Marmite need to be seen from a wider market perspective, allowing more consumers to discover it, leading to more product managers to experiment with it to create derivative products, and helping to expand usage even further. There is actually a product ecosystem at work today that benefits Marmite lovers and the product company together. The brand owners support a third-party licensing program to allow more than 100 external companies to create Marmite-based products, and a portal boasting “the world’s first spreadable technology app”.
It’s not quite Open API, but Unilever are effectively using an “Open Marmite” community to increase core transaction volumes, and to generate more revenue from secondary sources.
Lu – you’ve gone a bit surreal. What’s the difference between Open APIs and APIs in terms of technology?
That’s a fair challenge. Although Open API has been discussed enough for it definitely to be a new “thing,” there are quite a few conflicting definitions as to what sort of thing it is.
Is it one of those things that’s always been around, but never really properly appreciated – a bit like Sting? Or is it one of those things like Gluten Intolerance – wham! - it’s come out of nowhere and yet now it’s on track to change civilization?
For technology folk, “Open API” has a reassuringly familiar feel to it – after all, the concept of Application Programming Interfaces (APIs) has been around for decades. These are just the technical constructs that allow different computer programs to talk to each other. And the “Open” adjective is often seen as superfluous signage – possibly designed to make APIs more appealing to the Generation Z developers working in FinTech.
So perhaps there is nothing new about Open API? But curiously, the term is frequently interweaved with “Open Banking.” Perhaps this is a nod to new Open regulatory environments like the European Union’s PSD2 (Payment Services Directive) framework and more general Open Data initiatives adopted by governments around the world. These pro-competition banking initiatives are forcing existing banks to provide access to Third Party Providers (TPPs) of payment services that have permission from consumers. There can be little doubt that this scenario of providing access - inevitably via API techniques - is “Open,” particularly when you consider that banks will not be allowed to discriminate against access from TPPs, and certainly not hide behind traditional barriers of contracts.
But “Openness” in the context of Open API needs to viewed beyond just the (potentially reluctant) provision of free access to data and systems. Nor is it a slavish commitment to use a specific industry “Open” Standard. Sure - the enabling technology of Open API can be framed in the terminology of APIs. But Open API needs to be viewed through a new lens of partnerships and collaboration.
API used to be just a technology. But now Open API is also a state of mind. It refers to the creation of new dialogues, connections and way of working between participants in emerging business ecosystems. It points toward value-based relationships and better services for citizens. It’s about stimulating innovation via the kinds of interconnected ecosystems already adopted by media, travel, hospitality and retailing industries.
Put together, Open API is Open thinking and API technology combined – and it is definitely a big new “thing.”
Will PSD2 ripple worldwide?
When I discuss the EU Payments Services Directive with friends outside Europe - in particular in the US - it’s not uncommon to get quizzed about this weird social experiment that seems to be designed to kill card networks and established banks, and to create a new greenfield of banking services.
It seems unusual that, at a time when global public policy is trying to rein-in some innovative new platform industries (for example court rulings against Uber, Deliveroo and Airbnb), many financial services policy makers are actively encouraging more Uber-style banking.
Some of this is driven by national inward investment drivers – for example the UK, Germany and Singapore governments actively talk up their domestic FinTech industries. But there is a wider unifying thread that covers contemporary approaches to monopolies and avoiding the concentration of power in a small club of dominant providers.
So despite its payments-based acronym, PSD shouldn’t just be seen as an isolated regulatory tower. The directive, and its siblings like the EU regulation on EU interchange fee structures, has been influenced by contemporary economics thinking on competition, as championed by recent Nobel winner Jean Tirole. The Toulouse-based professor is an advocate for the non-linear regulation of “two-sided” markets - places where different actors need different incentives and regulatory controls to encourage participation, leading to overall benefits to all citizens in the resulting ecosystem. I’m not clever enough to understand Tirole’s Industrial Organization math, but I understand the application to taxi companies, dating agencies and credit card markets – one of his specialisms.
So far, the UK has progressed way faster than PSD2. Q4 2016 saw the Australian government make similar moves toward mandatory open banking. South Korea and Singapore have hinted the same.
There will be more than a few ripples of public policy and regulatory activity similar to PSD2 spreading around the world over the coming year. And dare I say it (or ask it) – does anyone know which way this is going to play in the US?
What’ll happen first: a drug-free Tour de France or Blockchain adoption?
Ha – you clearly know I’m a cyclist. I’m not into performance enhancing substances. But I have found that fruit jellies, caffeine and beer do no harm on long distances. There is a concept of Therapeutic Use Exemptions (TUE), which allow participants to take some banned substances to deal with diagnosed ailments (asthma for example).
Will the industry warrant mass adoption of a Blockchain-based TUE? Certainly more credible participants are dabbling, and despite fractures in some blockchain consortia like R3, the recent announcement by VISA with Chain was quite a big statement of intent.
Last year I was very skeptical – too much hype and lack of understanding. But perhaps we’re not far from seeing blockchain-based solutions playing a bigger role in payments.
Brex… (on second thought, let’s skip this one)
Oh man! Brexit is remarkably like Marmite – 52% love it, 48% hate it. And it will be around for quite some time.
Related Blog Posts
Why its Never Too Late for Women to Join STEM Professions
With ACI’s fourth Coding for Girls Camp coming up on April 21st, ACI’s Sampy Gajre, senior recruiter and an eternal advocate for women in tech professions, talked to us about the challenges and opportunities for women in STEM (science, technology, engineering, mathematics) professions. She shared with us what organizations and communities can do to help encourage more women to join the field, and why it’s never too late to follow your passion.
The Next Stage of Real-Time Payments Evolution is Here
Fragmentation resulting from multiple Pan-European Immediate Payments schemes is a challenge, but solutions exist
Maintain Vs. Invest: What the Digital Era Ushers in for Banks
Taking place this week in Brussels, the European Credit Research Institute (ECRI) will host a high-level debate on how policymakers can build on the process of digitalisation of banks to raise competitiveness in light of increased competition from fintech start-ups and tech giants.
The Climate, Weather and Payments – What the Winds Tell Us?
I am sitting in my home watching snow fall, it’s April and I just spent the weekend prepping my yard for the upcoming summer season. To say the weather patterns are odd is an understatement. The global climate is warming as we know. And though you don’t see it on a day to day basis, it seems to hit more regularly than in the past, with freakish events, colds snaps, warm spells and snow storms in April. And on this occasion, it had me thinking about our current environment in payments. We are seeing a fundamental change to our ecosystem with technology advancements like Open APIs, big data, AI and foundational changes like Immediate Payment initiatives and regulatory pushes.
Ursinus College: The Future of Campus Commerce is in the Cloud
Sixty-eight percent of schools are moving eCommerce to the cloudi. As Ellucian Live begins to descend upon San Diego this week, ACI’s Gene Scriven took a moment to chat with Ellen Curcio, Director of Student Accounts at Ursinus College, about the future of campus commerce.
Be sure to catch Ellen and Gene, as well as ACI partner and host Ellucian at the event on Wednesday, April 11, for a panel discussion on “The Future of eCommerce in the Cloud.”
Driving IoT Progress at Mobile World Congress
I felt fortunate to be among the 107,000 delegates from 205 countries attending this year’s Mobile World Congress, held earlier this month in surprisingly chilly Barcelona.
Showcasing everything from connected cars, to virtual reality, 3D printing to amazing app ideas—the exhibition and conference content at MWC gave visitors a chance to discuss the future of mobile and explore the world’s most cutting-edge, mobile-enabled products and services.
4 Reasons Why You Must Future Proof Your Technology
What does future proofing your technology mean? In my view, it means preparing your bank to deliver the best customer experience possible--today and tomorrow. Research from Greenwich Associates indicates that the customer experience and ease of doing business are key drivers of loyalty. Extracting value from your technology investments so you can provide a superior customer experience is not only important because of the impact on service, but also on loyalty.
I want to focus on 4 reasons why future proofing your technology is important. These insights are a sneak preview into some of the findings from our upcoming whitepaper produced with Ovum, the annual Global Payment Insight Series.
Increasing Collections & Satisfaction: Real-Time Payments for Loan Servicing
The old adage that “cash is king” is precisely that: old. In today’s world, convenience is king and real-time payments deliver it in spades. Consider that convenient ways to pay can reduce late payments by up to 76%, while reducing call center volumes by up to 83%, and it’s no wonder lenders are expanding their offerings over time to include checks, ACH, debit cards and now real-time payments.
GDPR: Modern Wealth Is In Your Digital DNA
Hands up if you don’t really know what GDPR is… don’t worry, you’re not alone in fact, 6 in 10 people have never heard of it.
And why should the average consumer know about the General Data Protection Regulation (GDPR)? The regulation itself, which will become enforceable in May 2018, is designed to stop businesses using our data without our knowledge or consent. And that consent means complete transparency on how our data is being used. This sounds like a very reasonable expectation for consumers to have, which of course begs the question; why hasn’t this been the standard up until now?
Fintech Frenzy and Fun
I’m in vibrant Singapore for day one of the inaugural Money20/20 Asia... or is this day two? I’ve lost all concept of time this week (and didn’t realize how close Singapore is to the equator… it’s like wicked hawt outside!) And I’m joined once again by my ever-intrepid Rantings colleague to rant about what’s happening in this fun-filled world of payments.