The Hammer Finds Its Nail: Open Banking and Commercial Cash Management
Globally, the Open Banking story has been shaped by Europe, thanks to PSD2 (The Revised Payment Services Directive) and the effect that it will have on us as everyday consumer banking clients. This will forever change our experience with financial tools for the better.
The banks that have traditionally served us will modify their models to support the foundational layer of a new ecosystem of co-invention and partnership. This story is all well and good, but so far most – if not all – of the discussion has surrounded the consumer experience and has neglected where the most fertile ground for change and disruption lies—corporate and commercial banking.
Corporate and commercial banking provide fertile ground for change
Traditionally speaking, advancements in consumer banking find their way into the commercial market in 5-10 year horizons; there have always been early technology movers, however the market itself traditionally trailed as change wasn’t embraced by all.
That said, as the technology-driven revolution in the consumer space has accelerated over the past 10 years, so too has the adoption in the corporate space. What was once a 5-10-year window has conceivably shortened to 1-3-year timeframe, and the chance for “leap-frogging” in technologies and practices has arisen as small tech startups are suddenly turning into corporate clients.
The chance to capitalize on the trend of Open APIs to help deliver net new experiences—direct to your clients—could not be more well-timed in the history of the market.
The US offers a different path for open banking
Unlike the regulated markets in Europe, where open banking models supported by Open APIs are being mandated at the consumer market level, the US has an opportunity to apply this technology and learnings to the area where the greatest opportunity lies. This is because those clients in the commercial banking space don’t start with the “Free Checking Account” product. The expectation in this market is based on service and experience, and the willingness to pay for both is not lost on either party.
When you look at the potential value of being able to break down various products into services that can be packaged and delivered to each customer uniquely, the pandora’s box of potential springs open. The utopian promise of individually-tailored solutions appears within reach, and the best thing about it is that the bank may not even have to know what the experience looks like on the corporates’ end – just that the information they need for the cash management services they are supporting is being delivered to their systems.
In a way, this is a continuation of the direct bank connection model (albeit on steroids) as it can be consumed by commercial clients of all levels, so long as they have the right technology folks or vendors sitting on their side. That’s the beauty of Open APIs; they are intended to be consumed by non-subject matter experts, whereas the APIs of yesteryear required deep levels of product knowledge to even start using them.
Where does that leave us? As the Open API revolution is well underway globally—and that is true for here in the US as well—it is time to roll up our sleeves and ‘get dirty’ with this technology trend. Almost as importantly, it’s time to prepare your organizations for the cultural shift that Open APIs bring with them, because the innovation may just as likely come from outside your walls as from within!
The payments industry is going OPEN – open technology (APIs), open collaboration (partnerships), and open choices (more customer options). The impact will be more innovation and greater competition. Read more in our paper “Open Payments and Their Impact on Banks”
Related Blog Posts
The Race to Real-Time Payments in Europe
Instant payments have quickly morphed into the new norm, and as individual European nations forge a real-time, digital-first payments environment, they raise the bar for all financial institutions conducting business in the Eurozone. It’s no longer a question of “what’s the business case?” but a matter of how instant payments players can take advantage of the opportunities now being created.
Keeping Up With Fraudsters: A Month Isn’t Enough
As the Government of Canada campaigns for improved fraud prevention and awareness this month, I’d like to do my part as a fellow Canadian, and shed some light on why payments need to stay a step (or more) ahead of fraudsters, today more than ever.
Local Perspectives: Real-Time Realities Across Asia-Pacific in 2019
Money20/20 Asia returns to Singapore this week, attracting payments professionals from around the vast APAC region – and beyond. The real-time and open imperative is one of the reasons why all eyes are on Asia-Pacific when it comes to payments, so I caught up with ACI payments experts representing three of the key countries within the region, to take the pulse of real-time schemes that are in varying stages of maturity.
What it Takes to be an ‘Influential Woman in Payments’ [Q&A]
Coming off the back of International Women’s Day this past weekend, PaymentsSource has recognized the Most Influential Women in Payments, spanning multiple industries including financial services, retail, investment and technology. Among the honorees is ACI’s very own Carolyn Homberger, group president, global sales. Part of the executive leadership team at ACI, Carolyn leads a team of payments professionals operating across all global regions, and plays a critical role in setting business strategy. As an advocate for the leadership and growth of women in the payments industry, Carolyn is also responsible for launching ACI’s own Women’s Initiative.
Instant and Open Payments for Consumer Purchases – Lessons Learned From India and Beyond
Did you know that 65% of merchants want to accept instant payments? That’s because they know the customer experience (CX) benefits will drive growth for their business, and they recognize that this payment type will save their business money.
What it Means for a Bank to be Real-Time Ready – It’s More Than Just Payments
Banks are quickly learning that real-time enablement of the business is more than just a technological upgrade – there is a wider challenge of transforming services and customer experience. Although the banking world faces this challenge with some trepidation, there are success stories from other industries that have overcome legacy technologies and transformed frustrating and opaque customer experiences.
What We Talk About When We Talk About Digital Transformation
The recent headline grabbing announcement that Banco Santander has signed a USD $700M contract with IBM got me thinking… what’s up with ‘Digital Transformation’ these days? Santander’s announcement was all about digital transformation… and they are a forward-thinking bank. The new global technology agreement is designed to increase efficiencies in the bank’s operations, enable it to be more innovative and deliver new products, faster. But not every bank can pony up $700M and not every bank has suitable technology in place. It got me thinking, what is actually needed for digital transformation?
Putting Malaysia on the Path to Payments Innovation
The public launch of the DuitNow instant credit transfer service, in December 2018, provides just a taste of what lies ahead as Malaysia’s Real-time Retail Payments Platform (RPP) is progressively rolled out. Fueled by Bank Negara’s (BNM) increasing support for e-payment platform development, there has been a steady increase in mobile wallet and digital payment usage, setting the stage for 2019 to be a year of transformation for the payments industry in Malaysia.
The Potential of 'Request to Pay' to Revolutionize Payments
How often have you been in a situation where you realize in the middle of the month that you’re late paying an important bill? And then hit with a wave of dread as you check your bank account with trepidation to see if you can pay? Many of us are lucky to not be in that situation regularly, but most of us have been there at some point, and likely know others who are regularly confronted by this situation.
What Can the Re-Regulation of Other Industries Tell Us About Open Banking One Year On?
UK Open Banking just reached its first birthday milestone (on January 13 to be precise) and given my own commentary – including in the ACI blog – on this topic, the first anniversary of Open Banking in the UK certainly won’t pass without a debrief on the progress that’s been made and what challenges lie ahead.