To Regulate Or Not To Regulate – Is That Thy Question?
Debates are healthy, and as someone who spent a little time during my college years dabbling around the edges of the speech and debate team, I can tell you it’s something that I personally relish. A chance to really talk through the pros and cons of an argument and lay out the bare facts… and then be judged based not only on those facts, but on the presentation and power of persuasion—sign me up!
My wonderful and insightful colleague, Paul “A Brit living in Omaha” McMeekin, recently shared his insights on the opportunity for Open Banking to take root at a state level in the US, but he’s skirted the main issue on this topic – or just assumed it to be fact; a folly many less seasoned debaters have made. The fact is that we need some regulation for Open Banking to take hold, which remains an open question here in the US.
The number 1 ‘pro’ of regulation is uniformity and a ‘call to action.’ The biggest hurdle we face is inaction. But at the end of the day, to reach the potential of open banking utopia, banks are going to have to invest a lot of money. We’re talking billions of dollars; just look at the news on what Nationwide and RBS have recently committed to as part of their transformation plans.
In the parts of the world where PSD2 and Open Banking are mandated, it’s no longer a choice of whether to embark on these projects; it’s necessary to operate efficiently and effectively in the new world of finance. This spend will effectively position those institutions to rapidly take advantage of newer and newer technology as the innovation cycle accelerates, while the financial institutions not undertaking this will inevitably put their legacies at risk.
And the number 1 ‘con’ of regulation? Cost and “what if we’re wrong?” As noted in the primary ‘pro’ above, the cost of re-architecting/platforming a bank is no small task. The cost will be measured in trillions (as an industry) by the time the dust settles… and what if we’re wrong? What if consumers simply don’t want any of these new technology-driven financial tools and payments options? I am hopeful that the latter POV is fading, as early usage for new payment types and alternative payment options flourish globally. However, the incumbents maintain a massive position of strength (as they own a clear majority of deposit accounts and financial transactions today).
I have stood by my view that market competition in the US is strong enough to move the ball forward on Open Banking, and we have seen a thaw in terms of creating partnerships, which even five years ago many of us would have said were never going to happen (Goldman Sachs and Acorn, Suntrust and Kabbage, to name a couple).
However, if we’re going to see Open Banking or digital banking ecosystems reach their full potential, it’s going to have to be less focused on driving revenue in current business models, and more on attracting data flows due to new value propositions – something that will inevitably lead to those new revenue streams that may make today’s revenues look like drips from a faucet.
Now that’s how you debate!
Mark Ranta will join top payments executives at the Leadership Loft at Money20/20 USA, for a session titled: “Return of the Planet of the APIs: The New Payments Ecosystem,” 4:00 – 4:40pm on Tuesday, October 23. In this session, experts will discuss how traditional boundaries that once defined the payments landscape have been removed with APIs.
Meet ACI at Money 20/20 at Veronese 2502, October 21-24. For more information, visit ACI at Money 20/20.
Related Blog Posts
What Will 2020 Bring for Payments in Latin America?
2019 was yet another year of payments disruption throughout the LATAM region. Thanks in large part to the proliferation of fintechs, Latin American banks and processors have been under immense pressure to modernize their offerings, while also gaining the agility to quickly bring new products to market.
Request for Payment and Other Real-Time Payments Trends That Will Shape 2020
In 2020, the conversation around real-time payments will increasingly be about what banks can do with real-time, as they move beyond setting up to support real-time payments schemes. New use cases will emerge – but there are a few main trends that are likely to shape the direction of real-time in the year ahead.
2020: The Year of (Near) Cashless Transactions?
Happy belated New Year and raise your hand if you make and/or follow New Year’s resolutions. I used to and then realized they were exercises in futility. But, over this past holiday, I thought I’d give the resolution game one more shot. This one was more a realistic goal than it was a resolution, but who can really tell the difference anyway!?! I decided to go cashless over the holidays, which can still be somewhat challenging for many in the US (though my friends in other countries are probably ridiculing me right now). I was traveling (to NYC and Florida) and wanted to pack as little as possible (in both my luggage and my wallet). I’m all about loyalty card points these days, hence the 2 back-to-back trips.
Three Merchant Payment Trends to Watch in 2020
In 2019, merchants everywhere were challenged by pressure from new entrants, the continued breakdown of traditional industry boundaries and growing customer preference for a digitally-led or digitally-influenced purchasing experience.
The Invisibility Cloak of Payments: What Are the Consequences?
If you could pick any superpower, what would you pick? Children often pick "invisibility.” Oh, the possibilities of being invisible! What fun! You can walk into a candy store and take all the candy you want, you can stay downstairs late with your parents and listen to what they’re saying, you can sneak out without anybody noticing… But when you think about it, there are also disadvantages that come with this superpower.
Looking Back at Money20/20 USA: Where Do We Go From Here?
Now that the dust has settled on another successful Money20/20 USA in Las Vegas, it allows for a moment of reflection on what some of the announcements and trends mean for the ever-changing financial industry. Discussions spanned a variety of topics, including the future of international and digital expansion of PSPs, how organizations developing cryptocurrency wallets plan to enter the payments space, and how challenger banks plan to revolutionize the banking experience. Inclusivity was a recurring theme throughout – and nowhere was this more evident than in the Rise Up program.
2020 Fraud Predictions: What to Expect Across the Globe as Cybercrime Evolves
Our payment experts take stock of the trends that shaped 2019 and make their predictions for where they see the industry heading in 2020.
I sat down with our own fraud experts, Marc Trepanier, principal fraud consultant for North America, and Giselle Lindley, principal fraud consultant for APAC, to get their thoughts on what we can expect in the year ahead around payments fraud.
Real-Time Payments Hits Its Stride in the U.S.
The recent announcement of FedNow in the U.S., the launch of cross-border services like SWIFT gpi, and multiple real-time payment systems including The Clearing House’s (TCH) RTP system and Zelle underline the fact that real-time payments are here to stay. The need to deliver real-time payment services to customers has never been more pressing for banks, credit unions, processors, acquirers and fintechs. However, the U.S. payments ecosystem – and its infrastructure – must keep pace with global markets to remain competitive, and interoperability between real-time payment systems will be key.
Deep Dive: Latin American Fintech Market (Part 2)
To support fintechs’ development and create a more inclusive financial system, governments across the Latin American region should adopt different regulations. Some good practices implemented in other countries, like the U.K. or Singapore, could also be adopted in Latin America, such as temporary exemptions on fintech authorizations on behalf of regulating entities, or the creation of temporary regulation sandboxes in which fintechs can operate, evaluate their business models and offer their innovative products in supervised environments.