BankTech

From Open Banking Towards Open Everything

TD Bank

Open Banking initiatives bring technology at the forefront of finance by encouraging (sometimes even mandating) secure underlying account data sharing by banks. The main purpose is to enable third parties, mostly FinTech players, to utilize the open access to banking data, in order to provide value-add service applications that enable consumers to easier transact, save, borrow, lend and invest their money.

For example, in the UK, after the Open Banking Standard (OBS) finally becomes reality, an authorized third-party service provider, like an account aggregator, is going to be able to leverage the established API standard to gain access to the variety of customer’s banking data, or even initiate payment transactions, if such power is authorized by the customer. In the rest of Europe, although currently there is no organized initiative to establish an Open Banking API standard like in the UK, there is a clear regulatory mandate for banks to provide open access to their customer’s data and transaction initiation interfaces, to any external party, under the well-known PSD2 initiative. Across North America, where Open Banking is not mandated yet, banks are already taking notice and adjusting their Open Banking positions and strategies for what’s probably coming here eventually at some point.

The way it has been currently put together and promoted, the Open Banking message may be seen as biased against banks by clearly favoring FinTech startups and established digital technology companies like Google, Apple, Amazon, Twitter and Facebook. Optimists still try to argue that this is, in the end, going to be beneficial for banks for they will be able to figure out ways to monetize on the fact that they ultimately control access to underlying account data and transaction histories. Pessimists, on the other hand, argue that the banks are destined to quickly become ‘dumb pipes and pure account balance maintainers’ that will completely lose touch with the account holders, whose ultimate behavior will be controlled by a bunch of agile and nimble non-FI players, providing front-end apps and services. In such an arrangement, the barriers for switching to another bank will be completely removed – clearly a nightmare scenario for today's FI incumbents.

Regardless of whether optimists or pessimists are right (probably neither), I would argue that regulators and the digital ecosystem as a whole, shall expand on the ‘openness requirements’ and bravely go beyond the current, in my view, one-sided approach. We shall be pushing for open data access standards across the board, which would create comprehensive and even playing field for ultimate data sharing and competition in the digital space. Why stop at mandating only banks to open up their bank account repositories without being able to easily gain access to other data about their customers (again, if authorized by them) from any merchant’s, any FinTech’s, Twitter’s, Facebook’s, Google’s, Apple’s and/or Amazon’s vast data repository?

Will not a bank’s customers benefit if their banks can access other third-party data repositories and gain valuable insights about their spending habits (via SKU level data they currently do not have), social activities and preferences, intellectual interests, music, movie, book preferences, etc.? Why not let customers (as opposed to regulators) decide and chose who they really want exchanging and sharing data that they ultimately own, if that has potential to help them? Clearly, such arrangement would optimally stimulate digital competition, encourage partnerships, greatly enhance the overall digital banking experience through the creative utilization of machine learning and AI, and in the end, directly benefit no one but consumers. That’s the ultimate goal everyone should be striving toward, isn’t it? I would certainly hope so.

Milos Dunjic

TD Bank

Milos Dunjic** **is a technology executive fascinated with and focused on payments innovation. He currently leads and is responsible for TD Bank’s Payments Innovation practice. All opinions are purely his own and not of his past and current employers.

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