Magazine BEAST #16 2019

32 #Business | FinTech
EMBRACING COLLABORATION
IN THE WORLD OF OPEN BANKING
BY ALEXANDRE KEILMANN
How is Open Banking currently transforming the financial services industry? BEAST met with Gael Denis (Partner, TMT* & Fintech
Leader, EY Luxembourg) and Patrice Fritsch (Principal, Payment Services Leader, EY Luxembourg) who tell us why the financial
sector needs to welcome such a disruption.
«Open banking includes the concept of a collaborative framework
in which banks and Fintech players offer to each other their
individualized services. Open banking as the next step of online
banking, offers intermediaries and Fintech providers the possibility
to interact with the banks and their clients,» explains Patrice
Fritsch. Gael Denis uses the term «marketplace bank», underlining
an additional aspect of the concept: an open ecosystem destined
to all players, from traditional banks to Fintechs, with specific
rules to follow, including: PSD2, GDPR and MiFID.
The experts also highlight the importance of APIs – application
programming interfaces – which play a central role in this new
world. They aim towards facilitating exchange and therefore
towards feeding the ecosystem, with no specific boundaries set,
allowing the creation of innovative services. «Open banking is to
the banking industry what unbundling was to the telecom sector.
It answers to three main trends that now drive our daily lives:
(1) customer empowerment as APIs allow users to decide the
information he/she wants to share, and who he/she wants to
share it with, (2) frictionless and fluid experiences, which require
collaboration between all counterparties and (3) more security as
it acts as a standardized control center dealing with the access
of data and permissions,» adds Gael Denis. Patrice Fritsch insists
on the enhancement of customer experience, which provides
new ways to interact with financial products and banks, and a
drastically improved timeliness, thanks to new technologies and a
dynamic competitive landscape. He also underlines the possibility
to access to a larger panel of services, significantly boosting the
diversification of products. He adds: «it allows the customization
of services in a world that is more and more global. Nowadays,
clients are eager to use a combination of services from different
institutions and providers. In this respect, open banking becomes
an important part of the newly created digital economy, with
hyperconnected customers, who need to access their services
at anytime, anywhere, and with any device».
According to both experts, there are numerous advantages for
banks, who will improve their operational efficiency
as well as ensuring client retention. «Partnerships
are becoming easier to conclude, in a world of
finance where interfacing new solutions and
dealing with legacy systems has historically been
painful and time-consuming,» they explain.
On the other hand, Fintechs benefit from an easy access to
clients and to the banks’ infrastructures. And in the long run,
these methods of working and the adoption of digital solutions
are boosting innovation. «In such an environment, defining
one’s role is key, for both the banks and startups,» highlights
Patrice Fritsch, «which role is a bank going to have in the
future? Will the Bank concentrate on product distribution or
on product manufacturing? What about providing other banks
with its own infrastructure? All the open banking players need
to figure out and define their role(s) as many models will coexist
and this profound transformation is already happening».
Banks are therefore facing challenges that can be turned into
opportunities. For instance, a successful product made available
in an open banking ecosystem could be very attractive and allow
the players to reach more customers. «Just like in the music and
hospitality industries, any transition needs a reinvention. Our
world is changing and it is absolutely crucial to define the role(s)
you want to take in the current, and future, environment. The
services of tomorrow are yet to be tailored» they underline. The
regulation-side is also pushing banks to dive into open banking:
GDPR, PSD2 and MiFID II have been implemented to support the
development of the digital economy by notably protecting the
clients, lowering the costs and advocating transparency.
Luxembourg, just like any other country, will face several
challenges in this open banking world, yet, it is well equipped
thanks to its stable ecosystem fueled by the collaboration
between most actors. «We are seeing more cross-sector
exchanges happening, mixing notably ICT and financial services.
That’s what’s Luxembourg has been doing for the past 15 years,
leveraging the strength of its main pillars that are digital and
finance. Fintech, in this respect, becomes the perfect blend
between those two sectors,» add the experts. According to
Gael Denis, transformation echoes with globalization, with more
clients coming to Luxembourg, making it more international than
ever. «We are working in connected international environments,
dealing with significant mass and volume. ICT and finance are
intermingling, supported by regulators and
by the government, all leveraging powerful
infrastructures. We must keep on
innovating and always be ambitious when
it comes to redefining our industries and
transforming ourselves,» conclude
Gael Denis and Patrice Fritsch.
BEAST MAGAZINE #16
*Technology, Media
& Telecommunications