Taking Open Banking to its logical conclusion, Open Finance may be struggling to reach the mainstream at the moment, but experts and analysts see a bright future ahead, including superior financial services to companies and consumers, and even a substantial boost to economic growth in countries that will adopt Open Finance.
The Payment Services Directive (PSD 2), which came into force in 2019, gave rise to Open Banking in Europe. However, since acquiring raw banking data and building applications capable of using it effectively both require deep knowledge of the financial services industry, Open Banking in Europe is still used almost exclusively by large financial institutions. The future of Open Finance is one of the topics to be discussed at the virtual Fintech Inn conference, which will take place on 21-22 October.
According to one of the conference’s panelists Ronalds Mesters – the co-founder and CEO of Nordigen, making Open Finance accessible to more companies has much to do with enabling developers to experiment with new ideas:
“This ability to have fun and to play around is absolutely necessary for future innovation. When we think about the future of Open Banking, the already operational infrastructure is being rapidly adopted by large financial institutions, but not enough developers. The latter also need a playground where they can have fun – if it’s not fun, they’re not going to be able to build anything that’s good.”
Developing a financial ecosystem for Open Banking necessitates some risk-taking and looking beyond immediate benefits or mere compliance with the regulatory framework. An important factor in this regard is unlocking currently unavailable data that would make it possible to create new products for a broader consumer base, rather than selling them individually.
“The fun would only come once the big banks – and even the small banks – are thinking about new business models that can generate more attraction to Open Banking,” states Gibson Nascimento, Head of Solutions EMEA at Sensedia.
According to Evaldas Remeikis, Member of the Board at NEO Finance, one of the primary needs reported by consumers is a simpler payment process, which currently takes approximately 5 steps, with some variation depending on the country and bank. Slow-moving incumbents are partly to blame.
“Dutch banks provide a much better user experience, as compared to those in the Baltics. Generally speaking, some banks are unwilling to do more than they are required, which is stopping us from developing more advanced solutions for users,” Remeikis says.
Another panellist, George Parks Davie, Open Banking Product Director at Klarna, expressed similar views: “We share the same pain points when it comes to user experiences. Klarna is all about smooth customer experience, and I think, fundamentally, with the move to PSD 2 the banks made the wrong decision to just comply with the regulatory framework”.
There are currently no less than 6,000 banks that offer free access to banking data, which provides an excellent foundation for further development, but most of the value is ultimately going to come from nimble fintechs and regulatory bodies opening up more data for innovators to play with.
“What is absolutely clear is that all three [banks, regulators, and third-party aggregators] want to engage, but aren’t sure how to. I think there’s a huge amount of value to be had, but we need to invite more dancers to the game to make it valuable to the end consumer, which is what we’re all about,” states the panel’s moderator Shaul David, Growth & Head of Banking at Railsbank.
Join this and other discussions on the hottest fintech trends and challenges during the virtual Fintech Inn 2021 conference. Held on 21-22 October, Fintech Inn 2021 will bring together 250+ enterprises and start-ups, as well as 1000+ investors, policymakers, entrepreneurs and technology leaders from all over the world to exchange knowledge and discuss topics from green finance to startup media. You can get your free ticket to one of the largest industry events now on myOnvent platform.
