Open Banking (OB) has become a buzzword spreading like wildfire across the globe. Recently in South Africa (SA) all sorts of companies and people are getting excited about OB and the way it is going to change the way we manage and transact our financial affairs. Companies like Stitch, Ukheshe, 22Seven, Spot Money to name but a few, are targeting this new marketplace. Recently the SARB and the FCSA published consultation papers on OB/Open Finance. Nedbank has already published OB API’s in their API marketplace. Mark Elliot from MasterCard wrote an excellent article on LinkedIn on how he sees OB playing out in Africa.
So the question is not will OB happen in SA, but how fast and what impact will it have on Banks and Fintechs? Will there be regulation? What opportunities are there? Worldwide there is a ton of reading material, podcasts and case studies on OB. Openfuture.world just published an eBook on OB Case studies. There is a great podcast series by Eyal Sivan called Mr Open Banking. Brett King has written a brilliant book called Bank 4.0. He also presents a podcast called Breaking Banks. So there is no shortage of material to get up to speed on this topic.
Once you have read some of the content out there and seen what is already happening, it is fairly obvious that OB is going to hit us like a Tsunami – in fact the earthquake has already happened. And yet when I talk to Bankers, I get a mixed reaction. Yes there are certainly some that can see what’s coming, but there are many others and some really senior people who have a wait and see attitude. For them it is all about concentrating on their own customers – admittedly there are many other distractions! They reckon if they look after those customers and add more products and services all will be well. They say they’ll only adopt OB if the regulators legislate it.
They are right in some respects. Looking after your own customer is incredibly important. The problem is no customer consumes all their financial services at one institution, no matter how loyal they are. So if someone else comes along and offers a complete view of your finances, choice of products, banking services, advice and the ability to make payments or consume financial services all in one app, then there is a good chance customers will vote with their feet. It’s like selling a feature phone when the competitor is selling a smartphone, or trying to sell film when the opposition has digital images. Just ask Nokia or Kodak.
Fintechs can provide a consolidated view of your finances by offering a PFM or enabling you to make payments seamlessly and quickly to any third party. Fintechs such as 22Seven or Ozow and many others, will become a very real value proposition to consumers. They are nimble and there are lots of them. In addition Neobanks will start to gain traction like Starling, Monzo and Revolut in the UK or in SA such as Tyme, Bank Zero and Bettr.
OB doesn’t need to be legislated as one can see in the US, India, Singapore and elsewhere. Consumers can, and are, demanding the services OB enables irrespective of legislation. Secure data sharing is the order of the day with OB, but if the incumbents don’t play ball the innovators will find another way, whether it be screen scraping via Yodlee or OCR or via API’s where possible. It is still a slow, tough road for Fintechs and Neobanks to get the scale, trust and funding of the Banks, but if they have enough time, the wave will break and consumers will reorganize their lives where they find the most comprehensive offering.
So here’s the thing, the incumbent banks are still best placed to win the OB race. They have the best brands, the biggest customer bases and according to many international surveys are more trusted with your personal financial data than anyone else. They are currently in pole position pre-legislation (where the rules, may change). They can charge for data sharing, they can charge for authentication, they can demand data reciprocity (think insurers, asset managers, telco’s). So this race is theirs to lose. All they need to do is the exact opposite of what their traditionalist thinking tells them to do. They need to embrace OB now, they need to allow their customers data to be shared responsibly and they need to partner with the right Fintechs. If they do this fast enough, why would I ever leave my banking app and why would I go to a Neobank?
It could be a Kodak moment…
by: Paul Moss, CEO Comcorp