Oscar Sala, VP of Product Strategy at Strands, Member of the Board of Mobey Forum and co-chair of their Open Banking Working Group, has extensive experience in digital transformation in retail and corporate banking, contributing in particular to the transformation of several companies within Grupo Caixabank, where he was instrumental in the development of new digital banking services, and the application of Fintech methods to ‘disrupt’ the status quo of the financial sector.
Oscar currently defines the product strategy at Strands, alongside the product management team, helping to consolidate the company as the Fintech partner for banks around the world.
1. What is your take on the first 2 months of Open Banking in the UK in comparison with the new PSD2 legislation?
UK banks are quite a bit ahead of the rest of Europe, mainly because the agreement was made to exchange financial data using APIs in 2016. Most British banks, at this stage, offer simple-to-use APIs for data collection purposes only.
To become a RAISP, or Registered Account Information Service Provider, certification must be awarded by regulators (FCA in this case), a process that can take several months. Transactions via APIs will kick off mid-2019, in keeping with the established PSD2 calendar.
2. And in the rest of the Eurozone? What have the differences in strategy been?
Though many banks plan to offer API services in the near future, or gather customer data from other banks using third-party APIs, there are currently very few banks who publicly offer this service.
Most countries’ regulatory bodies are still in the preliminary phases of establishing the necessary procedures.
The main difference between Open Banking in the UK and PSD2 revolves around the banks’ motivations to move into Appification. In Britain, banks entered into this process with a view to standardizing their communications using APIs, whilst for their European counterparts, the driver was to allow the consumer the choice of which bank to manage their money with.
This new ‘open’ context and the coming into force of GDPR (the data protection act to be effective as of May 2018), will force a tightening of processes and regulations, to avoid putting the consumer at risk, minimizing access to financial data or payment initiation by unauthorized parties, something that will inevitably push back the timings initially established.
3. What is your vision of Open Banking and the new regulations?
Banking is at a very exciting and pivotal moment at present; we are experiencing irreversible transformation which will benefit the consumer above all. It’s time to think differently and define new rules, new business and collaboration models. The challenge is to see this change for what it is, and mark a well-timed transformational strategy. Above all, the most difficult aspect for banks will be the need to cannibalize part of their current business for the good of future business, commercializing third-party products in favor of the overall services offered to clients, or indeed provide access to non-financial products, with competitive conditions for the customer, reinventing what it means to be a bank entirely.
Partnerships between banks and Fintechs could be fundamental in this period of renewal.
New regulations aim to speed up this disruption phase, but it is still very early days.
4. How are banks coping? What is their strategy?
The majority of banks are analyzing what it means to adapt to this new regulatory framework: despite 60% claiming they will be ready in time, only 5% say they are prepared now*.
Though almost all (95%) are well aware that if they are not proactive in this regard, the risk of disintermediation by internet giants is very high, very few are doing much to move matters along. The consensus is that this conversation is still very much at board level.
Additionally, though many banks are currently closing several offices and reducing operational costs, a large number are focusing on transforming the traditional office space into a place where customers can access non-financial third-party products with beneficial conditions and associated consumer credit options, taking advantage of their position to offer attractive services to their clients and generate new sources of revenue. These initiatives are very interesting and show what the role of the branch could be in the future.
5. First compliance, and then what?
According to the recent Finextra & CA survey published in January of this year, 75% of banks predict that their principal business model will be based around providing financial information (AISP), payment solutions (PISP), or establishing a services marketplace. In my opinion, banks now have a huge opportunity to become a key player in a new online ecosystem, helping other companies to know their clients better, providing value-added, or KYC information, scoring and analytics, and evolving from an AISP to an AVISP (Added Value Info Service Provider). Banks can capitalize on being their customers’ lifelong ‘financial advisor’ and establish new collaborations with third parties, which benefit everyone involved.
6. Strands is co-chair of the MobeyForum Open Banking Working Group. What’s the main objective of this group?
We are very excited to have such an important role in a banking association such as Mobey Forum, discussing this topic of global relevance. We are proud to be recognized as a key figure in banking transformation worldwide.
The objective of this group is to exchange experiences with the other members (many European and international banks participate in this group alongside important players in the financial sector), and work together to leverage the current context to define a watertight Open Banking strategy.
The group will publish content throughout the year, using real examples as the basis for reflection and planning strategic next steps.
7. How can Strands help banks take full advantage of the opportunities Open Banking offers?
We currently live at time in which the consumer has the final say and more choice than ever before; now the customer chooses the service that most fits their needs at any given time, resulting in a more transparent, more competitive market that benefits everyone. Banks must understand this new consumer-centric paradigm, to be able to take advantage of all interactions with the client, listening to their needs, understanding them and making decisions about the best service to offer, based on a deeper knowledge of their painpoints.
Strands has partnered with some of the biggest global banks over the past 10 years, providing bespoke solutions to Retail Banking, SME Banking and Wealth segments, helping banks to use Smart Data to have a more-personalized conversation which each individual group.
*Finextra & CA Technologies research, January 2018