#More and more consumers are turning to #mobile, which is why #banks are hurrying to make mobile account opening the norm for their financial #customers, according to a study released yesterday by #technology provider Avoka. Mobile account opening is available for around 40% of banking product types in North America and Europe, Avoka’s State of […]
Bank Innovation
#Citi has brought the #convenience of single sign-on to #corporate #treasury.
Financial Technology
Today, #Open Banking is gaining traction globally, through a combination of #banks’ internal efforts, market initiatives, and regulations like the EU’s #PSD2 and the UK’s CMA Open Banking. Now #Hong #Kong has also gotten on board, with the Hong Kong Monetary Authority (HKMA)’s launch of its draft Open API #framework.
Publication of the framework on January 11, 2018 marked the start of a public consultation that will run until March 15, 2018. Responses will feed into a final version that will be binding for the territory’s largest retail banks, although other banks will be able to join in the future.
One of the most interesting aspects of the HKMA’s framework is the splitting of use cases into four phases with different product categories and timelines:
Product and Service Information: Third-Party Providers (TPP)’s access to banks’ products information, which is frequently used by customers on a ‘read-only’ basis and thus helping financial product comparison sites. Banks will be expected to implement these APIs within six months of the framework’s finalization.
Customer Acquisition/New Applications: Customer acquisition via TPPs and through online applications for credit cards, loans and some insurance products. Banks will be expected to implement this within twelve months of finalization.
Account Information: Retrieval of both stand-alone and aggregated account information. It would help TPP services that aggregate multiple accounts or perform analytics to gain customer insights. The timeline for this phase will be discussed later between HKMA and the banks.
Transaction Processing: Enabling TPPs to communicate customers’ payment instructions to banks. Again, the timeline will be discussed later between HKMA and the banks.
Comparing the HKMA’s framework with the Regulatory Technical Standards (RTS) for strong customer authentication (SCA) under PSD2, one of the biggest differences is that the HKMA’s draft is a mixture of a regulatory paper with some initial timelines, recommendations on specific protocols and data formats, and high-level specifications for each product category. PSD2 is #technology-agnostic and does not define any API standards, with other initiatives like Berlin Group and STET stepping in to fill this gap.
While HKMA Open API was inspired by Open Banking and PSD2, its approach is visionary—and in many ways, unique. It remains clear that a single API standard is vital for any economy to attract global innovation and avoid fragmentation. This is a lesson that HKMA is well-placed to take on board.
My thanks to Hakan Eroglu for his research and analysis for this blog.
The post A summary of the new Open API framework in Hong Kong, and how it compares with PSD2 appeared first on Accenture Banking Blog.
The acquisition of software provider #Mulesoft by financial #technology provider #Salesforce will go a long way towards opening the #banking ecosystem in the United States, as Salesforce integrates the former’s API #capabilities into its platform. The acquisition, with a potential $ 6.5 billion value, will give Salesforce the ability to use Mulesoft’s API integration engine, which …Read More
Bank Innovation
The American square #dance evolved from 16th-century English folk dances, in which the dancers are prompted or cued through a sequence of dance steps by a caller to the beat of the music. The caller is typically on a stage beside the musicians, giving full attention to directing the dancers.
Payments stakeholders in Europe are gearing up for #Open #Banking, a new type of square dance where they are answering the regulatory compliance calls of the revised Payment Services Directive (PSD2). If they pick the right partners and are skilled enough in the dance, then they’ll stick around long enough to benefit from the new value being created. But if they are not careful, they risk falling over their own feet. #Banks need partners in this new dance and some of the most important are retail #merchants.
PSD2 allows consumers to grant merchants access to their bank accounts for direct payments, rather than using a credit or debit card. By using bank-to-bank payments, merchants can clear and capture funds faster and significantly reduce—if not eliminate—the fees they pay for card and processor interchange services. The British Retail Consortium estimates that merchants in the UK alone could save £650 million per year1, thanks to the PSD2-required Interchange Fee regulation. Innovative application programming interfaces (APIs) will play an important role in enabling retailers to deliver faster, more personalised shopping experiences at a lower cost.
Smart banks will view merchants as attractive dance partners—and will help them optimise Open Banking to reap benefits and grow their business—despite it cannibalising existing bank revenue streams. If banks sit on the sidelines, then the merchants will undoubtedly find other partners.
For example, banks can offer APIs that give merchants access to the bank’s capabilities. A recent Accenture online #pulse #survey of 50 payment executives within the European retail industry indicates that most plan to implement PSD2-related APIs over the next two years. Only nine percent of the retailers who are familiar with PSD2 do not have any immediate plans to do so; 63 percent of them cited slow customer adoption as the main reason. Most of the retailers we polled would consider embedding bank account balance displays, payment initiation, and bank account transaction history APIs into their point-of-sale (POS) systems.
Considering high levels of consumer confidence in banks handing their data and transactions, banks are in a strong position to take on and dominate the new role of registered account information service providers (AISPs). In that role, banks can aggregate their massive amounts of customer transaction data (that is approved by regulation and authorised by consumers) to isolate and identify spending patterns based on age, region, store location, and so forth. (Think Nedbank Market EdgeTM) Merchants will value and pay for such insight to gain a better understanding of their market and to tailor their offers. Seventy-four percent of retailers familiar with PSD2 say that access to better consumer information is most important to their organisation, followed by API-initiated payments (53%), fraud reduction (53%) and the ability to generate offers at the POS based on insight from bank account data (51%). As AISPs, banks can serve as financial advisors to both merchants and their shoppers to monetise their data.
Like the AISP role, banks are well positioned to serve as PISPs, initiating direct payments to merchants on behalf of their customers. Seventy-six percent of consumers we surveyed are likely to choose traditional banks as their PISP over third-party PISPs. Merchants are also likely to choose to partner with PISP banks to accelerate the bypassing of card networks for online payments, improve their merchant service fee structure, and gain access to ancillary services. Over the next three years, 65 percent of European merchants plan to use a third party to provide AISP or payment initiation service provider (PISP) services. In operating a PISP service, a bank would have the opportunity to capture an additional slice of transaction revenue while also providing opportunities for customer loyalty schemes and cross-selling. Accenture estimates PISP services could account for up to 16 percent of online retail payments by 2020. It’s an opportunity for banks to help merchants deliver more seamless shopping while also protecting their own relationships with customers, and avoiding being cut out of the value chain by merchants and other non-bank players.
Whether collaborating in promenade or do-si-do style, banks and merchants can perform a variety of Open Banking dance moves to strategically lead the migration away from card payments. Banks can become “the dance caller,” giving full attention to directing the migration towards new revenue models and market relevance. Those who sit with their arms crossed on the sidelines are unlikely to be part of the long-run future of the industry.
I invite you to share your thoughts on the near-term dance partnership between banks, merchants and consumers.
[i] Currencycloud.com, “How Will EU Interchange Caps Affect the Industry?, February 27, 2016. https://www.currencycloud.com/en-us/news/blog/how-will-eu-interchange-caps-affect-the-industry/
The post Pulse survey results suggest banks should ask merchants to the Open Banking dance appeared first on Accenture Banking Blog.
The Turritopsis dohrnii, commonly known as the immortal jellyfish, is an extraordinary survivor. Through the rare, natural transformation of cells, an adult can revert to the polyp stage at any time—essentially being reborn as a young jelly.
The #Open #Banking trend is beckoning traditional vertically integrated #banks toward a similar transformation, where they can hit the reset button on their business models to pursue new opportunities, grow their business and guarantee their continued relevance. Driven by regulation, competition—or both—banks are increasingly using APIs to make certain customer data available to third parties. Those third parties can then embed that information into their platforms to improve offerings (theirs and, often, the banks’) and benefit end customers. This reciprocal exchange is causing a rare, natural effect: #bilateral #trading that can fuel a rebirth in banking.
On the outbound side, banks become exporters of not only customer data, but also bank-owned algorithms and business processes. It also positions banks as advisors to help create new products and services that help third parties and consumers capitalise on bank exports. By enticing and training developers to use their API-delivered component services, for example, banks can offer existing customers new services like single sign-on, the ability to pay with credit card reward points, and open accounts right from third-party sites. Consider how Mint.com is extracting and consolidating customer account information to help consumers organise and manage their personal finances. Mastercard is unbundling its services, like consumer credit check or identity management, and offering them to fintechs and other banks. Through such exports of information and services, banks can amplify their reach, distribution and customer loyalty.
On the inbound side, banks can easily and meaningfully plug-and-play product and service features from third-party partners into their own customer-facing offerings. By doing so, they can embed themselves in more transactions—from banking products they don’t already offer, to home, auto, consumer goods purchases, travel and other non-banking services. Through its partnership with OnDeck, for example, JPMorgan Chase offers small businesses loans that lie outside its traditional risk appetite. Even new challenger banks like Starling in the UK are adopting a marketplace strategy, where they offer third-party products on their app, in addition to their own current accounts. The extreme version of inbound open banking would be to only offer third-party products, making money from orchestrating a full platform-based business to improve customer service, build customer loyalty, generate new fees and lower operating costs—without the ‘bank’ having its own balance sheet.
More and more bank executives are seeing Open Banking as an opportunity rather than a threat. But seizing that opportunity requires mastering both the art of interdependence and bilateral trade. It requires investing to regenerate the bank and open up to third parties, creating value from both export and import flows, and differentiating the brand within and beyond financial services.
I invite you to read our report, The Brave New World of Open Banking, to learn more.
The post Banking born again: The power of Open Banking bilateral trading appeared first on Accenture Banking Blog.
U.K.-based #CreditLadder, an online platform that enables tenants to help build credit score, launched an #open #banking #service today, making it the first in its sector to do so. Thanks to European regulation PSD2, users can now authorize CreditLadder to access their banking transactions through open APIs. By accessing information on a user’s transaction history, […]
Bank Innovation
The American square #dance evolved from 16th-century English folk dances, in which the dancers are prompted or cued through a sequence of dance steps by a caller to the beat of the music. The caller is typically on a stage beside the musicians, giving full attention to directing the dancers.
Payments stakeholders in Europe are gearing up for #Open #Banking, a new type of square dance where they are answering the regulatory compliance calls of the revised Payment Services Directive (PSD2). If they pick the right partners and are skilled enough in the dance, then they’ll stick around long enough to benefit from the new value being created. But if they are not careful, they risk falling over their own feet. #Banks need partners in this new dance and some of the most important are retail #merchants.
PSD2 allows consumers to grant merchants access to their bank accounts for direct payments, rather than using a credit or debit card. By using bank-to-bank payments, merchants can clear and capture funds faster and significantly reduce—if not eliminate—the fees they pay for card and processor interchange services. The British Retail Consortium estimates that merchants in the UK alone could save £650 million per year1, thanks to the PSD2-required Interchange Fee regulation. Innovative application programming interfaces (APIs) will play an important role in enabling retailers to deliver faster, more personalised shopping experiences at a lower cost.
Smart banks will view merchants as attractive dance partners—and will help them optimise Open Banking to reap benefits and grow their business—despite it cannibalising existing bank revenue streams. If banks sit on the sidelines, then the merchants will undoubtedly find other partners.
For example, banks can offer APIs that give merchants access to the bank’s capabilities. A recent Accenture online #pulse #survey of 50 payment executives within the European retail industry indicates that most plan to implement PSD2-related APIs over the next two years. Only nine percent of the retailers who are familiar with PSD2 do not have any immediate plans to do so; 63 percent of them cited slow customer adoption as the main reason. Most of the retailers we polled would consider embedding bank account balance displays, payment initiation, and bank account transaction history APIs into their point-of-sale (POS) systems.
Considering high levels of consumer confidence in banks handing their data and transactions, banks are in a strong position to take on and dominate the new role of registered account information service providers (AISPs). In that role, banks can aggregate their massive amounts of customer transaction data (that is approved by regulation and authorised by consumers) to isolate and identify spending patterns based on age, region, store location, and so forth. (Think Nedbank Market EdgeTM) Merchants will value and pay for such insight to gain a better understanding of their market and to tailor their offers. Seventy-four percent of retailers familiar with PSD2 say that access to better consumer information is most important to their organisation, followed by API-initiated payments (53%), fraud reduction (53%) and the ability to generate offers at the POS based on insight from bank account data (51%). As AISPs, banks can serve as financial advisors to both merchants and their shoppers to monetise their data.
Like the AISP role, banks are well positioned to serve as PISPs, initiating direct payments to merchants on behalf of their customers. Seventy-six percent of consumers we surveyed are likely to choose traditional banks as their PISP over third-party PISPs. Merchants are also likely to choose to partner with PISP banks to accelerate the bypassing of card networks for online payments, improve their merchant service fee structure, and gain access to ancillary services. Over the next three years, 65 percent of European merchants plan to use a third party to provide AISP or payment initiation service provider (PISP) services. In operating a PISP service, a bank would have the opportunity to capture an additional slice of transaction revenue while also providing opportunities for customer loyalty schemes and cross-selling. Accenture estimates PISP services could account for up to 16 percent of online retail payments by 2020. It’s an opportunity for banks to help merchants deliver more seamless shopping while also protecting their own relationships with customers, and avoiding being cut out of the value chain by merchants and other non-bank players.
Whether collaborating in promenade or do-si-do style, banks and merchants can perform a variety of Open Banking dance moves to strategically lead the migration away from card payments. Banks can become “the dance caller,” giving full attention to directing the migration towards new revenue models and market relevance. Those who sit with their arms crossed on the sidelines are unlikely to be part of the long-run future of the industry.
I invite you to share your thoughts on the near-term dance partnership between banks, merchants and consumers.
[i] Currencycloud.com, “How Will EU Interchange Caps Affect the Industry?, February 27, 2016. https://www.currencycloud.com/en-us/news/blog/how-will-eu-interchange-caps-affect-the-industry/
The post Pulse survey results suggest banks should ask merchants to the Open Banking dance appeared first on Accenture Banking Blog.
Major changes are underway in Europe’s payments landscape. In the UK, the Competition & Markets Authority (CMA) has triggered a fundamental reshaping of the UK’s digital financial #industry ecosystem through the #Open #Banking regulation. And in the EU, the #PSD2 (Revised Payment Services Directive) regulations—coming into force on 13 January 2018—require #banks to open their systems to third parties, and provide interfaces for them to initiate payments and retrieve account information.
However, PSD2 leaves open the details of the application programming interfaces (#APIs) that third parties will use to connect with banks. While the CMA has required British banks to set up an independent implementation entity called Open Banking Limited, the European Banking Authority’s (EBA’s) draft Regulatory Technical #Standards (RTS) for PSD2 specifies only technical framework conditions and no interface standard.
As a result, cross-bank or pan-European API standards have yet to be clarified. Creating these standards is #vital: PSD2 aims to develop a unified, innovative, pan-European digital ecosystem for financial products—and uniform interfaces and processes are essential for achieving this goal. So the lack of an implementation entity for the EU is a significant gap.
To help fill it, the Berlin Group—consisting of almost 40 banks, associations and Payment Service Providers (PSPs) from across the EU—has defined a common API standard called “NextGenPSD2” for the use cases specified in PSD2. Initiatives are also being launched in Poland, Slovenia and France. However, given that the standardisation initiatives of the Berlin Group and Open Banking are the most advanced, it makes sense to compare these two frameworks to identify their main differences. Here they are:
USE CASES COVERED: Open Banking supports the use cases &8220;Payment Initiation&8221; (PSD2 article 66) and &8220;Account Information&8221; (PSD2 article 67). The Berlin Group covers all PSD2 use cases by adding &8220;Fund Confirmation&8221; (PSD2 Article 65).
DATA FIELDS: Working with numerous EU banks, the Berlin Group analysed various online banking masks to create a minimum standard set of data fields which all banks must offer via their APIs. In contrast, the Open Banking standard was negotiated only among the CMA9 banks and a UK third-party advisory group, and provides more extensive information, including on balances and available balance types that are particularly relevant to fintechs.
CONSENT MODEL: Open Banking allows the customer to allow specific data clusters for use by third parties – for example, only account balances, deposits or direct debit transactions. This approach is close to the data minimisation requirements in the EU General Data Protection Regulation (GDPR). The Berlin Group provides for consent only for account balances and transaction histories for a certain period.
MESSAGE FORMATS: The Open Banking Standard uses only the JSON (JavaScript Object Notation) format with field names based on ISO 20022, while the Berlin Group offers alternative industry-standard formats. On top of JSON, Berlin Group supports JSON with encapsulated ISO 20022-based pain.00x for payments and camt.05x and MT94x for account information.
AUTHENTICATION: Open Banking supports strong customer authentication (SCA) through the &8220;redirect&8221; approach, while the Berlin Group offers two more approaches: “decoupled” (using a dedicated bank app), and “embedded” (the name of the customer is carried directly through the bank API).
USER EXPERIENCE: In addition to the API specifications, Open Banking standardises the user experience and text modules in the click route, unifying consent issuing, authentication (2FA) and account information/payment authorisation. The Berlin Group allows each bank to devise its own user experience.
TRANSACTION RISK ANALYSIS: The Transaction Risk Analysis defined in the RTS is supplied differently, with Open Banking offering more parameters via the API.
While these are the main differences at this time, the gap may narrow. For example, the Berlin Group is expected to incorporate #fintech requirements in the final version of its proposals, scheduled for publication by the end of 2017. It’s also important to remember that implementing a standard does not automatically make a bank PSD2-compliant, since it still needs to comply with other aspects of the RTS like authentication methods, exemptions from SCA and API testing systems.
The EBA’s RTS is expected to be ratified by the European Parliament at the end of February 2018, after which banks and other PSPs will have 18 months to implement it—including providing APIs. In choosing between the available standards, banks should make their evaluation as early as possible and take strategic and technical aspects into account so they can hit the ground running. Time is short—and having the optimal APIs in place will be critical to success in the PSD2 world.
For additional information, see our report, PSD2: Defining new customer journeys
My thanks to Hakan Eroglu for his research and analysis for this blog.
The post Why PSD2 and Open Banking make it vital to establish industry standards for APIs appeared first on Accenture Banking Blog.
With the introduction of the revised payment services directive (PSD2) in January 2018 just around the corner, #banks face a new and potentially disruptive era. #Open APIs and PSD2 will, in time, disrupt traditional #banking. It’s no surprise, then, that the majority of global banks are planning to invest heavily in open banking initiatives by 2020, as revealed in a recent Accenture study.
But are consumers ready to embrace the era of open banking? Customers will, for example, be able to share access to their financial data with non-bank third parties, which could provide customers with new, innovative services using their customer data. However, consumers appear to have their doubts and concerns about financial services being provided by non-financial third parties. Another recent Accenture study shows that two-thirds of consumers in the UK said they won’t share their personal financial data with non-bank providers.
These results suggest that banks already have an extremely valuable competitive advantage they can use as they build their open banking initiatives: their customers’ #trust. But in order to capitalize on this in a rapidly changing market landscape, banks need to act now and create their strategy for winning in the era of open banking.
The banks need to move quickly because while they currently possess the advantage of customers’ trust, the study shows millennials are already significantly more open to using services from non-banks. Banks should use the time before PSD2 APIs become mandatory to strategically plan for open banking, create compelling digital launches, link into ecosystems and gather a developer community to be better positioned before non-banks make their moves.
In the Nordics, we see quite a mixed degree of preparedness between various banks to enter the new market. In contrast, for example, retail companies seem to be actively grasping the upcoming opportunities. Many Nordic banks face challenges from adapting their legacy systems and architecture to become Open API-enabled business models.
Reach out to us to learn more about how to address open banking in order not just to comply—but to compete.
The post Open Banking: Why trust matters appeared first on Accenture Banking Blog.
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