Stefano Vaccino, Founder of Yapily
Consumers never owned their financial data. Banks controlled everything from how much money came into an account, to where that money was spent. While technology has already changed some of these processes, like the way we pay or move money around, when it comes to control over our data, the system has remained unchanged for decades. Until now.
Open Banking has disrupted the status quo. A decade on, and thanks to APIs that underpin Open Banking infrastructure, consumers now have more control over their financial data than ever before.
Handing back consumer control
Before Open Banking, consumers were at the mercy of the banks when it came to accessing their own data. There were only two ways to leverage the financial data in personal accounts to get better deals and access fundamental services. The first involved consumers physically printing or downloading a PDF of their bank statement to share with other banks or third party providers (TPPs).
The second saw banks and third parties utilise screen scraping. This meant users had to share their username and password to grant access to their bank account, to, for example, feed into money management tools or to access account information. Both options are long and cumbersome, but option two left consumers at risk of fraud and data breaches unless they remembered to change their passwords.
Reducing account fraud & data breaches
Many organisations have legacy IT systems which utilise screen scraping. This practice easily leaves systems open to data breaches. In fact, the Commonwealth Bank has reported that companies using screen scraping are at least two times more likely to experience account fraud. Not only is this bad for consumers, businesses can also be badly hit by the repercussions.
Thankfully, as of March 14th, a combination of SCA and PSD2 regulations mean that screen scraping has effectively been outlawed – significantly increasing the security of payments. The only secure way of accessing account information is through an API. Now, every individual payment requires a unique authorisation token, which once used, cannot be used again. Even tokens for recurring payments, such as standing orders for mortgage repayments, can be revoked and immediately rendered useless if suspicious activity is detected. This has greatly increased the security for consumers who make payments online.
Breaking down barriers with APIs
While in the UK, Open Banking was given a narrower focus than in the EU – only the nine largest banks were mandated to provide TPPs access to their services and data. However, it did specify a single, pre-defined API (Application Programming Interface) that was set as the standard for integration. While not as immediate as expected, banks did eventually make good progress in opening up these APIs, and it has led to the creation of new services. Moreover, APIs have been instrumental in handing back control of financial data to consumers.
Heading into an Open Finance future
Thanks to these APIs, we are seeing the global growth of Open Banking. Now, consumers can choose when to stay or go, as well as how much information they want to share, with whom and for how long. This is an important move given that as many as 15 million people in the UK could be using the wrong financial services product for them. In fact, around two million people miss out on the best interest rates and four million are denied credit each year.
Further, we’re not only in a world already reaping the benefits of Open Banking. We’re also moving towards a financial services industry powered by Open Finance, where laborious processes such as mortgage applications will be gone. Data that would have historically taken weeks or months to manually compile and send to the bank for review will be collated in minutes. Credit scores to ID verification, property affordability and residential checks will all be securely and seamlessly accessed thanks to open APIs. This will greatly reduce the lag time between application and acceptance or rejection – giving consumers greater control over the whole mortgage process.
In a world powered by Open Banking and Open Finance, consumers now have more control over their financial data than ever before. We can expect to see financial inclusion for the unbanked and a better experience for those with existing products and services.
WE NEED MORE CRYPTO COMPANIES TO IPO TO INCREASE DIGITAL ASSET SCRUTINY AND ADOPTION
Stephen Ehrlich, Co-Founder and CEO at Voyager Digital
As a publicly listed digital asset trading business, the recent announcement of Coinbase’s IPO has naturally put a spotlight on us at Voyager Digital and we welcome their move as it will improve trust, transparency and above all, adoption of digital assets. It is imperative that the crypto asset space ups its game as there’s still a great deal of scepticism and concern in respect to their legitimacy or even purpose. This scepticism comes even at a time when several well-known household institutional names have entered the space in 2020.
But there are more than just signs that the mood is changing, with even some of the die-hard naysayers starting to accept that Bitcoin and crypto assets are here to stay.
The regulators are slowly coming to the table with the introduction of new rules, for example the US’s SEC is looking to impose greater KYC (Know Your Customer) on crypto wallet providers and France, a vocal advocate of the emerging blockchain technology and digital asset space, is looking to implement anonymity measures to fight money laundering activity.
Being a publicly listed company naturally provides an extra level of transparency and today there are quite a few digital asset focused public companies ranging from Bitcoin miners, crypto investment companies and in Voyager Digital’s case, crypto brokerage firms that allow investors to buy and sell crypto.
Over the Christmas and holiday period Bitcoin has continued its stratospheric rise showing further evidence that investors are hungry for alternative assets. With traditional markets being closed for public holidays, people have had time to read, research and because crypto-assets trade 24/7 they can take action. So while many around the world will have been trying to forget the trials and tribulations of a torrid 2020 by gorging on turkey or goose and opening presents, many investors will have been buying Bitcoin.
This is a trend we expect to continue well into 2021 and beyond. As people become more accepting of the digital asset space and adoption increases, more crypto based businesses will pursue the IPO route and become public companies. This process should become a self-fulfilling prophecy, bringing a greater proportion of the space under the regulatory regimes of stock exchanges and allowing anyone to dig deep into the business, providing greater scrutiny.
But this expansion will present regulators across the globe with multiple challenges. As Bitcoin and other crypto-assets are borderless, it allows brokers such as Voyager the ability to expand quickly, providing secure trading platforms to meet the demand of wider adoption. Regulatory hurdles will be overcome though as we are already seeing forward-thinking Central Banks and established regulators embracing this new asset class and the technology underpinning them. By working with regulators, established crypto businesses and in particular publicly listed ones, can help forge the way for the industry.
The future for crypto assets, Bitcoin in particular, looks bright and we look forward to playing a major role.
THE POTENTIAL OF PaaS IN FINANCIAL INSTITUTION INNOVATION
By Barry Tarrant, Director, Product Solutions, Fiserv
Financial institutions continually balance competing demands for investment in technology maintenance, compliance, innovation and the delivery of value-added services. Delineation between the “need to have” and “nice to have” is difficult when everything feels like a “must have”. For many institutions, outsourcing strategic services such as payments can enable them to strike a better balance of their investment pool, by enabling more efficient operations that allow for more investment to be focused on rapid delivery of new capabilities and innovation that adds incremental value.
Shifting focus to innovation
Financial institutions are facing change on multiple fronts. Customers have quickly come to expect continual product innovation and a consistent experience across multiple channels. And the industry is experiencing structural changes, such as the convergence of payments.
We are witnessing challenger banks and fintechs fully embracing digital tools, such as the cloud, to optimise operations and create transformational customer experiences. Increasing choices available for customers to initiate payments across card and non-card payment rails are leading to further demand for innovation and change. As a result, many financial institutions are reviewing the costs and operational effort required to maintain payments technology in-house and considering how new innovations can be implemented.
Financial institutions have an opportunity to leverage shared innovation to stay ahead of this competition. This can come in the form of payments-as-a-service (PaaS). PaaS can also bring additional benefits such as savings in capital costs, opportunity costs, compliance costs, as well as reduction in one-off costs associated with infrastructure or technology upgrades.
The case for PaaS
Outsourcing payments to a PaaS provider can allow a financial institution to focus more time and effort on customer innovation and experience that drive incremental value. It could also lead to other financial benefits associated with reduced capital expenses, such as increased free cash flow. This is particularly important as financial institutions navigate the current environment and capital investment is being analysed under a microscope.
Another benefit to outsourcing to a PaaS provider is the ability to leverage its expertise. While investing in a robust platform is one of many areas for financial institutions to consider, it is the primary business for PaaS providers. Therefore, it is in the provider’s interest to continually invest in the platform and recruit qualified personnel to support and innovate the technology.
Geographical scale can also provide further opportunities to add value. A PaaS provider with clients around the world enables them to deliver innovation on a global scale, and this can be redeployed elsewhere quickly and at a lower cost than custom developments. Additionally, a global payment processing network enables providers to gather useful insights, such as new payment types, changes in consumer behaviour, and threats, which could then be used for further innovation.
As payments become more commoditised, and traditional payment revenue streams decrease, the case for retaining payment processing in-house may become narrower. By adopting PaaS, financial institutions can benefit from significant cost savings, maximise retained payment margins, and rebalance their resource and investment pool, which can be used to focus on more strategic and valuable activities.
While the business case for financial institutions to adopt PaaS is compelling, some remain reluctant to do so due to certain ‘industry myths’. For example, there are concerns that outsourcing data is inherently risky, however, the reality is quite the opposite. PaaS providers have the scale, resources, and practices to invest in key areas such as cybersecurity, whereas keeping operations in-house could in fact lead to greater risks around data security, especially if resources are limited.
Aside from costs, experience and expertise in delivering transformation of payment technology should also be considered as part of the decision to adopt PaaS. Most IT managers within financial institutions are likely to have delivered few major transition projects in their entire career. However, teams at a PaaS provider will collectively have likely overseen many. They also develop and update a range of specialised skillsets and toolkits to provide additional expertise and a seamless service. The ability to deliver transformation effectively is critical to benefits realisation and PaaS providers are likely to be better equipped to do so.
Innovate and differentiate
The current pandemic has shifted payments innovation into the spotlight. To fully understand how changes can be made and implemented that respond to this shift, a comprehensive assessment of existing technology, and how it will affect business in the long-term, will be needed. Adopting PaaS brings a wealth of financial and operational benefits, enabling a financial institution to be agile and strategic, so that it can devote more resources to innovation, provide services and experiences that customers want, and differentiate from the competition.
WE NEED MORE CRYPTO COMPANIES TO IPO TO INCREASE DIGITAL ASSET SCRUTINY AND ADOPTION
Stephen Ehrlich, Co-Founder and CEO at Voyager Digital As a publicly listed digital asset trading business, the recent announcement...
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