Open Banking Opportunities

Open Banking is a global phenomenon that brings many possibilities. So, how can corporates harness the potential of APIs to drive increased efficiencies and effectiveness in their treasury function, as well as identify new business opportunities?

What is Open Banking?

Open Banking allows registered Third Party Providers (TPPs) to access bank accounts in a secure and standard manner based on an explicit consent from the bank clients. It was introduced to bring more competition and innovation to the financial services industry.

In response to the regulatory requirements, banks have developed Application Programming Interfaces (APIs) to enable TPPs build applications and solutions around financial products and services traditionally offered by banks.

Availability of standardised and secure APIs for Open Banking services has fuelled a proliferation of innovative payment services in the market and has created an Open Banking ecosystem. While much of this innovation is targeted towards individuals and small businesses, corporates play an important part of this ecosystem.

Progress so far

Over the last couple of years, banks in the UK and Europe have continued to enhance functionality, performance, security and stability of the Open Banking APIs. Banks have made these APIs available on their developer portals for TPPs and Financial Technology (FinTech) companies to access.

Prior to the introduction of regulated Open Banking API services, numerous FinTech companies were active in financial services, such as personal finance dashboards for individuals, or bookkeeping services for small businesses using account balances and transactions data. These were often accessed using screen scraping or automated data feeds from banks. These FinTech players were the forerunners of Open Banking APIs.
As of May 2020, there are now over 240 registered TPPs in Europe, 185 of which are registered in the UK.

Some of the major banks, including Barclays, have started offering account aggregation services to their retail and business banking customers. With these aggregation services, clients are able to view their balances and transactions from their accounts across banks in a single app rather than having to login to a number of banking portals.

However, few FinTech companies, particularly in the cross-border remittance business, have started offering innovative services based on Payment Initiation services, utilising services such as Faster Payments in the UK.

As the understanding of the on-demand and near real-time nature of Open Banking services matures, new business models will appear, opening up new opportunities for all the players in the industry.

A global phenomenon

Open Banking initiatives have now taken off around the world. Contrary to the regulatory-mandated implementation in the UK and Europe, these global initiatives take diverse approaches in implementation. Some of them are regulatory driven, while in some jurisdictions, these have been left to the industry to develop the Open Banking infrastructure.

In Asia, Monetary Authority of Singapore and the Association of Banks have published an API playbook to encourage implementation, as has the Hong Kong Monetary Authority. In Japan, by law, the banks are expected to take reasonable steps to develop an Open API infrastructure. India is implementing Open APIs through a combination of public and private efforts whereas in China, the pace of Open Banking is set by leading FinTech companies.

Banks in New Zealand have adopted an industry-driven approach that is independent of regulatory influence whereas Australia is looking to implement Open Banking through regulatory requirements.

Similarly, in the Americas, Mexico is implementing Open Banking through a regulatory-driven approach while the USA and Canada are leaning towards industry-driven implementation.

The Open Banking implementation under PSD2 in the UK and Europe applies to corporate accounts as well as personal and business banking accounts whereas many of the global Open Banking initiatives in their nascent stages are targeted towards opening up access to personal bank accounts. It is expected that these will extend to corporate bank accounts in the next few years.

What are the opportunities for Corporates?

Corporates are an important part of the Open Banking ecosystem.

Corporates can use Open Banking for achieving efficiencies and effectiveness in their treasury function. They can also use Open Banking to understand their clients’ financial position better and provide tailored products and services, thereby enhancing the end-to-end client experience.

Near real-time treasury

Open Banking APIs enable accessing account balances and transaction data in near real-time and on-demand. These combined with the latest technological innovations such as data analytics and Machine Learning provide timely insight into financial positions across the bank accounts that corporates may hold.

Payment Initiation APIs for Faster Payments/Instant Payments to move funds in near real-time along with technologies such as Artificial Intelligence and Robotic Process Automation enable proactive actions to ensure effective and efficient treasury management.

Efficient account receivables

Payment Initiation APIs, particularly using Faster Payments in the UK and Instant Payments in other jurisdictions make account receivables cheaper and more efficient through quicker settlement as compared to card payments.

For point-of-sale terminals, corporates can combine Payment Initiation APIs with technologies such as QR codes and Near Field Communication as an alternative to cash or card payments.

Understand client needs to serve them better

Open Banking Account Information APIs provide a unique opportunity for corporates in the business of financial services to access their clients’ financial data, with their consent, to understand their financial positions better. In response, they can develop tailored products and services to suit their specific needs. Through tailored offerings, corporates can ensure enhanced client relationships and thereby sustained revenue.

Embracing Open Banking as part of a digital experience

As the Open Banking matures into extending the API access to other financial and non-financial services, the possibilities and the opportunities for corporate clients are endless.

By enhancing client experience not only through financial APIs but also through non-financial APIs, corporates are able to create propositions that were not possible before. Open Banking has established a firm foundation for digital transformation for corporates and banks alike. The importance of digital experience, both internally within organisations and externally, in client interactions, cannot be greater in current times of the pandemic and social isolation.

We have a number of strategic initiatives to help corporates of all sizes to embrace Open Banking as a part of their day-to-day business activities.

If you would like to know more about the possibilities that Open Banking offers and how Barclays Corporate can help, please contact your Relationship Director to discuss further.

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