Areas of the market in which open banking protocols are implemented without standards could risk seeing new bank monopolies emerge, according to Paul Freemantle, chief technology officer at open source tech provider WSO2 during a panel today at the Open Banking World Congress.
“Maybe we’ll get new bullies who will take the market and I’m afraid to say I think in some areas where open banking has not been mandated and is maybe happening through commercial rather than compliance models, there may be some companies that try and take the open banking model and own it in a way that hasn’t really happened in Europe. And I think they could become the new big monopolies of the future,” he said, during a panel today at the Open Banking World Congress.
Despite his concerns he still believes open banking’s future is bright, as a regulated and standardised initiative diminishes banks’ “unfair position” in the market.
“It makes it much, much harder for any large player just to use their weight to push others around."
Other panellists agreed, adding that standardisation is necessary to see open banking take off.
“Creating those standards will definitely mean a change in the way that companies, banks, every single player in the ecosystem of open banking will work,” said Carmela Gomez, head of Open
Some European players have been working to adopt an EU wide approach to open banking similar to the UK’s Open Banking Implementation Entity (OBIE), founded by the Competition and Markets Authority (CMA) and mandated by the Second Payments Services Directive (PSD2). On April 30, Open Banking Europe (OBE) published work on standardisation of European application programming interfaces (APIs) for industry review.
But despite positive outcomes, standardisation also causes implementation burdens for banks, said Julia Holzgreve, director, Open Banking and Ecosystem Partnerships, Keen Innovation AG on the panel.
“I’ve seen lots of banks that have now had immense costs of implementing the standards and the regulation and are now looking for the business cases like ‘what do we now do with it?’ – and I think that’s a really interesting time because everyone’s watching each other and seeing what others are doing,” she said.
According to Carlos Figueredo, CEO and founder of Open Vector, it’s important that banks do not see open banking as a regulatory checkbox and realise that it does hold commercial opportunities as well.
Holzgreve said that in places where open banking has not been mandated such as in Switzerland, the initiative is mostly driven by one-to-one partnerships between banks and digital platforms or fintechs.
“There’s a risk at the moment that lots of things happen without the standards and then maybe there will be some change required in the future,” she said.
“But I think the mindset of the banks is really interesting at the moment, to realise with banking as a service that they can develop a whole new business model where possibly they’re not even visible, where they’re in the background and powering something which is so against what has always been the driving force.
“The customer interface was always the most important thing for banks and realising that [it] might actually be better served by someone else that has a different relationship to the client that maybe has a better [user experience] or already existing relationship through another industry, that’s something that’s slowly changing and that’s really interesting to watch.”