Open Banking is the great enabler
Open Banking and its impact on financial services is a big topic of discussion. In this blog, originally published on FinTech Futures, Identitii discuss why technology such as APIs, AI and overlays will be the driving forces for change while Open Banking itself is really the great enabler.
Uncorking the payments bottleneck
By Nick Armstrong, CEO, Identitii
We read Dr. Leda Glyptis’ article on ‘Open Banking: much ado about a brave new world’ with great interest. Not only because of the clear Aussiephile undertones (the feeling’s mutual, Leda) – but because it clearly articulates how Open Banking isn’t going to change the world by itself.
Think about it.
Open Banking is purely a mandate that provides customers with access to their data if they want it. The benefit is that both corporate and retail customers can go with another provider for banking services if they choose to. But what are they doing with that data? Just having access to it doesn’t get you paid faster or open the gate to more finance. Someone needs to come along and create that solution, making use of the data and access available under Open Banking, in order to deliver those benefits.
For example, we see a huge opportunity around accounts receivable and invoice payments under Open Banking. In a traditionally linear payments process for example, companies can take control of the data needed to settle payments faster, reducing the need for information to flow along the payments chain, and opening up the possibilities presented by peer-to-peer sharing of information. Not just clearing, remittance and regulatory reporting information, but settlement information too.
Why is this such a big opportunity? The answer to that is quickly revealed when you take a look at today’s payment processes. When a payment hits a company’s bank account is wholly dependent on how long it takes the bank to perform their checks and release the funds. If the bank has a question about the authenticity of the payment or if the supplier can’t reconcile the incoming payment to an invoice, there’s a hold up in the process.
Phone calls are made. Emails are sent. Messenger pigeons distributed. OK – maybe not that last one, but the lengths all parties have to go to to retrieve the data and documents necessary to complete transactions are laborious, time-wasting and frankly unnecessary going forward.
Under Open Banking, banks and businesses can connect via APIs to link the payment to other systems, creating a shared ecosystem for data and documents that can streamline the process and enable direct sharing of information. It also opens up the possibilities of new, linked offerings such as dynamic discounting or receivables finance that add even more value to the relationship.
This is what makes Open Banking so exciting. And we are pleased that we get to play a part in the changes that it can provide in making the whole industry more efficient, transparent and progressive.
As Leda says, the old rules are shifting. We think for the better.