"The Revolution has just begun". The new world of Open Banking summarized

“Global management of banking and tax information has arrived”. These are the words of the CEO of nBanks. In a presentation during the Angola Innovation Summit, on July 29, Orlando Costa spoke about open banking and summarized the advantages and functionalities of this solution. And he stressed: “the revolution has just begun”.

One sentence is enough to explain the evolution of Open Banking. For Orlando Costa, we moved from an “ego” system to an ecosystem of financial services. It is a play on words to illustrate the transition from a closed and defensive business model to a more open environment, based on cooperation and the aggregation of banking systems.

One system, four functionalities

It seems complex, but this transformation is easy to understand through four major key ideas, according to the co-founder of nBanks.

First, he tells us, there is a “break in data monopolization”. That is, bank customer data “is no longer instantiated in just one entity”. Customers can now, for example, aggregate banking information from several accounts on a single platform - banking or non-banking - and thus “coexist in a shared, secure and duly authorized data environment”.

This particularity leads us to the next two aspects, as the manager states: on the one hand, “the ease of aggregating information and initiating payments”; on the other hand, the generation “of controlled environments of banking information”. There is a disruption, yes, but “everything has to be regulated and duly supervised”, stresses Orlando Costa.

Finally, Open Banking opens up the “banking space for banking entities and also for the so-called fintechs, technology companies that provide financial services”.

It was, in fact, from a fintech movement in the United Kingdom that Open Banking was born. It began with the simple facilitation of primary tools for handling banking files in 2009. The trend is now taking hold worldwide and has already been consolidated through two payment directives to regulate the service - the “Payment Services Directives” (PSD) 1 and 2. Today, we even speak of “World Wide Open Banking”.

Gains for banks and customers

With this paradigm shift, the customer gains the most. “They have greater freedom of choice, they aggregate information, they can compare solutions and decide based on much more information”, he summarizes. All by being able to “share a relationship with several entities that will give them information skills to make the best choice”.

Now, the question arises: “What about banking?”. The truth is one: there was a forced transformation, but it was for the best: “This movement forced banking entities to modernize”, being able, among other measures, to establish new, more innovative intrabank applications. According to Orlando, banks themselves see fintechs as “industry innovators”, “solution providers” and “digital accelerators”.

The advantages multiply, from the emergence of new revenue sources, to the reduction of operational costs or the high connectivity between various stakeholders. It is “coopetivity” in action, as Orlando Costa tells us, in an allusion to the fusion between “cooperation” and “competitiveness” in “presenting new solutions” to the customer. Strictly speaking, it is easy to understand that we are talking about an opportunity; not a threat.

The main actors of Open Banking

To implement the Open Banking model, Orlando Costa highlights two protagonists. On one side, we have the so-called “PISP”, the Payment Initiation Service Providers. These are the entities that “facilitate and accelerate the connection between the merchant and the customer in banking payment”.

On the other side, there are the “AISP”, the Account Information Service Providers, which allow the quality of aggregating banking information in the same place. nBanks' services are an example of this type of service, says the CEO. “A customer, instead of having to open and close several home banking sessions to see balances and transactions in 10 or 20 accounts, for example, can, on a single platform, aggregate all that data”.

Use cases: how does this work in practice?

There are several uses - and benefits too - that arise with adherence to an open banking solution. And they involve much more than payments. Let's look at concrete examples.

Let's think about a company's financial management. On an open banking platform, updated information can be easily shared with accounting or control teams. Employees themselves can integrate expenses they have on hand into the system “and, in this way, the treasury accesses all that information in real time”, he adds.  

The aggregation of tax, fiscal and various corporate responsibilities information is also an added value, especially if we consider that these platforms provide access to collaborative agendas.

No less important, these integrations will also allow a better perception of banking risk to leverage better negotiations.

From time savings, to information quality, to the acceleration of bank reconciliations or operational efficiency, the advantages are many and result in more efficient companies. For accountants, an open banking solution also brings gains.

If you haven't had the opportunity to see Orlando Costa's intervention at the Angola Innovation Summit, access this video and watch the session in detail from 3:53:44 to 4:10:46.