Corporate treasurers are yet to be convinced about the benefits of open banking and application program interfaces (APIs). A majority of them (55%) attending the EuroFinance international treasury management show at Palexpo in Geneva, Switzerland, 26-28 September which attracted 2100 delegates, said it 'wasn't relevant' or they didn’t know about it when asked how they viewed the EU Payment Services Directive (PSD)2. This is the regulatory driver behind the trend in Europe.
There is some interest in the technology trend towards open APIs and ecosystems where new connectivity, data tools and services can be 'plugged' into more open banking systems in the future, with 29% of attendees at the EuroFinance 2018 day two session entitled New World of Banks saying in the live poll that they were 'exploring the trend', with the rest 'preparing for it'. The majority though were uninterested. [Separate ACT Conf.18 blogs 1 & 2 can be seen by clicking on the highlighted text]
The live poll API findings from EuroFinance 2018 in Geneva suggest there is an education effort required to convince corporate treasurers about the claimed benefits of open banking and APIs such as increased connectivity, competition and data-enriched front-end services and cash management analytics. Perhaps corporate treasurers won't notice it until they're consuming it.
Shahrokh Moinian, Global Head of Cash Products at Deutsche Bank did his best to convince the audience at the Palexpo venue, stating during the conference session at EuroFinance 2018: "APIs can be used to connect technology companies to banks to clients, ensuring more seamless data-enriched banking in the future."
He added: "Open banking is probably one of the biggest disruptions we're seeing in Europe, with PSD2 the driver."
From a bank point of view, you can be compliant, said Moinian, in your approach or you can be fully open and "on the front foot", or at least adopt a hybrid approach of the two. The ultimate aim is to "provide more services to clients."
Ireti Samuel-Ogbu, EMEA Head of Payments & Receivables, at Citi Treasury & Trade chimed in, saying: "Open banking is a real-time enabler of information and data. It's a continuation of the change already underway with the move away from batch towards real-time payments (RTP) and operations. APIs can give you real-time 24x7 information, so you can see what balances and funding, cash sweeping options and so on, you have as a treasurer at any given time."
"The challenge is standards, as having 4,000 separate APIs for 4,000 banks is no way to proceed," added Samuel-Ogbu, referencing the fact that only the UK so far has one common mandated standard for how to implement open banking and APIs, despite collaborative efforts in mainland Europe from the Berlin Group with its NextGenPSD2 Framework voluntary effort and other such bodies.
This debate led to future-gazing discussions about if there is a possible global role here for SWIFT in the future to set an international API standard? But this could be a contradiction as the trend might anyway threaten SWIFT's position as the nexus for global cross-border payments. If banks can bilaterally deal with each other based upon a common API standard without an intermediary do they still need SWIFT? Not everyone on the panel agreed with this supposition, maintaining there will always be a need for a collaborative organizational body. Others argued the open trend could adversely impact the position of treasury management system (TMS) providers instead. Banks too could lose out to FinTech insurgents taking advantage of the more open data environment, if they meet minimum security requirements and gain customer permission, to provide easy price comparison services to drive down prices.
Fellow panellist, Albert Hollema, Head of Treasury at the Endemol Shine Group, said: "In the beginning banks were cautious and worried about this trend towards openness and initially afraid FinTechs would step in [and take business away]. That is changing though as 95% of FinTechs disappear or collaborate with banks."
Engagement with the 900 corporate treasurers attending EuroFinance 2018 and their colleagues around the world, is required over the long-term in order to sell the benefits of open banking and APIs. "It's an interesting topic, but not a 'hot topic' from a corporate treasury perspective at the moment," said panellist, Paul Misere, EMEA Treasurer at Medtronic in the Netherlands.
Will the open trend be a facilitator for better treasury operations or a beneficial long-term disruptor, with potentially negative short-term impacts as everyone gets used to a new environment? These are some of the questions that treasurers are no doubt asking themselves, but they are in the minority for now. Most are concentrated on their everyday cash management and risk hedging activities, so banks, regulators, FinTechs and others will have to work hard to engage them on the issue. It appears as if open banking will first require open communication to gain treasury uptake and approval. As ever, practical useful tools will need to be delivered to engender uptake.