What is the current state of the PSD2 landscape? What is the timeline for open banking for the second half of 2018 and through 2019?
At the moment, the focus is on becoming compliant with the PSD2 regulations, which came into effect as of 13th of January 2018. This is then closely followed by working with the security measures as outlined in the Strong Customer Authentication (SCA) and Regulatory Technical Standards (RTS) which are applicable 18 months after the date of enforcement of the RTS. Currently, most of the banks are focusing on meeting the compliance standards and deadlines. There are, of course, many different models and solutions evolving, but at this moment, compliance is a key driver in the adoption of open banking.
Looking ahead to 2019, we expect tier 1, tier 2, and tier 3 banks to be ready with their solutions and we will begin to see new and exciting use cases within open banking.
What challenges are banks facing when implementing open banking? How is Volante helping financial institutions overcome these challenges?
Generally, tier 1 banks have started implementing in-house solutions. Some of the challenges that these tier 1 banks face are tied up with their legacy technology. Therefore, their key challenge is to implement quite a few changes in their complex ecosystem. On the other hand, for smaller banks (which have a smaller number of systems), the main challenge is the business case for running a technology program to implement this regulation with very little plan for an ROI.
Yet there is one problem which remains the same for all the banks. Even though everyone talks about APIs, the challenge, at a conceptual level, is not about creating and exposing APIs. It is about fulfilling the functionality of the API in a simple user experience to make the user journey as smooth as possible.
Adoption and momentum will begin only when the use cases and the user journey are seamless.
Open banking and PSD2 are trends that will certainly grow. Therefore, it is important to ensure that you are ready from a compliance perspective, and that you also understand why the open banking concept has been introduced. Volante is working closely with banks to not only provide compliance but also flexibility for the future.
How is Volante enabling banks to adopt new API-based technologies regardless of their current infrastructure?
Volante provides an out-of-the-box PSD2 solution designed for all banks no matter their size. This has been of particular interest to the smaller banks who are looking for a solution that makes them immediately compliant with minimum cost and time taken to implement.
The same solution also works for the tier 1 banks. They do not want to re-engineer their back-end payment systems to handle API-based payment orchestration and processing. The solution acts as a strategic pre-processor, supplementing their existing payment workflows. It provides the flexibility in the back-office for an effective, seamless payment processing user journey, in a very cost-efficient and timely manner. This way, not only do banks become compliant quickly, but they also build the foundation for a much wider adoption of open banking and new potential revenue streams.
What are the strategies out there for banks looking to adopt open banking capabilities and meet open banking demands? What options are available to them?
The strategies for all banks depend on their size, geography, as well as the customer base they serve and more. The key aspects around open banking demands, for now, are related to achieving compliance and planning for commercialisation.
It’s relatively easy to be compliant today by putting your trust in a strategic piece of software, which enables you to grow your business. However, the revenue stream can also be improved by introducing new products and entering new markets, new customer bases and new segments – for example, paying a taxi service through a current account, providing your bank statements for a credit check or partnering with players in the fintech world. Thus, it’s not just about becoming compliant, but setting the foundation for wider usage and a new business or a new product line.
What is the future roadmap of open banking and where do you see the major use cases and new propositions going forward? How can banks get revenue on the investment in open banking?
Open banking on its own is not what one would call a revenue generator. However, it will be the enabler to build new products which enhance your customer’s experience. You need to provide real-time experience within your back-end to accompany it, which is what APIs provide - real-time, ease of access and more. If your back-office is not supporting a real-time scenario, the whole customer experience falls through. Once you are able to achieve productivity in the backend, you can start tackling some of the problems with payments, such as lack of transparency or lack of speed and transformation.
This interview was first published in our Open Banking Report 2018. The Open Banking Report 2018 focuses on topics such as building trust, gaining consent and improving customer experience in Open Banking.
About Nadish Lad
Nadish heads Volante’s Payments Products. He has over 20 years of design and advisory experience in payments and related areas such as: funds check, liquidity, FATF, FX and sanctions. Nadish started his career working on cheque Payments within the UK and has worked with leading banks and organisations implementing core payment products.
About Volante Technologies
Volante Technologies enhances business agility in 80+ financial institutions and corporates globally. Volante’s solutions, including VolPay Suite of payments products and Volante Designer, promise rapid implementations in payments on-boarding, pre-processing, processing, clearing and financial message integration. With our out-of-box software, extensive automation, configuration rather than coding and inbuilt testing, we deliver significantly accelerated implementations for large or small projects.
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