Open Banking – Multi-Banking 2.0 or is there more to come?
Open Banking has been a topic that one could not have really overlooked when following the discussions on Banking and Fintechs. One could also say that there is a “hype” around Open Banking, and a lot of expectations in the air in terms of improving customer experience, aggregation of real-time financial data and payments processing. All of this is enabled by using the Application Programming Interfaces (API’s) which are supported by the regulation and standardization of the revised Payment Service Directive (PSD2). Banks face increasing competition within the cash management industry by the Fintechs. There is an abundance of players on the market who enable Payment Services (PISP/PSP) and Account Information Services (AISP). The enthusiasm of developing API’s has also been on the news as the major Nordic banks have announced that there are hundreds of developers in their developer portals.
Before my current position, I worked for a decade in a Nordic Corporate bank with large corporates, financial institutions, and institutional customers. One of the main differences I noticed between Finland and the other Northern European countries is that Finland is the country where the long-lasting popularity of multi-banking software stands out. There are of course multi-banking tool solution providers and standards supporting the services in the European level like EBICS. But if we compare to the size of the market, Finland seems to be one of the most mature markets of multi-banking. (In this context multi-banking is referred to as software which communicates directly to several banks through Web services or similar Host to Host connectivity methods but is not considered as company´s sole ERP-system.)
Going forward in the upcoming years, what concrete and new services corporates can expect from Open Banking? When discussing enabling payment initiation to several banks via PISP’s and gathering financial data from several domestic and foreign banks at the same time with one software, you might think that it sounds somehow familiar? Especially some of the Finnish corporate cash management specialists might consider that what is all the fuss about Open Banking as many Finnish corporates have used multi-banking software and middlewares for these purposes already from the beginning of the 1990s.
Multi-Banking and Global Banking
Open Banking is not only about Europe and UK´s Open Banking initiatives but similar initiatives are going all around the globe. For example in Asia, there has been a lot of developments and a rise of Fintechs which co-operates with banks. Therefore, the advantages are not only limited within Europe and this gives value to both local and international business. In practice, the firsthand benefit for international companies is access to the account and financial information from banks because it gives a holistic real-time view of their liquidity in different regions. But still, a treasurer having business abroad usually needs at least one software in order to analyze and illustrate the data, like a cash flow forecasting system. Also from the perspective of payment automation, execution of large batch payments with extensive payloads are probably not the best use case for Open Banking. So it will be more efficient if the information is processed with a multi-banking tool instead.
Taking this all into consideration, one cannot underestimate the upcoming Open Banking era as it will enable completely new and enhanced services. On the other hand, all this will not happen at a glance. I believe that by developing the capabilities of current corporate multi-banking solutions and combining it with the new Open Banking services, the best use cases can be set on the scene in the near future. Perhaps this era can also retrospectively be seen as the evolution to Multi-Banking 2.0 with totally new co-operation models and service possibilities with a set of new technologies.
In any case, it will be an interesting journey with Open Banking and we at Nomentia look forward to new collaboration possibilities with Open Banking in order to create innovative services for our customers.
Are you ready to adopt a multi-banking structure for your payment traffic or interested in learning more? Contact us and let's discuss more!
Asko Autelo, Project Manager