Do people know what open banking is? And what should they know about the accelerating trend poised to redefine the US banking landscape? Axway’s own “Mr. Open Banking,” Eyal Sivan, joined Glen Sarvady recently on the Big Fintech podcast to talk about what this technology’s adoption has the power to do for consumers.
Back to the basics: What is open banking?
Axway has pioneered enterprise data integration for two decades. Its solutions, experts, and experience are guiding businesses around the world into the era of open banking.
“In many ways, open banking is just the evolution of the kind of API-based integrations that organizations have been building for decades,” Eyal Sivan explained.
“What’s exciting is that more recently, the APIs have moved from the internal into the external world, as organizations try and embrace external developers as a way of extending their reach. Open banking really comes along and tries to standardize how that’s done for the financial services industry, creating incredibly powerful network effects and opening up the field to whole new kinds of players.”
Open banking powers fintechs around the world that offer anything from simplified payment systems (think Stripe or PayPal) to better insight into and ownership over personal financial data.
It can even help power social good. It’s about giving customers control of their financial data, and it allows third-party software providers and banks to build new, customer-centric financial applications and services.
A shift in attitudes
Many consumers don’t necessarily have a deep awareness of the technologies they use every day, but they appreciate the experiences they provide. This was the main theme in the consumer survey on open banking release Axway released this year: Half of Americans have never heard of the term “open banking,” but 84% agree with its central tenet that they should have control of their financial data.
“The concept of being able to control your money and your financial data, being able to move it from one institution to another securely, being able to grant access to that data for new kinds of fintechs who are offering entirely new ways for you to move money faster or make more on your savings… I don’t think there are many people who, once they understand this, that’s the goal, would really be against the idea,” said Sivan. “When it’s explained properly, it’s kind of intuitively positive.”
The survey also found that even though 81% of Americans feel their banks offer all the financial services, they need in their day-to-day life, 40% say they use at least one finance or budgeting app other than their bank’s mobile app.
The evolving landscape of open banking
Host Glen Sarvady pointed out that the Axway survey was timely, coinciding with President Biden’s executive order designed to improve competition. While never actually mentioning the words “open banking,” the order explicitly touches on issues of data portability and ownership.
Sivan said that much of the reluctance of consumers about adopting open banking — whether for security and privacy purposes or from a data ownership standpoint — often comes down to misconceptions. In fact, open banking would give people significantly more control and greater security.
Eyal added that what has sometimes been missing from the open banking discussion between fintechs, regulators, and banks, was the voice of the average consumer — the ones who can pressure their representatives and banks to make it happen so they can take advantage of these new financial tools and opportunities.
“That’s why I created the show, Mr. Open Banking. To create a voice that any layman could understand, and hopefully be a little bit entertained, as they learn about open banking and how important it is to this 21st-century digital economy being built around us every day.”
Where we’re headed next
Sarvady and Sivan also discussed roadblocks to adoption, such as fears of competition from established banks. Sivan noted that in the U.S., banks have embraced open banking as far as it forces “big tech” onto a level playing field with them.
Sivan added that in markets where open banking is more established, banks’ fears of being cannibalized by new fintechs and neobanks didn’t come to pass in fact, they sometimes saw more banking activity as a result of fintechs offering new services that integrate with their banks.
“One of the things I love about open banking is it’s a non-zero-sum game — I like to call it a win-win-win situation,” said Sivan.
Ultimately, Sivan explained that while the U.S. is taking a more market-driven approach to open banking, there will need to be a level of cooperation and agreement between the public and private sectors.
It is beginning to happen, he said, between the executive order and organizations such as Financial Data Exchange (FDX) that are developing standards with industry, taking a consortium approach. Forced disruption from tech giants will also continue to play a major role, Sivan believes, and likely act as an accelerant.
“But the exciting part,” Sivan concludes, “is that a lot of the pieces are already there. And you have consumers who are digitally savvy, who are using these fintech apps today and constantly becoming more and more educated on what it means to control your data. I think all of these factors are going to come together to bring North American open banking to the fore. But it will definitely happen in a uniquely North American way.”
Hear why Eyal Sivan believes that with open banking, the rising tide lifts all boats. Listen to his full interview on the Big Fintech podcast.
If you missed Mr. Open Banking’s previous podcasts, read more and listen in here.