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[Music] hi everyone and thank you all so much for joining our newest think outloud session my name is karina and i'm part of marketing team here at think uh before we start i'd like to share some technical instructions for the webinar so all participants will be muted during this session but if you have any questions please do not hesitate to submit them by the question tap on your right in the go to webinar console on your screen we will have approximately 10 minutes for the q a session at the end and we will try to get through as many of the questions as possible another important thing is that we will share the recording of this session afterwards so now without further ado jan will be talking about how to take advantage of open banking over to you yan thank you so much karina um thank you uh so once again my name is john valvano and let me begin by saying that it has been a crazy year um literally flipped upside down um and there are many people who you know simply cannot wait for their lives to go you know back to normal but the thing is normal will likely never be the same right so one thing i've noticed is that we've been incredibly flexible uh to do things differently we've been organizations have been flexible to run things differently and many processes uh you know despite all of our uh prejudices have been flexible enough to you know in order to deliver the same outcomes and and i've noticed that especially in the world of finance we have now moved from an idea of um you know something digital being a substitute for something physical to a situation where we've come to the realization that many physical processes may actually be a substitute for digital processes that are designed by default now the norm is now digital and and i think that's not something new per se in the world of open banking but it's it's good to um take a minute and contemplate what that really means what that impact really is and and what that really requires in order to in order to successfully be realized all right um let's let's get it on with so i work as a research director here at tink i joined about two years ago and when i joined tink i remember that you know i remember thinking that open banking was going to be that next frontier in the financial services industry and i think we're now in a really unique situation where we're seeing open banking mature globally and to be honest that's that's making me more excited than ever because like i said um and as i've said many times you know tink has been in the space uh for a long time and you know tink was founded back in 2012 in stockholm and and even back then tink was enabling intelligent banking solutions through the use of open banking technology but actually the notion of you know account aggregation or that notion of open banking goes back even further even before 2012 even before take was founded we define open banking as the exchange of data and services between financial institutions and third-party providers in order to deliver and create enhanced capabilities and experiences in the market now taking a step back we're seeing open banking spread across the world and we've been seeing the shift happen for for many years but i think it's more concrete than ever nowadays because from canada to japan from from brazil to australia and from mexico to hong kong regulators all over the world have put in place or are developing new legislation to enable open banking and the open banking regulations in every market are just slightly different what we have in common what you know these regulations have in common is that they aim to increase transparency they aim to increase security and protection for the consumer whilst at the same time they're aiming to increase competition and innovation in the market now europe has been pioneering in terms of open banking especially from a regulatory point of view it's not the only country i think we'd often refer to south korea as an example of a market where there's been high adoption of open banking technologies among consumers with nearly half of the population using open banking technology but i think the the europe especially has set an example of the type of momentum that open banking can bring today europe is counting over 416 licensed account information service providers and payment initiation service providers better known as third-party providers tpps in the industry and this is an eighty percent increase compared to last year the same time last year now what's interesting is that the growth of the number of businesses that are licensed that acquired one of these banking licenses differs greatly by country within europe and i have to i have to give my credits to the uk for instance where nearly half of all licensed institutions are established in the uk and what that shows is that where there's confidence from the government and where they're looking to empower an ecosystem in order to in order to generate new innovation and new types of solutions in the market we're seeing an entirely new industry emerge an open banking industry and which is which is helping and helping modernize the financial services industry and uh and creating a new segment on its own and this isn't just uh reflected in the number of new businesses that are licensed this way it's also reflected in the investments a market research firm called allied market research uh forecasts that the uh that the opportunity for open magic technology will be about 43 billion us dollars by 2025 representing a compound annual growth rate a keger of 24 now i would actually say this is a very conservative estimate and it doesn't even bring into perspective the indirect effects and opportunity costs that open banking can improve by transforming not just the customer experience but most importantly by enhancing uh processes and reducing risk and we know that financial institutions are taking this seriously as well not just from a compliance perspective but also from a product innovation perspective because when we you know looking at one of our previous survey reports we discovered that the median spending on open banking including both capital expenditures and operational expenditures is in the range of 50 to 100 million euros now this is a phenomenal amount of money and it shows how significant the open banking regulations of a burden is on the on the cost structure of of a financial institutions but at the same time it also shows the incredible amounts of confidence and investment that's going into this space so um the 416 hopefully by next year we're going to see that double again but things have happened in the meantime and i think we we need to we need to stand still in terms of looking at what's what's ahead uh because we cannot forget that we are in the middle of a crisis right a crisis that no one could have predicted and is impacting millions or even billions of people around the world the imf the international monetary funds world economic outlook forecasted a global economic decline of 5 in 2020 and since the lockdown uh rishi sunak the the chancellor of the s checker in the uk predicts that the uk gdp is expected to decline by more than 11 percent i mean he shares his concerns um that that the economic that the uk is currently in an economic emergency um and he expects the economy to contract by 11 11.3 percent in which would be the biggest fall in output in over 300 years now things are starting to look up governments have made huge budgets available to support businesses in need and they have progressive distribution plans for you know a promising vaccination strategy so as we move into the new year it's it's not going to be about a it's not going to be a year of open banking it's not going to be a year of value creation it's it's going to be a year of crisis recovery and i sincerely believe that open banking will play a key role in this recovery not just in the uk and not just in the eu but around the world there will be an acceleration and increased demand for data in order to reduce risk enhance credit worthiness assessments and improve depth disposition analyses improve underwriting and income verification these are all use cases that can be enabled by open banking in a more convenient intuitive and seamless way than ever before so over the past 12 months we've published a series of studies on how financial institutions are responding to the open banking movement our first report addresses the shift in open banking attitudes it shows a positive sentiment uh on average uh towards the open banking movements compared to 2019 uh the second report addresses the investments in the context of open banking as i pointed out before they are astronomical and what's also interesting is that they are expecting uh quite quick returns on average so um i think over half of organizations expect positive returns within four years and 80 of organizations expect positive returns within um six years so only two percent expects a expects no return on their investment so that provides confidence in many of these investments and we also discovered that it's touching every part of the business for instance um that there's a huge portion of the spending going into modernizing legacy i.t environments and that that is being captured within the open banking budget but also to optimize internal processes such as the kyc process as well as the onboarding process um only approximately 10 of open banking budgets is actually creating tangible outcomes for the customer now the third report looks more at where the money is being spent the use cases of open banking it should come as no surprise that many of them are related to compliance digital identity services kyc processes transaction monitoring are all areas where open banking technology is being used in order to improve these compliance areas but they're also it also shows that the battle for the customer has begun organizations are starting to invest in areas that help them increase engagement with their customers i believe that many of these priorities have now been reshuffled since the recession and many many financial institutions have a big opportunity to start taking advantage of open banking especially in response to the current recession but this is easier said than done and this is one of the themes for our final report and that's what i want to share with some of you on the call today some of the insights that we've gained on the topics of alignment within the organization and perceptions within the organization so let's go into it let's start with the shift in perceptions so here we're showing the results by archetype within the organization from c-level executive to channel owner and showing to what extent they agree with a number of statements with regard to their perception towards open banking one of the statements that that we provided is whether open banking is viewed as an opportunity within the organization what we see is an important gap between c-level executives and product owners those were product owners are those who are typically responsible for delivering a tangible financial product or digital service although c-level executives are confident in the organizational view on open banking with nearly 70 percent of them agreeing less than half of product owners believe this as well we find a similar trend when we ask if the benefits of open banking are widely understood throughout the organization only 42 of product owners agree compared to nearly two-thirds of c-level executives now there's an important question whether the product organization has been informed and properly educated around the motivation to invest in open banking and how they can start taking advantage of this but to me the most interesting insight here is not from the product owner it's actually from the channel owner so when we ask if organizations have a clear strategy to realize the benefits of open banking channel owners generally agree now just to understand who is the channel owner typically the channel owner would be a an executive responsible for the delivery of the interface mobile banking interface a online banking interface uh it could also be the developer interface these channel owners have been ex exposed to a lot of compliance related objectives in order to enable strong custom authentication through sea in order to provide apis for tpps and in order to manage um basically all those interactions across uh the number of channels because they have increased uh they've multiplied exponentially uh with the introduction of psd2 so when we ask if the benefits outweigh the cost we clearly see that this has been a struggle for those who are in working at the channel less than 40 percent of channel owners agree with the statement it's a stark it's a stark contrast compared to c-level executives as two-thirds believe that the benefits that weigh the costs perhaps this shows that the executives responsible for delivering sca and complying to psd2 are not seeing the immediate outcomes they they fail to see the bigger picture of open banking of the open banking movement and how that's shifting the industry the gap becomes also evident when looking at the alignment by function so here again we've asked respondents to reflect on several statements but now we've grouped them not by seniority by archetype or by their role but by the department that the respondent identifies with one of the issues that the product organization highlights is that they feel that they do not have access to the right talent in order to execute on open banking objectives other departments are generally more confident in this and i think when we're talking about the response to the recession especially the response to improving onboarding in terms of reducing risk in order to increase transparency the product organization should be more confident in being able to uh get access to the right talents and the right capabilities because that is actually where we see an interesting contrast when asked if the products and services are taking advantage of open banking capabilities we see a big gap in the data only 32 of decision makers in the digital banking department believe that they have the products uh they that they have products and services uh that are taking advantage of open banking capabilities this is important because in order to respond to that recession in order to keep up with the pace of innovation it will be critical that these capabilities become available to the right departments and at the right time this is especially an interesting contrast compared to the i.t organization where perhaps a lot of the development is happening where they do feel that those capabilities are available but they've clearly not been sufficiently integrated or at least perceived to be integrated by the rest of the organization now looking at the current situation i'd say it's it's this is really keeping financial institutions from fully taking advantage of open banking it's making those capabilities available across the organization and there are some financial institutions who we've spoken with that see this as well so in order to validate some of those insights i've spoken with miles hillier he's the head of digital propositions developments at the natwest group he is a key member of the nat west technology leadership team and he's leading the strategic response to defend that west from increasing competition from neo banks and from fintechs he's done a lot of research in the space and he's concluded that open banking is a key enabler for them to deliver value to customers more interestingly over the course of the past two years they've done a study in order to in order to justify some of their investments that they're making in to enhance products and they're making to enhance the interface and what they've found is that the more a a digital customer engages with the mobile banking application the more likely they are to acquire a new service or a financial product from the natwest group in other words engagement equals customer lifetime value and that's been an important area for them to make an investment so what they've done and also looking at the increasing competition in the market the increasing competition from sps the increasing competition through multi-banking solutions from from from other retail banks they have launched a money manager within their mobile banking interface focused on their primary customers now they call this the better off this is the the program they call this better off because they're trying to help their customers who are in need um become better off in the current uh despite the current recession and the current pandemic situation they've implemented some of our money management technology but the outcomes have been phenomenal so they've rolled this out to nearly the entire retail banking population over five and a half million users and they've seen incredible adoption so i believe it's over sixty percent is nearly eighty percent of all mobile users are now active users of the technology that they've released and this doesn't just allow them to help their customers better manage finances this is allowing them to gain a better understanding in terms of what the needs and wants are of these customers to anticipate financial financial needs and or and and and be able to provide actionable advice in an intuitive uh non-intrusive way to those to those customers because as they had to close down physical retail branches this has become an alternative in order to engage with their customers not just an alternative it's become the prime one of the primary interfaces in how they engage with their with their customers and provide uh financial advice now like i said before um uh now west here this has been a an effort in order to improve the financial well-being of the customers but they're also seeing the rest of the market move in a similar direction right there's a battle to defend market share there's a battle to consolidate the market uh the customer relationship and there's a battle to improve the customer experience a lot of banks are responding uh doing this in response to the innovation that's coming from typical psps from other payment institutions or from other banks and even they were often referring to the emerging big techs in the industry but what i want to spend a little bit of time on is potentially one lesser-known emerging player and that is an incumbent that's actually uh well known in a different industry nl and it's digital subsidiary nox so and nell is one of the largest energy companies in the world if not one of the largest in in europe and nlx is their digital subsidiary primarily known for their uh electric vehicle charging points now what they realized in in replacing a lot of the petrol stations and fossil fuels is that in order to make this a scalable solution they all need to deal with a huge amount of transactions on top of that they're not just dealing with consumers and acquirers are also dealing with prosumers so potentially households that would like to generate electricity and sell that back to the grid and in order to make that simple and in order to create an end-to-end solution for this they realize that they've needed to change the way that they acquire uh acquire capital so they've acquired a company called pay tipper kt tipper has typically been known for point-of-sale solutions for merchants but they're now using this technology not just within merchant facilities but at every one of those charging points and this technology improves bill payments it allows them to improve acquiring and it comes with a marketplace to allow other fintechs to develop on that but their relationship isn't just with the merchants it's also with the with the consumer over the summer they've launched a new product called nlx pay and as they say themselves open banking is their monetization engine behind this their increasing loyalty by providing a 10 cash back on all credit card transactions but they're using the insights from open banking in order to help their customers achieve their financial and sustainability goals in order to create a smart home and a sustainable home that is carbon neutral now why would an energy company move into finance well for them they believe it's a natural consequence of the digitalization of the industry a cashless society is an electrified society that is their primary belief in that and i spoke with matteo conquest and he believes that the technology that they're developing isn't just going to be relevant for the energy industry they're looking to potentially even white label this technology to allow other retailers transportation companies heck even healthcare companies move into the fintech space so it's going to become incredibly crowded and i think it's critical for financial institutions that they focus on campaigns in order to make sure that they increase the awareness of open banking and focus on those opportunities in times of the recovery of the crisis so in conclusion i mean from this report it's quite clear that there are opportunities for financial institutions right now to get open banking on that product roadmap it's not just a compliance effort and it's not an effort that needs to be limited to the channel it's a it needs to be embedded especially within products as with the current uh crisis there's an opportunity to reduce risk and reduce costs and open bank is going to be a key enabler in that second embed open banking capabilities across the organization so what we're often saying is open banking has opportunities in every stage from onboarding uh to engagement uh to to driving sales and conversion think about the customer life cycle and you'll find use cases for open banking at every single stage of that journey and finally it's really all about the data so what open banking is doing it's unlocking that data so thinking about how that data with consent of the user can be used for product development will will accelerate the appetite as well as the um the the uh prioritization of open banking use cases so with that i'm gonna pause here i'm gonna say thank you very much for for listening to the story so far i'm gonna check with karina um if there are any questions from our audience and i also want to invite all of you to feel free to connect with me following this webinar if you uh if you want to engage with me directly but over to you karina thank you thank you and thanks to everyone who attended our webinar as promised we will send out a follow-up email with a link to the recording of the session as well as to the full report all of our previous reports are available at openbankingthink.com now let me check quickly if you got any questions yeah and i think this one actually sounds interesting and it's can you provide some example on how open banking will enable the crisis recovery all right oh great yes um so um on friday uh the eba is going to publish a transparency database of all of the non-performing loans for nearly all of the financial institutions across europe now this has been an exercise in response to the pandemic and it's it basically shows what the risk exposure is for every single bank now open banking is going to allow many of these financial institutions to get a very easy and intuitive way to do a credit assessment and basically a debt disposition analysis on the on their exposure uh to see what has changed in the customer's profile in order to uh in order to better assess whether there's a probability of of the depth being default you know defaulting or rolling over um that's a that's a key use case but it also starts with the the fact that the point of onboarding right so not just in terms of doing a credit analysis but also being able to do income verification um being able to get a clear idea on what the cash flow is and there are standard metrics and uniform or not entirely uniform but there are credit worthiness assessment factors that are required by law in every member state in europe but what open banking will enable is an even richer analysis on top of this for credit decisioning there are also other areas where open banking can can can improve and i think um this has primarily to do in terms of the increasing competition and the opportunity to to engage with customers and reduce costs return on equity is going to be critical to to prove shareholder value and open banking will allow the organization to reduce costs significantly especially in areas such as kyc in areas such as onboarding and customer interface which will lead to higher conversion and higher profitability so hopefully that gives you a couple ideas but if you're interested in knowing more we've prepared an entire presentation to address this this topic alone so happy to engage with you uh following this session thank you john well actually i think we can still manage one more because that one sounds very interesting too so with open banking going beyond regulatory requirements how could executives better leverage on this in order to have a common understanding within their organization and across all functions fantastic yeah so um yeah i mean they're they're open banking the the the regulations of pac-2 uh are quite static right so they're they're there there are a couple areas where there need to be significant uh significant changes and for instance in sea uh there are coming a couple areas in in the in the sense of cross-border payments and of course in the publishing of apis but i think especially the italians talk about an active and a passive api strategy and i think that active api strategy the focus on how you can use data from the industry in order to enhance products and services is going to be a an important next step and in order to do this i would recommend to to follow that customer journey and start to identify how would data transform or enhance the different types of steps in that customer journey so for instance at the point of onboarding typically a a a financial institution would require an individual or prospect to provide personal name their their their first name and their surname potentially some other pii information personally identifiable information as well as their iban accounts and some other financial details this type of data can be retrieved instantly through an open banking connection with the permission of the customer so i think focusing on how that data can be retrieved more easily and how it can be enriched in order to create more compelling financial products are key areas in terms of how organization can go beyond compliance and actively use the apis in the market in order to yeah basically create value for the customers thanks uh well unfortunately that's all we have time for today if we didn't have time to go through your question or if you would like to talk to us you can find the contact info on the last slide feel free to email us and thank you again for attending thanks everyone see you next time