How is Open Banking currently transforming the financial services industry? BEAST met with Gael Denis (Partner, TMT* & Fintech Leader, EY Luxembourg) and Patrice Fritsch (Principal, Payment Services Leader, EY Luxembourg) who tell us why the financial sector needs to welcome such a disruption.

"Open banking includes the concept of a collaborative framework in which banks and Fintech players offer to each other their individualized services. Open banking as the next step of online banking, offers intermediaries and Fintech providers the possibility to interact with the banks and their clients," explains Patrice Fritsch. Gael Denis uses the term «marketplace bank», underlining an additional aspect of the concept: an open ecosystem destined to all players, from traditional banks to Fintechs, with specific rules to follow, including: PSD2, GDPR and MiFID.

The experts also highlight the importance of APIs – application programming interfaces – which play a central role in this new world. They aim towards facilitating exchange and therefore towards feeding the ecosystem, with no specific boundaries set, allowing the creation of innovative services. "Open banking is to the banking industry what unbundling was to the telecom sector. It answers to three main trends that now drive our daily lives: (1) customer empowerment as APIs allow users to decide the information he/she wants to share, and who he/she wants to share it with, (2) frictionless and fluid experiences, which require collaboration between all counterparties and (3) more security as it acts as a standardized control center dealing with the access of data and permissions," adds Gael Denis. Patrice Fritsch insists on the enhancement of customer experience, which provides new ways to interact with financial products and banks, and a drastically improved timeliness, thanks to new technologies and a dynamic competitive landscape. He also underlines the possibility to access to a larger panel of services, significantly boosting the diversification of products. He adds: "it allows the customization of services in a world that is more and more global. Nowadays, clients are eager to use a combination of services from different institutions and providers. In this respect, open banking becomes an important part of the newly created digital economy, with hyperconnected customers, who need to access their services at anytime, anywhere, and with any device".

According to both experts, there are numerous advantages for banks, who will improve their operational efficiency as well as ensuring client retention. "Partnerships are becoming easier to conclude, in a world of finance where interfacing new solutions and dealing with legacy systems has historically been painful and time-consuming," they explain. On the other hand, Fintechs benefit from an easy access to clients and to the banks’ infrastructures. And in the long run, these methods of working and the adoption of digital solutions are boosting innovation. "In such an environment, defining one’s role is key, for both the banks and startups," highlights Patrice Fritsch, "which role is a bank going to have in the future? Will the Bank concentrate on product distribution or on product manufacturing? What about providing other banks with its own infrastructure? All the open banking players need to figure out and define their role(s) as many models will coexist and this profound transformation is already happening". Banks are therefore facing challenges that can be turned into opportunities. For instance, a successful product made available in an open banking ecosystem could be very attractive and allow the players to reach more customers. "Just like in the music and hospitality industries, any transition needs a reinvention. Our world is changing and it is absolutely crucial to define the role(s) you want to take in the current, and future, environment. The services of tomorrow are yet to be tailored," they underline. The regulation-side is also pushing banks to dive into open banking: GDPR, PSD2 and MiFID II have been implemented to support the development of the digital economy by notably protecting the clients, lowering the costs and advocating transparency.

Luxembourg, just like any other country, will face several challenges in this open banking world, yet, it is well equipped thanks to its stable ecosystem fueled by the collaboration between most actors. "We are seeing more cross-sector exchanges happening, mixing notably ICT and financial services. That’s what’s Luxembourg has been doing for the past 15 years, leveraging the strength of its main pillars that are digital and finance. Fintech, in this respect, becomes the perfect blend between those two sectors," add the experts. According to Gael Denis, transformation echoes with globalization, with more clients coming to Luxembourg, making it more international than ever. "We are working in connected international environments, dealing with significant mass and volume. ICT and finance are intermingling, supported by regulators and by the government, all leveraging powerful infrastructures. We must keep on innovating and always be ambitious when it comes to redefining our industries and transforming ourselves," conclude Gael Denis and Patrice Fritsch.


*Technology, Media & Telecommunications


Interview by Alexandre Keilmann

Publié le 19 novembre 2019