It is time for banks to reconsider their judgment on open banking. In today's transaction- and data-driven world, it is desirable to decentralize data sharing in an interoperable and reliable way, writes Shikko Nijland, the managing partner of Innopay.
author: Shikko Nijland
The way regulated supervision and control takes place in the world of payments should also apply to data sharing. Banks are currently in the unique position to ensure their relevance. They are able to compete with the Big Tech's and even surpass them.
But only if they know how to properly deploy their core competencies, infrastructures, business models and years of experience in payments and transactions - especially in the area of digital identities. For that, it is important that they invest sufficiently in open banking. And now, before it is too late.
Despite laws and regulations such as PSD2 and GDPR, the volume, value and complexity of data continues to grow much faster than we can handle as a society. This leads to challenges especially when it comes to data sharing and related issues such as privacy, data sovereignty and the data value balance ("data benefit balance").
We now know that in our data-driven world, a handful of major players dominate entire sectors. These platforms are protected by the network effects of customer reach on both sides of the market and the information advantage based on their monopolized access to relevant market and customer data.
Data as a scarce resource has become the subject of geopolitics, which manifests itself, among other things, in the way neutrality is applied. Our collective societal inability to fully understand and act on the new rules of the game has resulted in disruption of virtually every sector and market. People no longer feel that they live in a digital data democracy that is set up according to the same principles as the real democracy of which they are a part.
If we in Europe care enough to regain control of our data, eliminating the root causes of the aforementioned exponential data network effects seems most effective. This can be achieved by establishing a decentralized yet interoperable approach to data sharing that is built on a foundation of trust.
This not only requires cross-border cooperation, but at the same time requires the deployment of new and disruptive technologies, the availability of locally and globally accepted appointment systems and the presence of proven reliable operational models with 24/7 availability. Banks have shown for decades to possess all these competencies.
Moreover, banks learned early on the importance of interoperability. They have extensive experience in setting up and managing arrangement systems and collaborations related to payment transactions. Leveraging these competencies for data sharing is, in our view, a logical next step for banks to remain relevant.
There is an opportunity for banks to secure their relevance in the future by evolving from a "keeper of money" to a "keeper of data. To a booster of fair and secure data sharing. One example: digital identity can be seen as the essence of data sovereignty - it provides the crucial, legal basis by which individuals and companies can lay claim to their data.
In this context, banks can strengthen their role as trusted parties by developing propositions for digital identities. In addition - besides being compliant with GDPR and PSD2 - banks can create relevance by providing their customers with the concrete tools and resources to actually control their data. In Innopay's vision, open banking should be repositioned as "efficient and secure reuse of data.
To enable the banking sector to fulfill this new role and achieve a sustainable, robust and profitable position in the data economy, banks should consider significantly increasing rather than reducing their budgets for open banking.
For banks aspiring to once again become the trusted cornerstone of society, now is the time to invest sufficient capital in open banking data and API competencies. By thinking ahead, banks help not only themselves but also their customers to operate within not only current legislation, but also within the far-reaching data legislation that is in the making in Europe.
It is worth remembering that the size and scope of their open banking footprint determines how quickly banks evolve from a keeper of money to a keeper of data. It determines how quickly and appropriately they can adopt new data-driven open business and operational models in the future, thereby remaining relevant and adding value in the future.
source: Banks.com
