Open Banking: The future of treasury?

The Global Treasurer spoke to Anders Olofsson, Head of Payments at Finastra and Hakan Eroglu, Global Open Banking Expert Lead at Accenture about how Open Banking will impact the future of treasury.

Do treasurers really understand the benefits of Open Banking? Do they understand what’s available to them now?

Olofsson: That’s the million-dollar question! I think treasurers are already procuring or consuming services that is based on this technology.

The ecosystem of treasurers, ERP vendors, the TMS systems, the banks and the banking technology vendors, as an industry, are moving and we’re not always moving at the same pace. And that can be a problem – it’s important that a treasurer understands how they actually can support the business and the changing business model with technology that makes a tangible difference.

The treasurer has been predominantly focusing on streamlining operations, lowering the cost of back-office operations. Whilst treasury is now becoming more strategic, it’s not only doing that because of the higher attention on cash flow, but also because it can now support a changing business model. Corporates are moving, whether it’s Nokia or Ford, people are moving into an entirely new business model.

I’ll give you an example: I’m currently working with a huge Asian car manufacturer who is looking to change their business model from manufacturing cars to providing the journey between A and B. They’re still going to produce cars, but they perceive that the value is movement of people, the way that they charge, the way that consumers would subscribe to services, co-sharing of cars, bundling the car service with other services.

That business model change puts a huge requirement on the CFO and treasury function because how do you still generate cash flow? How do you moderate your potential exposure without changing the dynamics and your business model? That’s a huge shift.

Who is best placed to help treasury with that? 

Eroglu: When you ask SMEs or corporates about ecosystem or platform solutions, more than 70% of them are interested in sub-solutions, where they are sharing data and information with third party providers (TPPs) to get better services.

The banks are obviously keen to capitalise on the opportunity too. However, I personally believe that one bank, depending on its size and its relevance in a certain market, is probably not sufficient, so a solution where multiple banks build a consortium together to build a platform is the way forward. There are some big banks in the US, for example, they have the size and the power to build these platforms and we feel that banks have the potential to do so.

When you look at JP Morgan, what they have done in the area of E-commerce payments, what they do, for example, they are providing the corporate payment rails for big tech companies like Uber, Airbnb and others, suggesting the future will be built around collaboration.

Olofsson: I think that all of these parties in the ecosystem have the confidence and the capability to support and advise the treasurer, but I think that the most likely to do it would probably be the large techs or the platform providers like Alibaba or Facebook – who for instance have initiated Libra. I wouldn’t be surprised to see other large platforms providing similar capabilities, and I think that they would be the one that actually follows the entire physical value chain.

I think that they would be probably be best placed to the treasurer, going forward. Even though I would have hoped that the banks would do it, they’re also stuck with their legacy and also with the legacy revenue that they need to protect. During the transition I think it would be too much of a challenge for banks to run with the legacy business model and also reinvent themselves to play a vital part in this new type of platform.

What are the major barriers that exist at the moment that are stopping more adoption of Open Banking and the related benefits?

Olofsson: First and foremost, it’s the existing revenue stream for banks. There’s an inherent view in banks that they are protecting their own channels and the way that they do their distribution. I think that banks will try to hold on to that distribution and operating model for as long as they can, which means that it’s an extra barrier for adoption, but it’s also that door for new novelty players that is an opportunity.

Secondly, a lack of standardisation body is also making it very cumbersome for fintech and/or banks to scale their adoption. They’re moving to more of a integration company than a provider of financial services, meaning that the profit margins are low and adoption is long.

Lastly, the biggest one may well be the lack of visionary thinking on the treasurers side – something that will change as the forerunners show what’s possible.