TechnologyOpen Banking paves way for globalised treasurer

Open Banking paves way for globalised treasurer

As the global economy becomes increasingly digital, research supports the need for both financial professionals and banks to embrace Open Banking

A report published by Intuit QuickBooks found that the implementation and opinion of Open Banking is on the rise globally.

Of the UK respondents surveyed, 51 percent said they trust Open Banking either a “great deal” or a “fair amount,” compared with 49 percent of Canadians.

“The UK has seen an explosion of fintech investment over the last 10 years that has put us ahead of the curve compared to other markets,” Adam Prince, vice president at Sage who oversees compliance, Brexit and migration, said via email.

“Thanks to the government’s support and a mandate to introduce Open Banking in early 2018, this is bringing much-needed diversity and innovation to the UK market. The good news is that corporate treasurers have more access to financial data and insights to develop new products and solutions for customers.”

The UK versus the world

The UK was the first nation to push for open banking, giving its residents and business members a unique opportunity to blaze a digital trail with its Open Banking initiative. With PwC predicting that 71 percent of SMEs will be using Open Banking by 2022, the next few years of digital adoption are set to impact the finance function.

Prince explained how the introduction of Europe’s second payments directive (PSD2) in 2015 set the stage for payment service providers to provide APIs, but Open Banking’s freely-available APIs helped standardise the UK’s retail banking offerings.

“Although the start of Open Banking was targeted at consumers and small businesses, the industry is quickly translating this into use cases for the medium segment,” Prince continued. “Corporate treasurers today have access to much better services than they would have had two years ago, and they can expect to see significant investment in making those even better and more readily available.”

A 2018 Accenture study found that 77% of UK corporations, both small and large, had either begun integrating Open Banking platforms or planned to do so the following year. This shows a slight advantage that UK-based businesses can take advantage of, particularly as other countries lag behind.

On the whole, the UK and Europe have been quick to embrace open banking, but several countries have been slow to the table. Australia has delayed its open banking introduction by six months, pushing its banking sector adoption until July this year.

Bill Wrest, senior strategist, cash management solutions at GreshamTech explained that while open banking is a major catalyst to bank transformation, its regulatory frameworks vary wildly across the world.

“PSD2 is often cited in North America as a model to emulate, but as with APAC, providers and banks are already well-advanced with their own initiatives,” Wrest explained via email.

“APAC’s relative maturity will enable post-API driven advancements (e.g. Open Data) and North American banks and providers, whilst lacking a single PSD2-like framework, will surely not lag behind.”

As well as the US, South Korea, India, Singapore and Japan have also fallen behind in terms of open banking adoption.

These countries are using banking associations to implement open banking, whilst other countries, like Hong Kong and Australia, use a regulatory-driven approach. However, Canada is still working to implement an initiative with its advisory committee, and has yet to announce whether it will also be driven by regulation.

Real-time service advantage to UK companies

For treasury professionals, these changes offer a real-time advantage for UK-based companies.

“Four years ago, it was acceptable for businesses to manually input banking information into accounting software,” Prince commented. “Today, the majority of businesses expect to have access to tools that automate the data flows, largely powered by Open Banking. We believe that users’ expectations will significantly grow.

“They will expect real time services, 24/7 support and services enabled by machine learning, allowing them to query data as well as provide more transparency on cost and access to funding.”

This was supported by the QuickBooks survey, which found those within the 18-34 age range were the most trusting of open banking, with 76 percent of Canadian and 78 percent of UK respondents trusting it, respectively.

Some of these open banking-backed services have been highlighted in the alternative banking scene, particularly in non-physical challenger banks like Monzo and Revolut. While there is a clear customer desire for these services, businesses can benefit from the same processes.

Additional research from Adaptive Lab found that over half of its respondents (55 percent) were even willing to pay for services that freed up their time, allowing them to focus more on their business; an additional 34 percent said they would consider it.

Prince noted that while existing regulation and compliance have made the banking environment more accessible, will also provide better insights and data transparency in the next five years.

Prince elaborated: “What’s more, each provider can add their own software to work with the data from there, to calculate average closing balances, group multiple bank accounts together, or automatically generate reports such as company accounts or your tax bill.

“Overall, it would make it possible to get a business loan in minutes rather than hours or days, and substantially reduce the painful manual processing of bank account data.”

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