Accurate data key to unlocking full potential of Open Banking – and much more

The key to unlocking the enormous potential of Open Banking for corporates and SMEs alike is the quality of the technology that underpins it, according to Ralph Bragg, co-founder and chief technology officer of UK-based Raidiam.

The six-year-old fintech has just played a fundamental role in helping Brazil implement a nation-wide project that is already showing value to smaller enterprises.

“Often people talk about what Open Banking can deliver for other sectors – or ways that its use could be extended – but it’s not open banking itself that is the key here. It’s the technology that sits behind it,” Bragg tells The Global Treasurer.

“This the case whether you’re a bank wanting to enable your customers to manage all their financial data with other providers in your app, you’re an SME looking to better monitor your incomings and outgoings across multiple accounts for more efficient business operations, or you’re a lender wishing to make faster, more accurate credit decisions,” he says..

Bragg’s views coincide with those of the Association of Corporate Treasurers (ACT). Speaking at an ACT webinar,  Open Banking commercialisation specialist Yogesh Sholapurkar sees the concept taking SMEs far beyond real-time transaction through the wider spread of APIs.

“Open banking APIs represent a move towards real-time business,” he said. “As a corporate you could build proposition that in the past you couldn’t because the payment can now become part of the customer journey.”

As an example, he cited a car dealership which typically deals with the finance company in a sale and, assuming the loan is approved, the customer can only drive away the following day. “But with an API, they could transact instantaneously,” Sholapurkar said.

That’s what Brazil is aiming for, according to Raidiam’s co-founder, who considers the country a frontrunner in real-time business after the launch of what it calls open finance, a project that enables institutions to provide to customers a much wider range of products and services – and much faster than previously.

“Very quickly [Brazil] recognised the huge potential and used the same technology to move beyond open banking to open insurance and are now exploring the possibilities of open health,” adds Bragg.

In fact, Brazil has already got open insurance up and running under a fully regulated programme.

Raidiam’s technology empowers the data sharing that makes Brazil’s open banking work, but it has important applications for corporates as well.

Described as an “eco-system in a box”, it’s a software-as-a-service product called Raidiam Connect. A suite of technologies, Raidiam Connect is quickly deployable and, says Bragg, “can be used in any sector, by any size organisation, and for any data-sharing use”.

With a highly versatile, bullet-proof data-sharing technology embedded in a small corporate’s treasury, the opportunities could be limitless.

“There is no limit to the potential for how the Raidiam Connect technology can be deployed by businesses and other organisations to streamline, digitise, or enhance processes and competitive offerings – both internally and externally,” says Bragg.

Regardless of the nature of the business though, it’s all about controlling the data.

“The fundamental requirements of needing to control what data is shared, with whom, and how that is done are the same regardless of the end requirements,” he says.

Through APIs, the risk of human error is reduced because many tasks are automated. For instance, payments are sent without human intervention through enterprise resource planning (ERP) systems.

Similarly, bank statements and other notifications are despatched automatically. Taken together, numerous chores are taken out of the hands of treasurers, allowing them to turn their attention to more strategically important projects such as cash management.

The potential for small organisations is clear, Ardonagh Group’s treasurer Pedro Madeira told the ACT webinar: “You can obtain multiple banking information via a SWIFT solution, but open banking gives you alternatives for accessing multiple bank accounts with one platform.

“If you are in a small team, and SWIFT doesn’t offer the cost benefits it presents to larger teams, you could utilise an API to look at four banking portals, plus four ways of downloading your statements, all at the same time,” he added.

API-driven open banking helps greatly in cash visibility. “The key with an open-banking API, compared to other mechanisms, is that it’s real time,” said Sholapurkar. “But with an API, you could go to all of your banks at once and say, ‘Give me all my transactions and balances,’ and [you can] receive that information instantaneously. So you could effectively have a view not only of your entire dollar position, but your sterling and yen positions too, all in one go.”

Access to credit, the lifeblood of many SMEs, also becomes much easier. “In terms of credit, the beauty of open banking is that it facilities a rapid analysis of detailed account information, thereby enabling quick decisions based on accurate, timely and complete data,” says Bragg. “For corporate treasurers, this works for both obtaining credit and managing it.”