Hans Tesselaar is an Executive Director at BIAN, the Banking Industry Architecture Network, which is a not-for-profit network made up of banks, technology providers, consultants, and academics from around the world who are dedicated to lowering the cost of banking and boosting speed to innovation in the industry.
Accountancy Age spoke to Tesselaar about Open Banking, its benefits and challenges, and how specificly it will affect the accounting industry.
1. How would you define Open Banking?
Open Banking is a way to increase competition between banks, making it easier for customers to change from Bank A to Bank B or have multiple accounts at different banks.
There are also third parties who can offer services based on the ability of the consumer or customer to share their bank details. So it’s all about ‘opening up’, hence the name Open Banking, giving non-traditional banks a platform to step into and the ability for additional service providers to provide services at lower cost than banks can today based on clients’ existing bank account data.
2. What is BIAN’s role in Open Banking?
It is a not-for-profit association so we have members, roughly 50% banks and 50% service providers. We started in 2008 by defining what a bank that does everything should look like. What is the information that needs to flow between the businesses? If you’re onboarding a customer what information do you need to get in and what information will flow through your bank. In terms of Open Banking we try to help the whole industry by saying, if you want to use mobile for onboarding a customer, you need an API because it’s the connection between your bank system and the mobile device. So we are now designing these APIs.
I’m the executive director, so I do the day to day management. My background is in IT in banking. I’ve been in IT all my life but for the last 12 years I was an IT director in INT Bank in the Netherlands. I started in 1972 so it was completely different in terms of IT – the way we see technology enabling our lives now is amazing. It’s such an interesting career to be part of this and help shape the future.
3. How does Open Banking differ from the past when we only had traditional banks?
Now, with Open Banking, data will be shared. It’s not only the bank that can decide what happens with the data, it’s more about the will or demand from the customers now. ‘This is what I want to do with my data and I want you, as a bank, to make this piece of data or account information available for party X’. Party X may give you additional services to add apps on your smartphone etc. So it should all lead to better alignment with current and future customer needs.
4. What benefits will Open Banking bring to smaller banks?
Open Banking is more or less like a vague acronym – people have different ideas about what Open Banking means. From a pure open perspective it gives possibilities for smaller banks to provide services that maybe the high street banks cannot offer today and it will give easy access to the consumer. It also gives opportunity to the Fintech startups to provide services like peer-to-peer payments or peer-to-peer lending, so there’s more, from an ecosystem perspective. It will open up a whole area of new possibilities for existing banks and enable them to give the client the ability to get involved and give them benefits.
5. What challenges are there that Open Banking could bring in terms of data protection?
You have to grant third parties access to your bank details and the question is – in light of the Facebook privacy debacle – would it be fair for people to assume their details are safer within the bank? If you make it available to third parties, there will be questions about how safe that third party is. So, of course, there will be real issues around privacy.
This issue will slow the development of Open Banking down until there are precautions in place that people feel confident with. Today people feel confident that their data is safe with their bank, there are hardly any issue with data leakage within traditional banks. They trust the banks. So then when it comes to third parties and other service providers, the question is, is the extra service worth risking your privacy. There’s a trade-off everyone has to make.
6. What do the big banks think about Open Banking?
I see a lot of the larger banks moving into Open Banking. One of the reasons is because they have deep pockets so they can afford the investment and some of the smaller banks are more agile but the question still remains, how well established is the customer base from the traditional banks. There is a lot for the banks to win or, I should say keep if you can provide existing customers with a state of the art, mobile experience – then they are not going to shop around.
In the near future there will be two types of banks I think. There’s the banks that go fully mobile and then there’s other banks that feel more confident with branch options, with face to face meetings and relationship building.
7. How does Open Banking impact accountancy?
There is no complete, end-to-end, value chain process anymore. If we go into Open Banking, the banks’ business model will change. Are they only doing Open Banking or are they also becoming a service provider or an information-selling provider?
If you’re opening up with APIs to third parties, are you going to ask a fee for it? If so, will there be an additional income stream? Ultimately, there will be a lot of additional business opportunities that are not one-to-one related to what banking is like today.
8. What changes do you expect to see happening because of Open Banking?
There is a difference between what I see and what I hope. I hope that we can agree a common standard around interacting within the industry. If we can agree on a standard way of moving forward this would be extremely helpful. I say that with my Bian hat on because that’s what we’re trying to achieve from an industry perspective.
In the near future there will be two types of banks I think. Of course there will always be a blend somewhere in the middle. There’s the banks that go fully mobile and then there’s other banks that feel more confident with branch options, with face to face meetings and relationship building. The branches will probably look a bit like Apple stores with all the high tech. If you’re making big decisions, maybe buying a house, do you want to do it online? Some people will, others don’t want to. It’s all about where you want to position yourself as a bank. Both will be successful as they appeal to different groups.
9. Do you think Open Banking will mean more people will start moving around?
It’s very difficult nowadays to change banks, you have to overcome hurdles to do it. So I think people will keep their high street bank account for their day to day business but for additional services they might turn to a green bank. These banks only invest greenly and are extremely successful. A lot of people contribute to the environmental side by opening a second account with one of these banks. I think that will be more of the trend – you keep your current account for your day-to-day and then for the additional things you will open something at a more niche bank.
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