How do you define open banking?
At Gellify, we define Open Banking as a “mindset of change” that industry players need to embrace to truly become collaborative and understand that by giving away a piece of the cake, they will get a much bigger cake in return. We have seen in the other markets that Open Banking is far above being only the regulation and development of technology interfaces. The majority of Open Banking initiatives nowadays in Europe are technically outside of Open Banking regulations because the industry players understood the value of Open Banking. To get there, the Middle East needs to overcome several challenges, technologically, culturally, and from a regulation perspective.
Do you see a noticeable upside for industry revenues because of Open Banking’s adoption or is this just a change in practices and procedures that will make little difference to profitability?
If well played, we clearly see an upside on revenues. The mindset shift is that Open Banking drives further unprecedented innovation opportunities. Financial Services institutions tapping into other industries and other industries tapping into financial services, completely blurring the industry boundaries. We see Open Innovation like compound interest, a snowball that will only get bigger and bigger as the ball moves.
How do you assess the pluses and minuses of Open Banking to ensure the positives greatly outweigh the negatives for banks and customers?
The Middle East is undergoing a peculiar wave of transformation in the financial services industry. On one side, FinTechs are booming, and we are seeing amazing value propositions and we see Banks more and more embedding FinTechs and innovation into their strategies. On the other side, however, Banks still drag a highly complex, coupled and siloed technology infrastructure. As the region’s leading innovation company, we believe that the positives of open banking greatly outweigh the cons, and if banks do not react, others will react on behalf of them.
Will Open Banking lead to consolidation of financial services due to natural economies of scale from big data and network effects?
Consolidation of the financial services industry is driven by many other factors, such as interest rates, macro-economic trends, and the regulatory pressures banks are facing. We believe Open Banking will not necessarily influence consolidation but will definitely play an important role in how industry forces, influences, and players will shape up in the near future. We will probably see a combination of consolidation and flourishing of new propositions, especially as we hinted before, on the blurring of industry boundaries.
What does the move to Open Banking mean for banks in terms of risk assessment and liability?
With the move to Open Banking, the banks can improve their risk assessment capabilities getting more insights on their corporate customers’ core business, for example integrating with the supply chain of their customers to provide an innovative lending product to the suppliers based on their track record of on-time delivery, real-time inventory monitoring, and asset usage. Furthermore, banks can gradually provide to their corporate customers’ non-financial value-added services, such as business financial management, account aggregation, digital procurement, and Industry 4.0 capabilities to help day-by-day operations while supporting their business growth. This will open a completely new collaboration model, with Banks acting as enablers and sponsors of the corporate transition to the new digital business model, with a balanced mix of risk/service products.