16 July 2018
Milos Dunjic


Milos Dunjic - TD Bank Group

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Instead Of Open Banking Should Industry Push For Open Everything?

20 February 2017  |  7161 views  |  2

Open Banking initiatives are bringing technology at the forefront of finance by encouraging (sometimes even mandating) secure underlying account data sharing by banks. The main purpose is to enable third parties, mostly FinTech players, to utilize the open access to banking data, in order to provide value-add service applications that enable consumers to easier transact, save, borrow, lend and invest their money.

In the UK, for example, with the Open Banking Standard (OBS) becoming reality, an authorized third-party service provider, like an account aggregator, is going to be able to leverage the established API standard to gain access to the variety of customer’s banking data, or even initiate payment transactions - if such power is authorized by the customer. In the rest of Europe, although currently there is no organized initiative to establish an Open Banking API standard like in the UK, there is a clear regulatory mandate for banks to provide open access to their customer’s data and transaction initiation interfaces, to any external party, under the well-known PSD2 initiative. Across North America, where Open Banking is not mandated yet, banks are already taking notice and adjusting their Open Banking positions and strategies for what’s probably coming here eventually at some point.

The way it has been currently put together and promoted, the Open Banking message may be seen as biased against incumbent banks, by favoring FinTech startups and established digital technology companies like Google, Apple, Amazon, Twitter and Facebook.

Optimists still try to argue that this is, in the end, going to be beneficial for banks for they will be able to figure out ways to monetize on the fact that they ultimately control access to underlying account data and transaction histories. Pessimists, on the other hand, argue that the banks are destined to quickly become ‘dumb pipes and pure account balance maintainers’ that will completely lose touch with the account holders, whose ultimate behavior will be controlled by a bunch of agile and nimble non-FI players, providing front-end apps and services. In such an arrangement, the barriers for switching to another bank will be completely removed – clearly a potentially problematic scenario for today’s FI incumbents.

Regardless of whether optimists or pessimists are right (probably neither), I would argue that regulators and the digital ecosystem as a whole, shall expand on the ‘openness requirements’ and bravely go beyond the current, in my personal view, one-sided approach. Industry shall be pushing for open data access standards across the board, which would create comprehensive and even digital playing field for ultimate data sharing and competition. Why stop at mandating only banks to open up their bank account repositories, without being able to easily gain access to other data about their customers (again, if authorized by them) from any merchant’s, any FinTech’s, Twitter’s, Facebook’s, Google’s, Apple’s and/or Amazon’s vast data repositories?

Will not banks’s customers benefit if their banks can access other third-party data repositories and gain valuable insights about their overal spending habits (via SKU level data they currently do not have), social activities and preferences, intellectual interests, music, movie, book preferences, etc.? Why not let customers (as opposed to regulators) decide and chose who they really want exchanging and sharing data that they ultimately own, if that has potential to help them? Clearly, such arrangement would optimally stimulate digital competition, encourage natural partnerships, greatly enhance the overall digital banking experience, through the creative utilization of machine learning and AI, and in the end, directly benefit no one but consumers.

That’s the ultimate goal everyone should be striving toward, isn’t it? I would certainly hope so.


TagsRetail bankingInnovation

Comments: (3)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 21 February, 2017, 18:47

Totally agree. Customers have as much right to have banks analyze their fintech transaction data as to have fintechs analyze their banking transaction data. Just that, if such two-side data sharing is mandated by law, fintechs might give up their demand to access banking data, as I'd pointed out in my blog post titled Innovative Fintechs Don’t Need No PSD2 Regulation.

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Milos Dunjic
Milos Dunjic - TD Bank Group - Toronto 24 February, 2017, 06:10

Thank you Ketharaman Swaminathan

Unfortunately the link which you provided does not seem to work, for I am geting

"503 Service Unavailable
The server is temporarily unable to service your request due to maintenance downtime or capacity problems. Please try again later" 

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Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 24 February, 2017, 11:40

@MilosDunjic: The link is from a service that highlights the portion of a webpage that's relevant in a given context unlike regular hyperlinks that land readers on a webpage and ask them spend time and effort to spot the relevant portion. Unfortunately, this service is a bit flaky. When I checked now, it worked. Nevertheless, let me provide another link that is less functionally rich but more robust: http://lnr.li/Q6npt. Worse case, if this also doesn't work, the passage I wanted to reference is the fourth last paragraph in my Finextra blog post Innovative Fintechs Don’t Need No PSD2 Regulation.

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job title AVP, Payments Innovation Technology Solutions
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Technology executive fascinated with and focused on payments innovation. All opinions are my own and not of my current nor prior employers

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