The recent announcement of the Global Open Finance Challenge has caused a stir across the fintech landscape – and with good reason. Speaking to Finextra about the upcoming global competition, representatives of NatWest Group revealed not only the motivations behind the bank’s decision to launch this initiative, but also the impressive bounty on offer for the teams that take the top prizes.

CIBC, Itaú Unibanco, National Australia Bank and NatWest Group are collaborating to host the virtual event, which takes place in October 2021 and is aimed at building a stronger, more progressive global banking and financial industry. With the support of Amazon Web Services (AWS), the four banks are inviting entrepreneurs and innovators to test new customer solutions on a global scale.

The banks have also been working with Oolys, an application programming interface (API) infrastructure platform, to develop a sandbox environment, run on AWS, which replicates the banks’ existing infrastructure and enables rapid testing for third parties. Each of the four banks is providing a set of shared APIs – including a combination of open banking, open finance and experimental services – and teams will have the opportunity to test, build and validate solutions within the sandbox, supported by mentorship from the banks’ leaders.

AWS will also assist in providing advisory support to help participants build their prototypes, ahead of the judging rounds in November.

Paul Thwaite, CEO of commercial banking, NatWest Group, says: “We have already seen the important role APIs can play for business and corporate customers at NatWest Group – for example, by facilitating open banking payments, helping to reduce fraud, supporting advanced cashflow management, and providing customers with real-time connectivity to their account and transaction data. APIs also enable us to serve our customers through the channels that are most convenient to them – whether that’s through cloud accountancy, or through our mobile app.”

Open banking and open finance for an open future

Speaking to Finextra about the importance NatWest Group places on the pursuit of innovation around open banking, Daniel Globerson, head of the bank of APIs at NatWest Group, says the very title of his role reaffirms that the world of open banking is seen by the Group as a tremendous opportunity.

He observes that while many institutions first looked at open banking as just a regulatory mandate or obligation they had to comply with, NatWest Group saw it as an opportunity to deliver products and services to customers in new and interesting ways. “It was an opportunity to partner with new, emerging, and established fintechs, as a means to deepen relationships with our customers, and to help our customers succeed in the emerging digital economy,” Globerson notes.

This mentality became particularly valuable to NatWest Group as the focus shifted from open banking toward the more overarching paradigm of open finance. Globerson believes that open finance is just another milestone on the journey toward smart data: “Across the world we're seeing an amalgamation of open banking, consumer data rights, and other types of regulation designed to drive innovation, competition, and more generally, to put the public in control of their own data.”

“From that perspective, when thinking about open finance, financial institutions should see the benefit of an even broader ecosystem moving beyond accounts and payments and open banking, through to pensions, investments, loans, insurance and beyond.”

He argues that open finance will offer institutions far more creativity in fulfilling customer needs –- by leveraging new sources of data to offer a more complete picture of customers’ financial life, deeper insights, and a more finely tuned product suite: “When it comes to financial health, having a full picture, in what we might describe as open finance, is certainly a big step, and that's an enabler for financial institutions to, again, provide a broader view of what consumers truly need.”

Globerson stresses that banks are about much more than just ‘accounts and payments’ – they’re also institutions of trust. Indeed, there is an entirely new opportunity that exists in a digital economy, for financial institutions to continue to build trust by offering safe storage of digital assets and records, as well as validating customers’ identities in the digital ecosystem, he adds.

“The more openness we have, the more opportunities there will be for financial institutions to take a leading position in offering digital services that also build trust, and not just a particular product.”

Improving customer experiences: The effective use of data and technology

When it comes to leveraging the opportunities inherent in open banking and open finance, Globerson believes there is more that can be done.

From the perspective of improving customer outcomes, he notes that financial institutions and new entrants, such as fintechs, could provide more tailored solutions for customers who might otherwise struggle to assemble a holistic view of their finances. This would help them understand what choices are available, and take more proactive control of their financial health.

“With open banking, we’ve seen things like personal financial management, services in the cloud accounting space, cash-flow management, and capabilities like alternative lending. This is just the tip of the iceberg.”

Globerson adds that since the bulk of attention has been focused on individual retail or personal banking customers, there are still plenty of opportunities for business customers to flourish in an open data economy – “not just in the kinds of services that businesses might find amongst financial institutions and fintechs, but businesses also leveraging these tools to offer their customers improved experiences,” he explains.

“If some of our business customers want proof of a customer's identity, that's something in an open world that we would certainly help them do. Not only does that support customers, but it also supports businesses. It's a win-win for everyone.”

Competition breeds success

While opportunity across open banking and open finance remains, Globerson speaks to the position financial institutions hold, and are attempting to retain, in an ecosystem that is increasingly open to innovative new players and agile operators: “In my view, within both our market and others, financial institutions are in a unique position of being trusted by customers with their data and privacy – not to mention a safe store of funds.”

While many institutions have been in business for quite some time (hundreds of years, in the case of NatWest Group), Globerson caveats that the fact that NatWest Group was not built to monetise data in exchange for services is a true competitive advantage.

“I think it’s important we are trusted with data and privacy and that our financial success is not built on monetising the data of others in exchange for offering them services. By leveraging this position of trust and longevity – with a strong focus on innovation and partnerships – I think financial institutions such as ourselves are very capable of competing and thriving in the new world.”

Details of the Challenge itself

Three areas have been identified by the participating banks for the competitors to focus on:

1. How can we better serve our corporate and business customers, and the public at large, by delivering high-value digital services?
2. How can we help current and new customers access banking services through more convenient or relevant digital channels?
3. How can we find innovative ways to help our customers make better decisions around climate and sustainability?

The Challenge has drawn the attention of industry heavyweights, and the top 12 teams will present their ideas to a swathe of leaders from the four participating banks, as well as executives from private equity and technology organisations. The notable figures include:

-          Victor Dodig, president and CEO, CIBC

-          Milton Maluhy Filho, CEO, Itau Unibanco

-          Ross McEwan, group CEO, National Australia Bank

-          Alison Rose, CEO, NatWest Group

-          Werner Vogels, CTO, Amazon

-          Rob Heyvaert, managing partner, Motive Partners

Globerson believes the event has attracted this calibre of involvement not only because of the banks and CEOs taking part, but also because there is a distinct appeal in being involved with the people and players at the “proverbial coalface of innovation.”

The uniqueness of the event is a result of participants’ diversity in both geography and experience. Indeed, the teams invited to take part will be comprised of innovators who come from a mix of universities, start-ups, established fintechs and big techs.

Thwaite notes that he is interested to see how the innovators taking part in the Challenge use NatWest Group’s APIs to create new solutions for serving customers: “The appeal of this Challenge is that it provides an exciting opportunity to uncover ground-breaking API-enabled solutions, as well as new and powerful partnerships, which will support us in serving our customers through their channel of choice.”

The prize for the Challenge winners

There will be four winning teams selected from the Global Open Finance Challenge, with one winner for each of the three challenge areas, as well as an overall winner.

The winning teams will each have the chance to participate in a post-event talent incubation programme, which Globerson notes will include a clutch of highly coveted rewards, namely:  

1. Proof of concept with one or more banks – whereby the banks will provide a dedicated team to collaborate on, and support, the project, as well as feedback from frontline and customer research groups.
2. Ventures pitch – winners will have the chance to pitch to all of the banks’ ventures teams, in order to discuss investment opportunities, whether it be from the bank, or externally.
3. Local market guidance – meetings and insights with experts across the banks will be arranged, to support with local market customer segment insight, regulation, and more.
4. Exposure to senior leadership – internal decision makers will be available for winners to engage with, receive feedback from, confer with regarding potential partnerships, and leverage their networks.
5. Media coverage – press releases will be issued across global banking, fintech and technology media channels.
6. Solution architecture – AWS will provide support with functional and technical designs from their very own solution architects.

NatWest encourages teams from fintechs, large global organisations, early and late-stage start-ups, and universities to join the Open Finance Challenge. The grand finale will take place on 16 November 2021, and event registration is open here until 26 September.