What will open banking architecture really give the Corporate Treasurer? Will it be the ultimate panacea - a system that provides a network of financial institutions’ data through the use of application programming interfaces, better known as API’s? The Open Banking Standard defines how financial data should be created, shared and accessed. The shift in emphasis means that institutions should be able to rely on networks instead of centralization, as open banking helps financial services customers to securely share their financial data with other financial institutions. I also fundamentally believe it changes the methodology of how data is retrieved, in that currently Banks “push” information in batches or by transaction reporting or end of day statement activity. This will evolve, as through open networks users will look to “push and pull” their data on demand. 

The EU's Directive on Payment Services 2 (PSD2), will accelerate the onset of this data transformation, but it is ostensibly a retail banking industry directive and therefore many banks are behind the curve in terms of institutional or corporate compliance to the directive. PSD2 provides both challenge and opportunity for the banks. The more enlightened institutions with better systems and more advanced product offerings are already working with key clients and solution partners to challenge the boundaries around payments and reporting standards. In the Corporate Treasury world, PSD2 offers unprecedented opportunity to re-energize expectations from relationship cash management and trade finance banks, as well as the interactive connectivity with what are currently peripheral systems such as TMS and ERP systems. Ultimately, PSD2 will empower users to own their own data without file format dependencies, and to potentially integrate everything within an open but secure environment within a cloud or blockchain. This interoperability will encourage both transparency and competition, which should result in reduced costs to the user, and future solutions will be built upon innovative and forward-looking Banks that are willing to collaborate with third parties to provide the ultimate client solution. For banks with a “build it ourselves “mentality this represents a radical change in mindset and product development as well as a need to allow third party partners to enter the overall client relationship. Whichever path is chosen, the opportunity to offer, create, or co-create new products and services to meet the needs of clients and to fully comply with regulation and directive is more prominent than ever before. Banks also face competition from emerging challenger banks and Fintech’s or emerging payment providers and information aggregators.

The major banks around the globe cover a spectrum of clients from start-ups and Fintech’s through to global corporate multi-nationals and global industry sectors -other banks, Insurance and Asset Managers. For many years the way systems integrate within a treasury environment has remained largely unchanged -proprietary formats to achieve some form of file connectivity and the ability to see across multiple banks, geographies, systems and subsidiaries is a daily challenge. To see that information real-time is pretty much an impossibility and to reconcile it quickly becomes an equally protracted process.

The Fintech revolution, whether it be driven by PSD2, open architecture, blockchain, cloud etc. challenges the legacy landscape and offers opportunity to collaborate and build new state-of-the-art solutions.

In summary, and it may seem a bit sci-fi, but we are talking about the future here. We must challenge the status-quo and ask for the unexpected. As with file formats and open data, it’s a bit like X FILES - the truth is out there!

Bill Wrest, Head of Strategy and Sales at The B2 Group, has been advising Global Institutions and Corporates on improving and future-proofing cash management internally and for clients focusing on technology, regulation and potential new products.  Formerly Head of Innovation for Non-Bank Financial Institutions at Barclays Corporate and prior to this 30+ years with Bank of America Merrill Lynch Global Product Solutions in London, as a Senior Vice President and relationship manager to a portfolio of Fund Managers, Transfer Agents, and Custody Banks.

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