Open Banking: “In the customer we trust”


March 9, 2018 | 6:00 am
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From transacting with millions of customers over time, the banks have come to be the biggest monopolies on data and customers’ information.

In Nigeria particularly, bank customers are more conversant with being told what to do than they are with telling their banks what to do. “Fill this form, if you want to open an account with us,” “You cannot withdraw X,Y,Z amount,” “Sorry, the CBN does not allow us release so and so data,” or “That information is not available to customers,” the list goes on.

The banks hold the authoritative record of everything customers spend, lend and borrow which they are often unwilling to share even with the customer that owns them.

Although the advent of technology and digital revolution has elevated the rights of the customer somewhat, lack of easy access to data by customers means there is a limit to how much of his rights the customer can express.

Open Banking therefore is meant to reinforce the rights of customers to their data as well as improve their banking experience in many ways.

The core idea of Open Banking is to give bank customers the right to provide banks and other online providers with secure access to their account(s), as well as manage their accounts in a way that is better suited to their needs. If customers have multiple current accounts, for instance, they will be able to see those accounts all in one place.

Open Banking as a system provides a user with a network of financial institutions’ data through the use of application programming interfaces, better known as APIs. It defines how financial data should be created, shared and accessed.

It could be a scary prospect for many traditional financial institutions but for the customers it would mean more innovation and competitive prices. For instance, Open Banking could make it easier for customers to switch their transactions from one bank to another or compare the features of different personal and business accounts in order to get the best deals.

It would be the ultimate test on brand trust and customers loyalty.

Open Banking will make it possible to pass your data on spending, saving, lending, or borrowing to third parties who may leverage it to design new products. If a customer’s money is sitting in a bank’s current account and not earning interest, he or she can decide to switch to another bank where the interest is guaranteed or perhaps move it to an investment portfolio.

Some institutions in Nigeria are beginning to recognise the potential of an Open Banking system. Recently, a group of fintech professionals, came together to form the Open Banking Nigeria.

“This is a global phenomenon but driven by regulations in other countries. However, a group of industry veterans have decided to jumpstart the process of Open Banking in Nigeria knowing that regulators would join us as partners to drive this,” Adedeji Olowe, a member of the group told BusinessDay.

The objective before Open Banking Nigeria is to drive advocacy for Open Bankingand develop a set of free and open standards for the Nigerian banks to adopt.

There are Nigerian banks that are already offering API solutions, which is a precursor to Open Banking. Some of the banks include GTBank, UBA, and Access Bank. The challenge however is the banks are developing in silos, meaning if each bank creates for itself, then customers and Fintechs will learn to connect to them differently as against using a common method.

In the United Kingdom where authorities issued directives to banks to commence Open Banking system from 13 January 2018, the basic premise was to make data sharing easier among the participating institutions, boost competition, and enable new banking products and services to be created.

Although creating Open Banking in silos may achieve some of these benefits, it places a limit that gives the advantage to the bank that owns the system.

Regulations however could be the biggest game-changer for Nigeria and other countries looking to exploit the potential of Open Banking.The European Unionhas pushed a regulation known as the second Payment Services Directive, or P2D2 which stipulates that all banks must open up their data and services via APIs to customers.

“By giving consumers the choice of new direct-to-account payment methods and the ability to share their transaction data more freely with third parties, the EU’s PSD2 and its UK implementation, “Open Banking” will alter the structure of retail banking for good,” Nick Caley, vice president of Financial Services and Regulatory at ForgeRock said.

In 2017, NdubuisiEkekwe predicted that the Open Banking system will become pervasive by 2025 as Bank Verification Number (BVN) becomes the only means of making and receiving transactions.

“Nigeria banking will change by 2025. The structure of our economy and the capacity to transfer money instantly will have many implications in the industry. For any bank to win, it will have to find a way to become a digital hub using the constructs of aggregation to compete,” Ekekwe said.


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March 9, 2018 | 6:00 am
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