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Open Banking and the Future of Financial Services

Marvin Vortkamp

Theresa: Hi Marvin, thanks for taking the time to talk with us today. Could you briefly introduce yourself and tell us what you do at Wallis?

Marvin: Hi there! I’m Marvin, and I work at Wallis. Wallis is part of the Sparkassen-Finanzgruppe and has the mission of strengthening cooperation between savings banks and external partners. In doing so, we rely on modern concepts such as open banking and business ecosystems. In practice, this means that we enable third-party providers to interact securely and seamlessly with the savings banks' systems.

Theresa: Open Banking sounds exciting, but many people might not know exactly what it means. Could you explain it in simple terms?

Marvin: Of course! Open Banking means that banks provide access to their data and services to other companies via interfaces called APIs. Specifically, this often involves data from customers' current accounts, such as transaction data. It's important to note that this data sharing happens only with the customer's explicit consent. APIs act as bridges that allow different software programs to communicate and work together seamlessly. With customer consent, FinTech companies can access this bank data to develop new and innovative services.

Theresa: Better access to data and increased interaction sound useful. But, what are the biggest benefits of Open Banking for customers?

Marvin: One of the biggest benefits is personalization. By accessing financial data, companies can create tailored offers and services. For example, an app can analyze your expenses and help you save better. Another benefit is convenience, as payments can be made directly from your bank account without needing a credit card.

Theresa: That sounds like there is a lot of potential for new products and services. How does PSD2 fit into this picture?

Marvin: PSD2, or the second Payment Services Directive, requires banks to provide these open APIs. The goal is to standardize processes and infrastructure, foster competition, and enable innovation in payment services. It ensures that third-party providers, like FinTechs, can access financial data to offer their services – always with the customer’s consent, of course. PSD2 is the regulatory framework enabling open banking to flourish.

Theresa: What opportunities does this create for companies like Wallis?

Marvin: It allows us to offer entirely new services. An example would be a loan offer integrated directly into an e-commerce platform. Customers could get a suitable financing offer immediately when shopping. Or we could offer secure and fast payment options that are directly debited from the bank account. This increases customer satisfaction and opens up new business areas.

Theresa: Speaking of security – how does PSD2 ensure that data remains safe?

Marvin: Security is a major aspect of PSD2. It emphasizes strong authentication, meaning there are multi-step security procedures to ensure that only authorized persons have access. For instance, an app might use two-factor authentication, where in addition to a password, you also enter a code sent to your phone.

Theresa: And how do you see the future of Open Banking? What developments can we expect?

Marvin: I believe we are just at the beginning. We will see more innovative solutions that make customers' lives easier and better. We’ll see more personalized financial services, seamless payment solutions, and even new business models that we can't yet imagine. Open Banking will also stimulate competition and attract many new market participants, ultimately benefiting customers.

Theresa: Looking ahead, beyond Open Banking, what trends or regulations should we be aware of?

Marvin: As we look to the future, we move from Open Banking to Open Finance. Open Finance expands the scope beyond just current account data to include a wider range of financial information. This includes data from investment accounts, insurance policies, pension plans, and more. One significant development in this area is the Financial Data Access (FIDA) regulation, recently adopted by the EU. FIDA aims to expand the principles of Open Banking to include not just banks but also insurers, crypto providers, building societies, and other financial service companies. This regulation mandates these institutions to provide broader access to financial data, creating even more opportunities for innovation and personalized services. The idea is to foster a more integrated financial ecosystem where data flows more freely and securely across different types of financial services. This will likely lead to new services and business models that enhance customer experiences even further.

Theresa: That sounds promising! In conclusion, what advice would you give to other banks looking to explore Open Banking?

Marvin: Be open to new things and don’t be afraid of change. Open Banking offers many opportunities for both banks and customers. It’s important to find the right partners and work together on innovative solutions. And always keep the customer in focus, because ultimately it’s about providing the best service.

Theresa: Thank you, Marvin, for the insightful conversation. I’m sure our readers now have a better understanding of Open Banking and the possibilities it offers.

Marvin: My pleasure! It was fun talking about it. 

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