CEO & Managing Partner: Shikko Nijland

It is time for banks to reconsider their perspective on Open Banking. In this new transaction- and data-driven world, data sharing – just like money and payments – needs to be decentralised. However, it must also be interoperable and trustable. Proper governance and oversight safeguard public functions for society as a whole, and data sharing should be no exception. INNOPAY believes that banks are currently in a unique position to outperform Big Tech challengers by leveraging their core capabilities, infrastructures, operating models and experience in payments and transactions, with a special focus on digital identity. But that requires investment in Open Banking now – before it’s too late.

In spite of regulations like PSD2 and GDPR, the volume, value and complexity of data is still growing much faster than we can cope with as a society. This poses particular challenges when it comes to data sharing and related issues regarding privacy, data sovereignty and the data benefit balance. Our societal inability to understand, regulate and control the new rules of the game has resulted in a shake-up of virtually all market and economic positions. We find ourselves in a new data-driven world in which the winner takes it all. A handful of large players are now dominating entire sectors, and this is creating relentless network effects in terms of customer reach and data richness. Data has become geopolitics and people no longer feel that they live in a digital data democracy that mirrors and embraces the same principles as their real-life democracy.

Apart from introducing draconic legal or regulatory measures aimed at putting people back in control of their data, the most feasible and effective option is to disrupt the underlying root causes of the exponential data network effects. This can be achieved by creating a decentralised yet interoperable approach to data sharing based on a foundation of undisputed trust. This requires not only cross-border reach, but also a wide range of technology, appropriate global and local legal frameworks and reliable operations – and banks already have precisely all these capabilities. Moreover, banks have learned about the importance of interoperability the hard way and they have extensive experience of setting up and running similar schemes and trust frameworks related to payments. In our view, doing the same for data sharing is a logical next step.

From money to data custodian

There is a fast-diminishing window of opportunity for banks to evolve from being a ‘money custodian’ into a ‘data custodian’. In fact, this evolution holds the key to safeguarding their future relevance and value. Besides payments, banks have the opportunity to take a leading role as a facilitator, enabling citizens and companies to exchange data securely and fairly. For example, identity can be regarded as the essence of data sovereignty; it provides the crucial legal link to data entitlement by individuals and businesses. In this context, banks can reinforce their role as a trust provider by offering digital identity propositions. Additionally, instead of merely being compliant with GDPR and PSD2, banks can provide their customers with concrete means and tools to actually control their own data. Open Banking should be repositioned as ‘re-use your data safely elsewhere’.

In order for the banking sector to carve out this new position and establish a sustainable, sizeable and profitable footprint in the data economy, banks need to increase their Open Banking budgets rather than rationalising them. Within most organisations, the budget discussions usually begin after the summer holidays. Therefore, if banks have the ambition to become a trusted cornerstone of society once more, now is the time to secure sufficient funding to invest in Open Banking data and API capabilities. By thinking ahead, banks can address not only current, but also upcoming data legislation. By working together as a sector, they can pool their defensive strength to lock out GAFA and establish more balanced and sustainable trust partnerships in any community of interest.

Ultimately, the size and depth of your Open Banking footprint will determine how fast you can evolve from a money custodian into a data custodian and secure your future relevance and value by developing new business models. How much budget is that worth to you?

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