UnionBank believes that open banking will drive the digital economy
There are two models that promise to revolutionize banking and financial services like never before and act as a catalyst for the new wave in financial innovation — open banking and open finance. These concepts were discussed in the most recent edition of UnionBank’s virtual roundtable series, E-Talk Tales.
Leading the discussion was UnionBank’s FinTech Business Group Head Erika Dizon as its main speaker.
Erika explained the difference between open banking and open finance. Open banking promotes data sharing on banking services while open finance has a broader scope by promoting both data and capability sharing across the entire financial sector. They may have their differences but the common goal is the creation of an open ecosystem.
She also said that the open finance movement can positively impact different sectors of society. For service providers, it can inspire innovation and create new revenue streams. For businesses, it can promote increased transparency and operational efficiency. For customers, it can help enable better personalization, and in turn more meaningful experiences.
Open banking has several pillars:
- Regulatory push for frameworks built on principles of consent, interoperability, and collaboration;
- Heightened expectations coming from the digital and modern social experiences that are redefining banking and finance;
- Competition especially with the emergence of non-traditional players; and
- Infrastructure, which is increasingly becoming more reliant on application programming interfaces
With all these pillars coming into play, Erika said that we are now seeing the unbundling of traditional banking models.
Erika also cited cases of open banking features in different financial areas: accounts, payments, remittance, and insurance.
During the Q&A portion with media, several key issues were taken up.
- Data privacy – Erika said that data privacy is currently one of the biggest concerns related to open banking and open finance. She reiterated that, at the core of open banking, there should be customer consent, where end-users can have the choice to share their data or not, and limit how much of their data is used.
- Competition vs collaboration – Since open banking calls not only for data sharing but also sharing of features that could be a bank’s competitive edge over another, how do banks now balance between competition and collaboration? Erika said they prefer to call the sharing ‘coopetition’. She acknowledges that there could be specific products and services offered by certain financial institutions or fintech companies that UnionBank may not be offering but in the interest of better serving their customers, she said they should be able to integrate those features into their own.
- Increase in value for UnionBank – Erika said that open banking and open finance allow the Bank to identify new potential business models, and with these, generate more income streams and revenue models. She said “More importantly, it adds value to our customers and how they do their financial transactions, and that is what’s really important to us. Of course, as a bank, there is a bottom line that we need to think of, but we believe that there is a space for both to co-exist, for the customers to be served appropriately and for the Bank to be able to have new business models.”
