Open Banking platforms: looking to future possibilities for corporate clients
Digitalisation of banking services has doubtless raised the bar for the user experience – introducing frictionless customer journeys and automated end-to-end banking services. Though not a new concept, Open Banking, and its underlying application programming interface (API) technology, could allow banks and Fintechs to create IT network and data flow processes with enough flexibility to address the complex challenges that corporates today face. Insights speaks to Christoph Berentzen, Cluster Lead for API Banking at Commerzbank, about what Open Banking means in practice and how corporates clients can begin priming teams to fully realise the concept’s future potential.
There seems to be various definitions of Open Banking. What does it mean to Commerzbank?
You are right that there are myriad ways to understand Open Banking – a term often used interchangeably with application programming interfaces (APIs). For us at Commerzbank, though, the concept entails the practicalities of sharing a corporate’s financial data with banks, Fintechs and third parties to explore new technological possibilities. It also encompasses a mode of working that encourages innovation and competition among banking players.
A common misconception is that Open Banking is synonymous with payment APIs – but it can be much more. For instance, platform integration can occur between a variety of players, including human resources platforms to offer automated payroll services for employees, such as tax filings and reporting (as well as payments).
What do you think will spur interest in Open Banking’s development?
The rise of Open Banking has been expedited by various regulatory initiatives – notably the Revised Payment Services Directive (PSD2) in the European Union, as well as initiatives in the UK, the US and Hong Kong. Even though most of these (similarly to other regulatory initiatives) mainly focused on payment services, they prepared the groundwork for the underlying technology for other, value-added services across the financial sector.
Another important driver has been the corporate clients' growing expectations for seamless and sleek services. Certainly, companies such as Amazon, Apple and Uber have altered expectations around client interaction and the customer experience – and these expectations have since extended to the corporate setting – where customisable banking services specifically tailored to their industry and needs are increasingly a prerequisite to client servicing.
What might be the resultant advantages of Open Banking for the corporate client?
When properly implemented, Open Banking provides greater flexibility to the corporate client – by connecting the myriad IT systems within an institution, and between institutions, without creating more dependencies.
The major advantage, of course, is more customisable solutions and services, fitted to the client's needs and delivered at the right time. This is crucial because, although no two corporate clients are the same, large corporates are typically motivated to continually improve their IT operations and financial management via seamless integration of their systems.
And here’s where Open Banking comes into play: thanks to the intensified degree of collaboration and data-sharing, banks and their partners are beginning to better understand each client’s specific business conditions and, in turn, generate a more accurate and holistic picture of the solutions required. The degree of customisation available for clients, therefore, will be dramatically enhanced.
What are the key components to making Open Banking work, in practice?
From the corporate client’s perspective, we see four crucial components: collection of high-quality and relevant data; having robust IT infrastructures in place that can autonomously determine if, and when, to share data with other parties; collaborating with the right partners; and, last, instilling an open mindset within the organisation to experiment with new modes of working. We believe innovation is a result of these four elements acting in harmony.
From our recent interviews with corporates, one final element was crucial: a close personal relationship between corporate client and banking partner. We noted a pattern among interviewees that, while the offering of sleek solutions was important, corporate clients also needed support from a trusted banking partner who had a 360-degree view of the organisation.
These four components also point to one key conclusion for our corporate clients: creating any Open Banking solution necessitates the corporate’s buy-in and engagement – and, indeed, the client is intrinsic to the development process. This means that while banking partners and Fintechs play their part in bringing solutions to market, Open Banking is far from an off-the-shelf experience. With that in mind, it is often the case that companies that embed Open Banking within their strategic DNA can garner the best results.
What are the first steps that corporate clients can take on their Open Banking journey?
At this stage, it’s important to remain realistic. While we are optimistic about Open Banking’s potential, instilling the necessary culture shifts do not happen overnight. As such, we encourage corporate clients to begin by setting up agile teams that can approach the technical and operational challenges they seek to tackle with an open mindset.
What is Commerzbank doing to advance Open Banking?
As one of the largest lenders to Germany’s corporate segment, including small- and medium-sized enterprises (SMEs), Commerzbank is committed to using Open Banking as means to support our clients’ digitalisation journeys.
Commerzbank began its API program in order to provide solutions for corporate clients to integrate banking services seamlessly. Commerzbank APIs are available at the Commerzbank API Developer Portal and we are constantly working to increase the offering of available services.
We understand that, at present, each of our clients are at various stages of their Open Banking journey – and many have yet to take the first step. So, arguably, Open Banking has yet to graduate from its nascent beginnings. But as more opportunities arise we at Commerzbank will be committed to bringing these to you.Contact us