Pinar Ozcan: Hello, everyone. I hope you can see and hear me. It's a pleasure for me to introduce you to a wonderful panel of researchers and executives who are going to discuss open banking together with me. Without further ado, let me get started. The topic of today, which is the first webinar of our Oxford Future of Finance and Technology Initiative, is open banking and the changing nature of competition. Pinar Ozcan: Here is the team. I am Pinar Ozcan. I'm a professor of entrepreneurship and innovation, and I'm also the academic director of the Oxford Future of Finance and Technology Initiative. Today, with me are two of my brilliant researchers, Andra Sonea, who is a research fellow funded by Ripple, and Dize Dinckol, who is a postdoctoral research fellow, for the Centre of Corporate Reputation. We also are delighted to have Ajay Bhalla, who is the president of cyber and intelligence at Mastercard and an executive in residence at Said Business School. Pinar Ozcan: Welcome, all. It's a pleasure to have you. What we're going to do today is we're going to be talking about two particular aspects of open banking which is going to be fresh-out-of-the-oven research findings for you which haven't been published anywhere yet, so, hopefully, you'll enjoy them. We'll have Ajay join us, too, to make sense out of what we're finding and how that matters and whether it matters. Pinar Ozcan: Before we get into all of that, let me quickly introduce you both to the initiative where this research takes place as well as the topic of open banking itself. As I said, the initiative that we're all part of is the Oxford Future of Finance and Technology Initiative. This is an initiative where we're trying to understand the role of technology and the way that it transforms the financial industry. In particular, the topics that are dear to our heart and centre of our research are financial wellness, AI in finance, and open banking. Pinar Ozcan: Today, as you know, we'll be talking about open banking, but we'll talk actually tangentially about financial wellness and AI as well because these topics are very much intertwined when you start to think about the way that technology is impacting the industry. Pinar Ozcan: On our website, which you can easily Google and find, we have research findings, case studies. We have just started Female Founders in Fintech case studies where we have three cases for you to download and read, as well as news from a research that is being published or that is actually being talked about in the media. Feel free to visit and feel free to reach out to us in order to participate and learn more. Pinar Ozcan: Now, without further ado, let me tell you a little bit about what we mean by open banking and why it matters and, after giving a very quick definition, I'll invite Ajay to join me in a short discussion and why from his perspective this matters and why we should talk about open banking. Pinar Ozcan: Open banking can really be thought about as a way to access customer data. As you know, finance is an industry that is highly data intensive, which means that, in order to innovate, you need to have access to data. This has been a problem in the industry and for new entrants for decades. Large institutions have been sitting on top of data which hasn't been accessible for new entrants. Without meaningful access to this data, it has always been difficult for new entrants to really provide any competition to the existing players, which makes the industry less innovative and more stale. Pinar Ozcan: That was the starting point of regulators trying to figure out what they can do in order to boost innovation and competition in finance. The open banking regulation, which is called PSD2 in Europe, but also is happening, as Andra will tell you, across the world is a new way for new entrants or third parties in general to access customer data. Pinar Ozcan: Anyone who is in the webinar, if I were to ask you how do you access your financial data, you would probably tell me that you either go to the mobile app of your bank or to their website, which is the left part of the picture that you see in front of you. That means that, as customers in that green band above, you use proprietary apps to access the data that is in the bank, but that means that only you can access it and you can't really necessarily meaningfully take it out and share it anywhere. Pinar Ozcan: Open banking changes that. What it does is it says, look, you can still access the data that way, but you can also give access to third parties in a secure way in order for them to access your data such that they can analyse that data, use machine learning models in order to innovate and try to tell you whether you can get a better mortgage, whether you're spending too much on coffee or also, if you're an SME, to basically budget and organise your spending, do your taxes, and all sorts of interesting outcomes start to emerge. Pinar Ozcan: That is what we're talking about. Imagine customer data being kind of electricity on a wall. Open banking basically gives third parties that you trust the socket, the plug that fits into the socket in order for electricity to flow out of there and to be used for innovative services. With that, I'd love to invite Ajay to join me to make sense out of why this matters. Pinar Ozcan: Ajay, if I may, welcome first of all to our webinar. I'd love to start by asking you what is the significance of open banking for you with your hat on as Mastercard? Ajay Bhalla: Pinar, good to see you. Thank you for inviting me. I think you articulated it very, very well. Open banking is like, I would say, a revolution in the data space. You got to look at the environment which is there today. We've got the kind of data that consumers, corporations, financial institutions are generating. it is multifold of what we used to see before. Now, that data, which like you said before, is now very easily deployable because of open banking, and that can change consumers' lives, that can change SMEs and business opportunities and, of course, it brings new opportunities for financial institutions. Ajay Bhalla: Now, if you were to look at it very, very simplistically, if you can have all your accounts in one space and you can give access to all those accounts to another entity through a very secure consent-based system, it can give you valuable insights into your money. It can get you new value propositions from new startups that are coming in. In my view, this is like, I always say, it's like democratisation of data. It's going to completely open up the financial services industry. Ajay Bhalla: Visualise, as a consumer, if you had to apply for a loan or a mortgage or anything. In the past, you had to get all your information. You had to then figure a way to get it to the new entity. The new entity where you were applying to had to then process all that information, check whether it is authentic. All that just goes away because, at the click of a button, you can consent-share that information, and that can go in a very secure way to the new organisation you're dealing with. Ajay Bhalla: I think, what it can bring, the opportunities are immense. I think we are just at the tip of the iceberg. We're just seeing the start of it, and visualise where it could take us five years or 10 years from now. Pinar Ozcan: Fantastic. Thank you so much Ajay. In fact, you're absolute right, we're at the very beginning. In fact, our two researchers will talk about how we are seeing different models emerging and what challenges might be in terms of the implementation of open banking. Pinar Ozcan: Maybe before we get into that one thing that I would love to mention is how this is in a sense the first step towards the future where data sharing will happen at a much wider scale. Of course, what we're talking about are iterations of open banking. The next level from open banking would be open finance. The difference between the two is that open banking is just about the current accounts or checking accounts, meaning, the payments that are being made into the account and that are going out of the account. Pinar Ozcan: However, several regulators around the world have announced that this will not just stay within finance, and we will use these kinds of schemes across different industries in order to make data interoperable across industries such that your transportation, energy, healthcare and finance data, you will have control over it, and you will be able to give access to third parties, which also means that there will be competition across industries, not just within an industry with this kind of access to data. Pinar Ozcan: Ajay, maybe, if I can ask you what this signifies for a financial institution, imagine a world where we're looking into the opening up of data across industries. What does this mean for you? Ajay Bhalla: If you were to look at it from a financials industry perspective, I think it just opens a whole plethora of new opportunities which did not exist. As you rightly pointed out, the regulation has started out by talking about bank accounts and by talking about payments use cases, but the number of use cases which you can do are plenty. Ajay Bhalla: You have to remember that, in the world of today, everything is driven by data, anything. By making this data available so easily through APIs and making it consent-based so consumers control their own destiny, you are going to actually completely open up the financial service market. Now, I do think it's not going to happen tomorrow. It's going to take time, but it's all about being able to see the future. Ajay Bhalla: What I'm really delighted with is that the regulators are embracing it, and we are seeing this all over the world. We are seeing the startups and the financial services industry embracing it. We ourselves have embraced it in a big way. We have done two new acquisitions in the space. We acquired Finicity, which is based in the US, which is a very large open banking company, and then we acquired Aiia in Europe, too. The whole financial services industry is embracing it, which is what we need for any of these changes to actually bring change at a global scale. Pinar Ozcan: Absolutely. Thank you for mentioning what you're doing in this space. I think that, in fact, without the involvement of large players, open banking cannot move forward, and that is a great example. Pinar Ozcan: Now, without further ado, thank you, Ajay, for your comments, and I'll get back to you in a few minutes, but what I would love to do next is to open or introduce our first researcher, Andra Sonea, who is a research fellow at the Said Business School, Oxford University. Her research is being funded by Ripple, and she brings a macro perspective to open banking, trying to understand how it differs across different geographies and, in particular, what type of business models we see particularly in the SME space, so over to Andra. Andra Sonea: Thank you very much, Pinar. Thank you, Ajay. Thank you, everybody, for joining us today. Andra Sonea: In the little time we have at our disposal, I would like to tell you a bit about the most important things I found while researching open banking in these countries listed here on this slide. We didn't try to produce a ranking. We tried to understand how open banking is seen across these different geographies because it really means different things in different countries, and I will explain in which way. Andra Sonea: Let's start with this. There are many dimensions on which countries differ, and there are not two countries which are the same, not even in the EU where the implementation was driven from the same directive. For me, the drivers of this implementation are important and different, and we can find a spectrum from compliance driven by... from a payment regulation, from consumer right regulation or market-driven approaches to open banking. Andra Sonea: Probably, the most interesting difference is the fact that, when we talk about data and financial transactions, we don't mean the same thing across different geographies. In EU and UK, we mean financial transactions from the current account only because this is a payment directive and this is where the payments are initiated. In the regulation from Canada and Australia, we see many financial products included. It's true that they are not realised yet as they are not implemented yet, but that's the intention. Andra Sonea: If we look at it in Africa, this category of customers we are interested in, the SMEs, they don't even exist in the banking space. Their data lives with the telecoms and, still, there is an open banking model appearing there which lives on telecom data. There are other differences on payment initiation, if they're included or not, what type of APIs, if there are country-level technical standards adopted or not, or even if other countries borrow or choose to implement the UK banking standard, which was an interesting finding across the globe. Andra Sonea: I would like to point you towards just a few business models that I found interesting. First, when analysing the companies which have been created and regulated in the UK and other countries, we realised that most of them address somehow this segment which is growing everywhere, the segment of micro enterprises and SMEs, which is traditionally are not served. It's not served not only in the UK or some EU countries, but also across the globe. Andra Sonea: There are reasons for that. I will not spend the time on that, but I would point you to the following models. There are a lot of companies trying to do credit decisioning or lending or both, then a combination of banking and accounting addressing the financial management needs of SMEs, a lot of models and super interesting models about payment, payment initiations and way of attracting customers towards various new payment methods. Andra Sonea: I would point you towards the difference between these two models. If we look at uncapped, it's a small or relatively small startup in UK, and they do revenue-based lending for, particularly, SMEs which do e-commerce. It's a particular type of business because it's entirely data-driven, and open banking is part of that. At the opposite spectrum, we have a startup based in Kenya, Credrails. They really built the infrastructure for open banking even if there is no regulation which mandates the open banking to happen. For them, because they believe in this model and they think that there's a need to cover it, they also build models or tools for SMEs to do their financial management and, in this way, they become the repository of the financial history of these companies. The opening of financial transactions goes in the other directions, not from the banks to startups, but from startups like this one towards banks, which is a very interesting model. Both of them enable or make things better for SME. Andra Sonea: In conclusion, even if probably I would speak a day on all things I find, I would just point you towards what surprised me. It surprised me how important the history or the starting point was in each country for how the open banking has developed it. I realised that, in order to understand the new ecosystems of new business models in each of these geographies, you have to understand the local problems because they're trying to solve local problems. Andra Sonea: Also, I found that this class, if you want, or category of customers, micro and small enterprises, it's growing everywhere, and there is an entire ecosystem which sometimes has similarities across the globe which tries to address their needs with technology. Last but not least, the study is still ongoing, so if you want to talk with us, I would be very, very happy to hear from you. Andra Sonea: Pinar, I give back to you the microphone and look forward to the questions. Pinar Ozcan: Thank you so much, Andra, for the short and effective presentation. I would love to invite Ajay to join you, Andra, in order to discuss some of the reflections that he might have on the findings so far on the macro-level view of open banking. Pinar Ozcan: Ajay, the floor is yours. Ajay Bhalla: Thanks, Pinar. Ajay Bhalla: Andra, you did a great job in articulating the way open banking is shaping up in the world, and I think it's actually very, very interesting. Ajay Bhalla: In fact, Pinar, you had a line in your slide, because generally you always see regulations come later in all the stuff that we see even in the crypto world. The regulators are talking about it while the industry has become already so big. Whereas, in the open banking space, the regulators have actually taken a very proactive role. It's very interesting how it's shaping up. It's shaping up with regulation in some countries, which is to me a surprise because, as I said earlier, it's normally always you have industry doing things and then regulations come. Ajay Bhalla: The second bit is a lot of innovation is happening with startup capital. Startup are mushrooming all over the world. I spoke of two companies which we acquired earlier, but there are several other companies all over the world which are using this innovation in data and open banking to set up platforms. Ajay Bhalla: The third piece which we are seeing, which is also very interesting, is that we are seeing the industry collaborate with each other because, you got to remember, if there is a regulation, then there is a seamless way to start it because then you say, "Okay. Hey. You need consent from consumers. You need securities to be shared in this way," but we are actually seeing that in countries where there is no regulation that industries collaborating with each other to say, "Let's combine, but let's do it in a bit of a structure and an organised way," and that's working very, very well. Ajay Bhalla: Lastly, I would say what is very, very interesting, and you heard a bit of that from Andra, is that the way regulators visualised open banking, which was with the payments use case and current account use case, is actually changing to a variety of use cases. I actually think, as regulation is formulated in the future, it's going to move away from just open banking of bank accounts and payment use cases to open data because it's really about data and, that data, as long as you have access to data which is secure and consent-based, can be used to do a lot of things. Ajay Bhalla: I think, as places evolve, I do know from my own experiences with SMEs I've spoken to that it has changed their lives. Andra mentioned it briefly, but I know of a coffee chain owner who was having a tough time accessing working capital. By the use of open banking and by the use of connecting to one of these lending platforms, he was able to share the banking data, all his details of transactions, et cetera, with the lender seamlessly, fast, and he was able to get working capital approvals very, very quickly. Ajay Bhalla: I think that's what we're going to see more and more especially in the SME space where it is very, very hard to get working capital. If you throw in lending platforms, you throw in open banking platforms and you bring in the financial services industry, if you combine all of them, I think the lives of SMEs will become much more simpler and better. Pinar Ozcan: Fantastic. Thank you so much, Ajay. Pinar Ozcan: Andra, any comments? Any questions for Ajay based on your research? This is a great opportunity also for us as researchers to exchange ideas. Andra Sonea: What was very interesting and important for me was to distance myself from my, let's say, Western-centric view. I spent so much time and years implementing open banking here in the UK, and I had to really open my mind to see how people develop a very similar concept how you can satisfy financial needs which are unmet based on data, but in certain environments where the regulator doesn't even discuss open banking as a concept, and still it's happening. If you look at it, I'm fascinated by the models that I find in Nigeria, in Kenya, in Pakistan. I think we have a lot to learn from them because they manage to build things infrastructure-like that can be deployed in other countries. They are built with this in mind because no country is big or no market is big enough at the moment in a monetary value, I mean, to make sense for the company to stay just there and really to deliver at that particular cost in order to be able to give 10-pound loans. Andra Sonea: That's something that we should learn because we cannot do this yet. That was the big discovery for me, what models people deliver there in response to the same problems that we have here. Andra Sonea: Another point would be the commonality of problems. You wouldn't think what the commonality between the financial needs of an SME in Africa and in the UK. It's the last mile, which is a very difficult part to deliver, but that would be another discussion. I think this is what was very surprising and how many things are in common and how much we can learn from other countries. Ajay Bhalla: Yeah. Andra raises a very important point. When we discuss many of these new innovative things, we paint it with one brush, and the world is not one painting. It's very, very different. Different countries are in different stages of market development. Ajay Bhalla: In my experience, frankly, innovation like this sometimes actually helps many countries which are in a different stages of development, which are behind the curve. They actually can leapfrog. We saw that when mobile phones came. We are seeing that in all the Internet speeds, the way Internet technology is developing. It's developing in a very different way. Many of these markets are actually leapfrogging, so I think here is an opportunity where, again, I think, many of these emerging markets where we do not have a lot of structure of sharing data, actually they may leapfrog because there is consumer need. There is SME need. There is financial services need. Ajay Bhalla: I think many of these countries are based on solving the needs of these various constituents and stakeholders and, because there are innovators there who are going to put in capital to solve these needs, I think we will actually see that it'll develop very, very well in various parts of the world. You gave some excellent examples in Kenya and Nigeria, and we are seeing that in many other parts of the world. Ajay Bhalla: Finally, I do think that this is a revolution in the making from a data perspective. I do think we need to spend more time as an industry thinking of how do we actually pace this development so it is done in a structured and organised way because that's when it will actually help everyone. Pinar Ozcan: Fantastic. Thank you both. This is so eye-opening, and also thank you so much, Andra, for sharing what was surprising for you because, in fact, what we can learn from developing countries in the way that they build infrastructures without the help of regulation is something very valuable. Pinar Ozcan: Now, in fact, I think this is a great segue to Dize's research because she's been looking at the implementation of open banking in the UK, and she has found several interesting aspects of how implementation may not have gone as planned and how that had implications for the industry structure and for competitiveness in finance, so, without further ado, over to Dize. Dize Dinckol: Thank you, Pinar, and hello, everyone. I will also share some of the findings from our research and especially from this project where we looked at how open banking regulatory standards impacted the industry architecture of the UK banking. Dize Dinckol: First, I'll start by talking about some of the challenges that we observed. The first one was the limited scope of the regulations. The regulators made a choice here to limit the scope of regulations initially to current accounts and payments data, and this was basically to have a more controlled approach to the rollout of this new technology and this new approach of doing things. This decision left out some of the other types of data such as investment data, savings data, pensions data, et cetera. Although this was a helpful logic to test and learn along the way, this has caused some challenges for the existing players in the industry. Dize Dinckol: For example, they were already providing... They were already fintechs in the industry providing services using these other types of data as well. This limited scope of the regulations made it difficult for them to keep providing their services, so they needed to use different data access technologies to access different kinds of data, which led to confusion for the fintechs as well as the customers using these different customer journeys to basically access their different data. Dize Dinckol: This also has led to uncertainties about when it would be best to switch technologies because the APIs initially were not resilient enough for these fintechs to keep providing their services in a frictionless way. There were questions about when it will be best to switch technologies from the old ones to the new open API technology. Dize Dinckol: Another challenge was what we call the curse of interoperability, and this was from the perspective of banks. Most of the banks wanted to be the primary bank of their customers, and interoperability made this different for them, made this different to achieve. This reduced their incentives to adopt this open APIs, and this was true both for incumbent banks as well as challenger banks. This lack of aligned incentives made it difficult for them to adopt the standard APIs, and basically, as a result, the implementation of the standard open APIs was different across all these different kinds of providers in the UK banking. Dize Dinckol: Overall, this slowed down the adoption of open APIs and the standardisation in the industry and which required a hands-on approach from the regulators. For example, due to the variants in, for example, strong customer authentication journeys of these providers, the regulator needed to step in and extend the scope of regulations to include standards for strong customer authentication and user experiences. Dize Dinckol: Overall, we observed that there was this push for open banking, but lack of standardisation in the industry, which led to new bottlenecks in the industry's interoperability. This basically allowed a way for these new players emerging in the industry which are called API aggregators. This meant that these players were resolving this bottleneck by aggregating different kinds of APIs and different kinds of data access technologies to provide a single API in the industry. These players were a key player in the architecture of open banking because they ensured the connectivity. Dize Dinckol: Basically, this is an advantageous position because there was this huge volume of data going through these players' systems, and this allowed them to develop data access, data analytics capabilities and AI capabilities. By deriving insights from this data, they were able to develop better targeted, more innovative products. This role that has become a technical role evolved into something more strategic, ensuring the connectivity at the national as well as global level. Dize Dinckol: We can go to the next one, Pinar. Dize Dinckol: By facilitating these global connections, they basically gave way to new innovative, competitive applications. For example, they were able to introduce embedded finance applications where non-finance providers could integrate the services from financial service providers into their systems. For example, this Klarna can be an example for this where they offered micro loans at the checkout of merchants, for example. Dize Dinckol: These services, as I said, ensured global connections, and they were unbounded by industries or geographies, so this was also a cross-industry application not limited to only banking industry. Basically, this strategic position illustrated how these players were becoming an emerging competition to a wide range of incoming players across different industries, including financial services. Dize Dinckol: Thank you very much. Looking forward to hearing comments and thoughts from Ajay. Ajay Bhalla: Dize, you did a great job in summarising your research. You obviously had a very interesting experience doing this research. I'd just like to highlight some of the very valuable points that you raised, that when we talk about open banking, it's not all a picture of just roses and lovely things. There are a lot of challenges it faces today and it will face as it evolves, but it's no different from any other technology that develops. It takes time. There are issues, and then the industry comes together or regulation comes together, and that helps in gathering and accelerating that particular trend. Ajay Bhalla: I'd just highlight three things which stand out for me, and I think they pretty much came out from in your research, too, that the industry is evolving differently in different parts of the world. One of the things which is lacking is standardisation. Yes, in countries where there is a regulation, yes, you can standardise it, but no regulation will ever be able to address everything. You do need collaboration in the industry. You need some kind of a agreement to say these are the standards that we should follow for open banking. That standards can be about API. It can be about how data will be shared. It can be about what kind of terms and conditions should be disclosed when you take consent, but there has to be some kind of a standards organisation which needs to come together on this. Ajay Bhalla: The second piece I think is trust. Here, I will say the kind of security which is used, the kind of data practises and how the data is being shared, is used, how consent is taken is extremely important because there is nothing else which can damage this entire trend other than a problem in any of these areas. If that happens in any country, any market, it will really shake up consumer confidence. It'll shake up regulatory confidence, and then it'll stifle the growth of something which can really help society and the world. Ajay Bhalla: The third piece I would say is experience. Ultimately, these things will do well if consumers can benefit from it, if financial services industry can benefit from it, if SMEs can benefit on from it. If they don't benefit from it, it is never going to take off. It'll just remain like a concept. It looks like it's benefiting. That's why we are seeing it take off in many countries. Ajay Bhalla: You mentioned valuations of some companies with such huge numbers. It's happening because there is a value proposition and that value proposition is working, but as we think about it as an industry, I do think we need to keep the stakeholders in mind and their value proposition. Consumers have to benefit. Financial services have to benefit. SMEs have to benefit because that is what is going to create a business model which will do well. The points that are highlighted before will actually help the standardisation, and the efforts on trust will actually help reinforce that confidence with our stakeholders. Ajay Bhalla: I think that's what I would say in summary. I really enjoyed your research presentations. Pinar Ozcan: Thank you so much, Ajay. In fact, one of the things that I find fascinating about the findings coming from Dize's research is the way that this API aggregator has a purely technical role that was there to solve a bottleneck, technical bottleneck, ended up creating, opening up the industry to players, too, from outside the industry. In a sense, it really accelerated the movement towards embedded finance. I would love to get your views on that as well. Ajay Bhalla: Yeah. If you look at the future, it's very clear that the way we've done finance historically, the way do we do it today, it's already changed in a very, very big way. How many of us now actually go to a bank branch? Digital transformation is already happening in a big way. I think, if you now cast that ahead five to 10 years, what you do from your mobile devices, what you do from a technology basis, what you do in terms of sharing based on APIs, I think there is a whole new industry which is already evolving and will evolve as we look out in the future, and I think new businesses will arise out of that. Ajay Bhalla: I use that phrase, democratisation of data, earlier. That democratisation of data will only remain a phrase unless we can actually put the infrastructure around it, which is all these APIs, and that's how the role of API integrators came in. In fact, one of the big things we looked at is, when all of this development was happening, how do we actually make sure that, when these API exchanges happen, that actually there are two secure parties exchanging it, because that was a big question when open banking was being thought of in the early days because anybody can come in? How do I actually put guardrails in place so that this is the correct API, this is the correct interface? How do we actually make sure that these APIs work smoothly? Ajay Bhalla: I'm taking it to early days. Well, early days is not very far away. It's only like the last two, three years. It's evolved very, very fast. I'm glad to see that some of these new startups and new developments have happened which is actually making sure that the path becomes smooth because, as I said, it has to be secure. It has to be a great experience. Otherwise, no use case will take off. Ajay Bhalla: To summarise what you asked, Pinar, I think all the makings of a new evolution in this space is happening because we are seeing regulations or industry coming together. We are seeing technology, startups, infrastructure come together. We are seeing standards not maybe as organised as I would like, but it's happening. We're already seeing the early days where industry is coming together and saying, okay, let's do it in a certain way. Ajay Bhalla: We are already seeing ecosystem evolve on open banking. We ourselves, as Mastercard, as I said, we have invested heavily in it. We have done two acquisitions. We see we can play a major role, and we are working in many parts of the world with the industry, with the financial services industry, to ensure that this evolves in a way that it actually benefits all our stakeholders. I think it's very exciting. I think the future is very, very promising in this space. Pinar Ozcan: Thank you so much, Ajay. This is a great moment for us to also open it to our webinar guests, and, with that, let me just move forward to our Q&A section. While we're going, Andra, has been amazing answering a lot of the questions, and I'll ask her in a moment to maybe select one or two of the questions that she might want to highlight. In the meantime, there's a great question for Ajay actually, which is building on the question of API aggregators. Pinar Ozcan: Are actors like Mastercard or Visa actually evolving to become themselves API aggregators, Ajay? Ajay Bhalla: From our perspective, we look at the whole ecosystem. We are a big player in the old payments ecosystem. From an ecosystem perspective, API is one piece. It is a very important piece, so we have invested very heavily in API technology, and all our investments in open banking is actually helping create this entire ecosystem. Frankly, as we evolve, we will need more technology developments, and we are very committed to help grow this entire open banking ecosystem. Pinar Ozcan: Fantastic. Thank you so much. We have quite a few questions in the Q&A, and some of them have been answered, but they are worth highlighting. In fact, I'd like to highlight myself one, and then I'll ask Andra maybe to choose one or two, which she has put brief answers, too, but they're worth considering. I'd like to highlight the one by Mikita Zabuga, and they're asking are TPP fintech's rivals or partners of the bank? How do they find synergy? What can we as fintech offer them? I'd love to get views also from my fellow researchers and Ajay, but I'll start maybe giving a few thoughts myself. Pinar Ozcan: Fintechs can be rivals to banks, and that is the nature... That's how competition works. Data being the most important resource in banking in addition to trust with the customers means that open banking will allow data to be shared more freely, and that will mean that data-based innovation and data-based competition will increase, but, Mikita, you're also absolutely right that there is synergy between them. There are win-win situations, because what fintechs lack is scale and resources, and what large institutions have are exactly that, so ways in which they can collaborate, they can partner, will really push open banking forward and will be good for customers. Pinar Ozcan: Now, our research, which we didn't share today, also shows... this will be again in the webinar in June... will share a bit more research insights into how fintechs sometimes struggle to work with larger institutions because the cultures are so different, and even the timeline for onboarding a fintech might actually be so long because of all the checks that need to be done that some fintechs are afraid of running out of money in the meantime. Pinar Ozcan: While the synergy and the potential for win-win is great, the topic of fintech bank partnership hasn't necessarily been one where we see all roses and know the challenges. It's actually quite the opposite. It's difficult to get the formula right, but if you do get the formula right, then it can be really the best way to go forward because the parties offer things that the other one really doesn't have. Pinar Ozcan: Ajay, any thoughts on that? Ajay Bhalla: I agree with you. I think it really opens up competition, but I have a little bit of a philosophical view of these things because, if you look at some of these things from an ecosystem perspective, it actually forces rebalancing of industries to focus on their own core competencies. When you open up data and the data can freely transport with proper consent and security, et cetera, I keep saying that because I think that that's really critical because, otherwise, it'll just fall off the rails, but if you do it properly, do it the right way, with consumer's consent, I think actually it will create pockets of core competencies. It will develop the industry more. Ajay Bhalla: Within financial services, you will see companies which will specialise on micro lending. You will see companies specialise on SME lending. That has already been happening for some time, but now you will support that with data, which means you can get decision-making on many of these things in a much faster way. I just think it's such a boon for consumers, for SMEs who currently in many markets have to wait for months to get working capital loans. Whereas, if this all opens up, yes, in early days, we could see this is competition, but I see this as it's going to help everybody. Ajay Bhalla: I also think that the industry has realised that because, in the early days, there was a lot of pushback. You'll remember that, Pinar, nobody wanted to really share data just openly. People were worried. What is the consent mechanism? Will the data be secure, and will it create a lot of problems for the company which is sharing the data because they could lose a customer, right? The way it's evolving is everybody's realising that, actually, everyone can come out as a winner, and I think that's where open banking has a bright future. Pinar Ozcan: Absolutely. Ajay, thank you so much. I completely share your view that this is forcing players to rethink their competitive advantage and understand what they have been doing maybe that they shouldn't be doing and what others should be doing and how cooperation and innovation ecosystems may be the answer to some of the lack of innovation in finance in the past. Thank you very much for that. Pinar Ozcan: I'd love to turn it over to Andra, because I know she's been quite prolific in looking at the questions, whether there are any questions that she'd like to highlight for us. Andra Sonea: Yeah. There are a number of them, and I'll group them together somehow. I think the questions around TPP, or third party providers, which are a special type of financial entity regulated according to PSD2, and it's a new type of entity, so I think what is not very obvious for many is the fact that these entities do not need to have a commercial contract with the banks in order to connect to their APIs, which makes the model very powerful because the banks cannot say, "I don't want to work with you," or, "Let me check. I don't know what." It's simply, if a particular entity, startup or not startup, obtain the TPP status, which means they either can call the APIs for getting financial transactions or that one type of regulatory regime or they can initiate payments from their application directly from the current account of the bank, they can do that. The banks cannot say I don't like you. Andra Sonea: If people are concerned about collaboration or cooperation, this is how it works. The model of integration or calling these APIs in Europe, and actually in UK as well because it was developed on the same model, functions in this way. Where the difference is however, or where the banks can make it difficult, but I don't think they do at the moment, it's in the quality of data they provide, in the reliability of the APIs. "Do I call these APIs when they are down? Do I call these APIs when, the data they give me, it's so poor that I cannot really use it? It's lacking context," and so on. Andra Sonea: There are situations like that, and I have to say that, in the UK, we take this a bit further. There's an intention to make it easier in terms of authenticating a third party because now they have to request the customer re-authentication every 90 days. There's a lot of customer attrition because of that, so this is planned to be removed I think somewhere in September in the UK. That's not the case in the EU. There is a lot happening on this model. Pinar Ozcan: Thank you, Andra. In fact, I think this is a great moment maybe to also bring Dize in because, Dize, I know that your research has also shown some implications of the, let's say, broken or imperfect APIs and how that affects fintechs that are using them towards the customer. It creates trust issues, I believe. Would you like to quickly elaborate on that before we- Dize Dinckol: Exactly. Sure. Thank you very much. Yeah, there are these issues as Andra mentioned with the technical reliability of these APIs. First, there is this variance as I briefly mentioned in the presentation. One, although they were the standard APIs introduced by the regulation, all banks' implementation was different. As our fintech informants put it, one connecting to one bank meant connecting to one bank, not all banks in the UK. Dize Dinckol: First there was this issue and, second, there was the issue of resilience of these APIs, and then you are as a consumer using this fintech service and you cannot connect your bank account to the service, you blame the fintech. This basically puts the blame on the fintech when the bank APIs doesn't work. It also impacted, as Pinar said, the trust to these fintechs which was already a challenge that they needed to overcome to get the customers to trust them. Pinar Ozcan: Thank you so much, Dize. In fact, that was one of the challenges that we saw fintechs struggling with the most regarding open banking. When it doesn't work, it looks very much like it's their fault whereas it may not necessarily be. Dize Dinckol: We heard the consumers sometimes needed to try 17 times to connect to their bank accounts, so this was a real problem. Pinar Ozcan: Yes. Yes. It was interesting to relive those challenges with them, in fact. Thank you, Dize. Pinar Ozcan: I'd love to direct the last question to Ajay because I think it very much is within his territory. The question is from Ravindra Meshram, and he's asking, "What implications are expected on financial frauds when the consumers are not very well-aware of what they're consenting for?" It's a little bit about security, but, in general, about financial fraud in the world of open banking. We'd love to get your thoughts, Ajay. Ajay Bhalla: Yeah. That's a great question, and it is my favourite topic because I do think that, ultimately, we all work for a consumer. If we don't protect consumers, there is no business. I think, from an open banking perspective, this was the biggest issue which actually stopped progress because the whole issue was how do you actually take a consent, how do you define consent, how do we actually make sure that consumers are educated enough to know what they're sharing and then be educated enough to know who they are sharing with, and then, finally, when they share this information with somebody, how do we make sure that information is used for that purpose and is not used for something else? Ajay Bhalla: There were all these questions, and that's the reason, frankly, I was really pleased when regulations started happening because regulations can help address many of these issues. Yes, a voluntary code, a standard, with the industry helps, but protecting of consumers I think can be very quickly addressed with regulation in this. Europe actually, as we all know, has taken several steps to do this on data and sharing of data, consent on data, how you store data, et cetera. They've already made progress, and the rest of the world has also now made changes on data policies and sharing of data policies. Ajay Bhalla: As we look at open banking, it really is those same policies which we got to apply to open banking, that a consumer owns their data. You want to use their data, you have to take their consent. You have to very clearly lay out what that data is going to be used for. I think there are very good guidelines available in several markets where regulation has happened which is very clear which can be a template for many other countries. They can also be a template for countries where there is no regulation, where the industry can adopt and embrace them. We are already seeing that. Ajay Bhalla: Overall, the progress is happening in the right direction. Again, it does not mean that everything has happened and everything is perfect and it's in place. We do need to keep a very tight eye. We need to monitor, and regulators I think need to play a big role here so that, as these development happens, the regulations can keep pace with it to make sure that they protect consumers, they protect their data, they make sure that the data is secure, it's stored properly, it's used properly, and all those things about data. Ajay Bhalla: Lastly, I'll just say, and I think we've heard this from the research, Pinar, you mentioned this, I used the word earlier, ultimately, for something to be successful as big as open banking, you need trust. Trust means you got to make sure that your stakeholders, and I would say consumers, in a big way trust what you do, and it starts with making sure that their information is safe, secure and used with their concept. I think that's the fundamental tenet we follow as a company. Ajay Bhalla: I'm glad that regulatory intervention in many markets is actually ensuring that that becomes a common practise around the world because that is key to success. You got to protect consumers. You got to make sure that they are the ones who are really taken care of for ensuring that open banking is successful for the future. Pinar Ozcan: Thank you so much, Ajay. This is a great way to conclude the webinar. I'll just take a moment to thank all of you, Dize, Andra, and, Ajay, for your amazing contributions. It's a true pleasure to work with you. Pinar Ozcan: For everyone who have joined, please feel free to keep in touch with us. We do update our website, and we also build courses based on some of these findings from the research. We would love to hear from you, and we would love to keep in touch with you both in terms of learning and in terms of collaboration and research. If you want to find out more, get in touch with us. Otherwise, we look forward to seeing you again hopefully in June where we will be discussing data-driven innovation in finance, and our guest speaker will be Steve Suarez from HSBC. Pinar Ozcan: Thank you again and have a good rest of day. Ajay Bhalla: Thank you, Pinar. Thank you all. Dize Dinckol: Thank you. Ajay Bhalla: Bye for now.
