Open banking – the drive for established banks and financial services to open their APIs to the market – is a scary prospect for many of South Africa’s big banks, but it’s a concept better embraced sooner rather than later, says Chipo Mushwana, divisional executive of emerging payments at Nedbank.
According to Mushwana, while the idea of open banking has a set of worries for big banks, Nedbank included, the sharing of data and APIs underpins the concept that has been happening for decades.
“The genesis of open banking is that it’s about the customer – do they have enough choice and enough access. It’s about empowering customers, with the secondary effect of helping smaller fintech players to launch platforms,” Mushwana said.
This has made larger banks defensive – because it means opening up their world. But closing up also has the effect of working against the customer, she said.
Mushwana said that Nedbank is working to embrace open banking rather than pushing back against it.
“Partnerships and collaborations are the name of the game. Sometimes we choose to partner, other times we are forced to do it. It bring complexities, but it is a path we are on and need to tread,” she said.
“Banks are worried, we are worried. How do they (banks) open new revenue streams? There is a saying that ‘they (fintechs) are coming for our lunch’. Others say ‘you have eaten enough’.
“But we at Nedbank have a different view. We’ve been practicing open banking for a long time,” she said.
Mushwana noted that there are hundreds of entities playing in the financial space, many of which have been around for over 10 years.
“We’ve been negotiating this environment for a long time. We’ve been sharing data internally using APIs for years – open banking is not as new as we think it is. ”
What is being asked of banks now is to open up APIs to share data with other service providers in the market – which Mushwana believes will help create something better and beneficial for all stakeholders, but more importantly for customers.
What is the difference between what Nedbank has been doing before and now? The main difference is the sharing of the data, and how to leverage this data.
“It’s now faster, cheaper and easier to deploy financial services, so companies need to make better use of the data that is now easily shared,” she said.
Through collaboration, financial institutions – the big players and new fintechs – can now address under-serviced customers and communities.
According to Mushwana, Nedbank has released APIs for fintechs, because this one of the goals it wants to achieve, and it cannot do it alone.
“It’s my view that the banks that accept this open banking challenge sooner rather than later – who adopt it into their business model – are the ones who are going to win,” she said.