Understanding the potential benefits of Open Banking

This article originally appeared in The Paypers ‘Open Banking Report 2021′. The article was independently edited by The Paypers and is re-shared here. You can download a free, printable PDF copy of the ‘Open Banking Report 2021’ by visiting The Paypers Reports section here.

How did the pandemic influence Open Banking innovation?

Agnija: We are a global team and thus it was not an issue to adjust to working remotely. Some adaptation to our working routines and daily lives was required, but we managed to adapt fairly easily.

However, we noticed an impact on our customers, partners, consumers, and providers. Several companies were dealing with uncertainty and we had to put ongoing dialogues with some companies and partners on hold for a while.

Agnija: Some customers and third parties, especially in the PSD2 and PISP areas, benefited from this pandemic because, as we all know, online shopping skyrocketed and, subsequently, online payments reached very high levels. Everything related to the payments industry, online shopping, customers’ seamless payments experience, all businesses which are working in this area – our core partners, our customers – thrived.

Ulrika: Technology, regulations, customer expectations, and changing behaviour drive the adoption and use of banking APIs. The pandemic boosted the adoption of digital banking solutions. Some of that also led to increased use of both regulatory APIs and API-based banking solutions. We saw customers moving to different digital environments, and Nordea started providing services through others; this indicates the customer push towards different digital solutions.

What lies behind banks partnering with fintechs and what are the benefits for banks?

Ulrika: The Nordics has proved to be a fertile region for many fintechs and startups for many years. Back in 2017, we believed fintechs would grow more into partners. Banks had customers and fintechs had skilled developers, so it seemed like a good match. Since then, the partner setup has been tested in some areas, with not as good results as thought possible at first.

There is a lot of venture capital in the Nordics and it’s not always easy to find a match between banks and fintechs. Besides that, it is often cumbersome to settle a partnership between large and heavily regulated banks and a small and VC-driven company in need of moving fast and showing a profitable business in an area where there is no room for a middleman or a customer willing to pay for a cool solution.

Few have succeeded, to be early out has been a strength.

Could you please name some relevant Open Banking use cases?

Agnija: Payment solutions are evolving. When it comes to customers and third parties, for both regulated and unregulated areas, we see a need for fast and effective payment solutions, real time access, real-time payment initiation, and less cumbersome processes – especially for corporate customers. These are the most common use cases demanded by the market. Also, there are API models that provide account validation which supports companies’ needs to reduce payments’ or partners’ risks. All these services – payments, AML, KYC – are services where I see a potential market increase. Real-time accounts, which combine payments and accounts, are important as well. Getting real-time data effortlessly is a challenging area for corporates and treasurers.

Ulrika: There are different angles to use cases. First, how can a bank improve customer experience and meet needs in other digital channels? That is what APIs are about, and it is not just around regulatory APIs, it is also around other banking services.

Providing banking services through open APIs brings various opportunities for a bank but also for our partners and customers. Examples could be extended reach, improved end-user experience and new ways of utilising basic banking services. We have already seen some concrete examples from Nordea. With direct access, our corporates can reach their accounts from their systems in real-time. Personal customers benefit from Nordea services in non-financial channels, they create convenience, an improved user experience, and also more choice. Third parties use banking services to power their platforms. For our partners, it can increase sales and for the end customer, it can mean a better customer offering and service.

What rests in Nordea’s future?

Ulrika: Nordea places a lot of focus on enhancing the user experience of banking services through APIs. The future services are built by understanding the full user journey and need, meeting the customer where they want to be met, in the event where their service is needed. We have active community management where we proactively innovate and team up with our corporate customers and partners to solve their needs.

Agnija: We have been working to advocate and educate on Open Banking for years and we finally see companies understanding the huge potential. Now questions such as ‘what kind of APIs do you have’, ‘we have this challenge; can you help with APIs’ have clear answers. APIs have become a discussion topic for decision-makers. We want to continue to understand what kind of benefits APIs give to corporate customers and for intermediaries, like ERP system vendors, etc.

Ulrika: In the banking industry, we see a higher understanding of data. We focus on ecosystem thinking, how we can use other banks’ APIs or other providers’ APIs in our applications, how we can leverage the community to provide better services.