Digitalisation, data sharing and open APIs

Ferguson’s Royston Da Costa is a huge fan of open APIs but does caution that it requires a standard, as in the UK via its open banking regulation, and a common approach. “Why would I sign up with 20 different bank APIs for instance?” he says. “I want one single API-enabled channel, so as not to recreate fragmentation.” 

Collaboration between fintechs and banks, an increasing trend in recent years, is also necessary to deliver useful solutions to treasurers, not just e-commerce merchants.

The collaborative trend is strengthening, as the days when fintechs could access cheap money due to low interest rates are long gone. As investment money tails off, co-operating with banks to gain scale and development money is now a necessity, bringing much-needed innovation to the sector. 

David Cox, Payments Strategy Lead at Virgin Media O2, is looking to increased open banking participation in the UK and more open API usage globally to give him “more payment and information options in the future”. Potential end uses include:  

• Cheaper bill payment mechanisms. For instance, via commercial non-sweeping variable recurring payments (VRPs) on the UK’s envisaged new payments architecture (NPA). This modernised infrastructure will be ISO 20022 compliant and in-line with other newer platforms in Australia and elsewhere globally. VRPs could, in future, rival consumer-facing direct debits as a UK payment mechanism. Fintechs could provide them as a PSP, battling it out with banks on a modernised infrastructure that they can now access, to ensure a cheap price for merchants. 
• “Offering services to overseas students without a credit history is easier in an open API-enabled environment as well,” says Cox, as increased data-sharing can enable dynamic credit checks. Receiving some overdue debt money, rather than nothing, is also possible. 
• Anti-fraud is another key end use. “An account information service [AIS] application in the UK open banking ecosystem can aid authentication,” explains Cox, as it permits the customer to authorise the sharing of key information. “For instance, we offer next-day delivery for expensive iPhones, so functionality like this can ensure a product gets to a genuine authenticated customer safely.” There are multiple other anti-fraud end uses further up the payment chain in the open banking and API era as well, covering payee verification, enriched sanctions screening, and so on, which would likely be of more interest to treasurers.

Virgin Media O2 has completed some proofs of concept (PoC) in readiness for the future payments ecosystem they expect to see, where banks, PSPs, fintechs and orchestrators, all interact more – and merchants will likely have to deal with multiple integration challenges. These emanate from evolving payment methods such as digital wallets for currencies, contactless cards, mobile and online channels, rewards, coupons, and so on – all of which must be integrated operationally into a seamless and smooth omnichannel environment for the merchant’s customer.

This is why Virgin Media O2 has undertaken PoCsvcovering potential open banking end uses in the future, in areas such as:

• Acquisitions: payment journeys can happen in the UK open banking ecosystem without traditional e-commerce baskets. This should aid conversion rates, as the time for dropouts is cut, but it does require operational integration and flexibility.  
• Customer journeys: in the open banking ecosystem payments can happen without expensive cards, so PaybyBank functionality is a given for forward-thinking corporations. If the consumer will see a cheaper price or extra reward points, due to the cheaper VRP-driven payment methodology, remains to be seen. But the attraction of this cheaper payment acceptance method is clear. 

All the above examples are reliant on using the extra data carrying and sharing capabilities of open APIs, which power the UK’s open banking regulation, and enable easier data exchange and connectivity to payment processing, anti-fraud, or credit-check stages in the payment chain. The new data-rich services that result can also span to end uses in the credit/loan arenas, as more customer and counterparty supplier information is shared in the digitally savvy future.

“Cheaper bill payment obviously interests me most immediately,” says Virgin Media O2’s Cox. “But I’m also interested in B2B future end uses outside of the consumer, customer-facing space.” 

B2B and digital marketplaces

“I’m particularly interested in the liquidity data-rich tools that open APIs can provide to corporate treasuries,” says Cox. “This extra liquidity information can be used for cash optimisation purposes, to enhance forecasting, link to corporate loans – or even power consumer loans direct from the merchant. Interest rates received could be positively impacted by enhanced liquidity data, plus a whole host of other treasury end uses become possible as data flows more freely, from enhanced working capital to supply chain optimisation end uses.” 

“Data is the new oil, and open APIs and banking provide us with it,” says Cox. “Its power is enhanced when aligned with modernised infrastructures that we can connect to via new fintech-enabled partners, PSPs and other newcomers that have access to payment and financial rails to which they could never previously connect.”    

Does this mean banks will not have a role going forward? “No, of course not,” says Cox. “It’s just that they’ll have more competition in future. That has to be beneficial for corporates.”   

The infiltration of B2C techniques and e-commerce practices into the B2B arena is perhaps best illustrated by the rise of digital marketplaces, which are sophisticated online ecosystems that serve as intermediaries connecting multiple stakeholders in an online economy. Uber is a prime example. “All those Chinese merchants that sell their goods in Europe and the US [such as Shein],” are further examples, points out BNP Paribas’ Praneuf, adding that “at some time they will need to repatriate their sales into Asia and China.”

This is why BNP Paribas is building a portal for B2B digital marketplaces into its incubator programme. “It’s an effective corridor we can use to leverage the position we’re building in Europe with Chinese PSPs and merchants, collaborating to embed our services,” adds Praneuf.

A large global bank will have legal entities, universal cross-border services, in-built compliance, experience, PSP partnerships, and so on that it can bring to the table in the quest to serve these emerging digital marketplaces, which further illustrates the hyper-connected trend evident in banking, e-commerce, and the B2B arena as open APIs, digitalisation, and technology advances.