I had the privilege of representing Western Union at Money 20/20 Europe in Amsterdam in June.
Money 20/20 is one of the largest financial services and technology conferences in the world. They host several sessions throughout the year, including a big one in Las Vegas in October. Each of the conferences has a slightly different focus given the variations in our industry across the world. The US conference is very tech- and start-up focused. The Europe version was more squarely focused on core banking and financial services, but several of the large and emerging FinTechs received a fair amount of attention throughout the week too.
It’s a really interesting time in our industry, with a number of significant paradigm shifts happening around us. Three key themes emerged for me as I listened to the various sessions and panels and visited booths at the conference: the potential effects of Open Banking on our industry, the emergence of Platforms as a key growth driver for firms in financial services, and Innovation more generally.
Open Banking is on everyone’s mind given the upcoming PSD2 compliance deadline in September. “Open Banking” happens when banks expose information and/or services over APIs (APIs are the way software talks to other software). Under PSD2, banks in Europe are required to allow their customers to access their account information and initiate transactions through third-party providers’ applications. The UK enacted a similar mandate for their nine largest banks last year. The goal of these mandates is to spur more innovation and better customer experiences, largely via third-party providers who leverage open banking APIs to build new apps or products.
Ultimately, the core principle behind open banking is similar to that of GDPR: customers own their data; it’s not the property of the firms with whom they transact.
I listened to several panels on this topic during Money 20/20. I heard various views on open banking during the conference. It could be a threat to banks: one of the promises of open banking is that it’ll allow customers to switch banking providers without much friction, as it’ll be fairly easy to change recurring transactions to a new provider based on the account information pulled from a customer’s existing provider. Yolt already offers fairly painless account switching within their app for UK customers. Open banking could also present opportunities for banks: institutions that provide better user experiences – or relatively flawless processing of transactions – can create platforms that win new customers and potentially power the FinTech competition (or coopetition) of the future.
One of the more fascinating Open Banking-focused speakers was Douwe Lycklama from Innopay, a consulting firm that specializes in the space. Innopay maintains the “Open Banking Monitor,” a tracker of how firms are responding to the open banking opportunity.
Beyond the issues with direct competitors, there’s also a threat here from non-bank companies. Banks have to share their data with these companies, but the non-banks are under no obligation to reciprocate. That means there’s an asymmetry to the potential benefits of open banking.
Multiple panelists expressed optimism that open banking is the first step toward a larger open data economy. Australia and India are good examples of this, where regulation mandates that utilities and telecoms have to share data over API just like banks. If this trend extends globally, banks and financial services companies could be well-positioned to become central players in customers’ digital lives.
The challenger banks came across as true believers in open banking. They’ve all built API-first platforms that embrace partnership opportunities. That brings me to my second theme: the shift from focusing solely on building products that satisfy a given customer segment’s needs to building Platforms that allow other companies and entrepreneurs to leverage a company’s capabilities to build their own products.
That’s kind of wordy, so let me try to simplify: instead of focusing only on building websites and apps, moving to a platform approach means that companies also build APIs for other people to use. Part of this involves a shift from focusing solely on user experience to also thinking about developer experience.
Western Union has offered API platforms that allow partners to leverage our retail and Business Solutions payment networks for years. Many other firms announced the launch or expansion of their platforms at Money 20/20, including Paypal, Transfermate, Mastercard, and Plaid.
The promise of open banking and the platform economy ties into my third theme: innovation. In the past, companies have looked to their own staff to drive innovation. That need hasn’t disappeared, but opening up core capabilities to external developers means that companies can allow other people to innovate on their behalf. Imagine the fantastic, creative, and innovative ideas that could emerge from dozens (or hundreds, or thousands) of start-ups integrating Western Union’s capabilities into their products!
Several speakers suggested that innovation hasn’t truly started in financial services. David Brear, the CEO of 11:FS, spoke about how “digital banking is only 1% finished.” His point is that financial services companies haven’t created truly digital services yet: they’ve just built digitized versions of analog processes, so we’ve seen channel shift from retail/branch to web and app rather than true innovation. He used the music industry as a comparison: consumers shifted from buying physical goods at in-person record stores to buying digital versions of the same products at online stores like iTunes. But then Spotify emerged, which was a truly digital solution that significantly changed the business model of the industry. His thesis is that financial services hasn’t seen its Spotify moment yet.
I heard an interesting back-and-forth between Eli Rosner of Finastra and Megan Caywood of Barclays during a panel session. They were focused on banks, but I think the theme is applicable across financial services generally. Rosner said “Banks don’t see themselves as tech companies that provide banking services,” and Caywood responded with “The banks of the future ARE tech companies.”
One of the panelists from a discussion called “How do you benchmark innovation in 2019?” talked about how the fastest way to delight customers and drive innovative solutions is to focus on breaking down a process, then iteratively working to make each step of that process better and better over time. I looked at this statement as a challenge relevant to product managers working in any industry: focus all of your efforts on solving customer problems. We can all empower ourselves to take on this challenge; innovation and continuous improvement is everyone’s job. Better really does come from everywhere!
I left Money 20/20 convinced that we’re in the middle of a truly exciting time in financial services, and we’re likely on the precipice of real and meaningful change across the industry. I’m confident that Western Union is well positioned to drive and benefit from these changes through our relentless focus on the customer and disciplined use of lean management tools.