The Connector Podcast - Exploring Open Banking: Innovations and Strategies with Liesl McKay, Remc...

Welcome to The Connector Podcast, an ongoing conversation connecting fintechs, banks, and regulators worldwide. Join CEO and founder Koen Vanderhoydonk as you learn more about the latest available trends and solutions in the markets.

Welcome to another podcast of The Connector. Today it's a very, very special one because I'm not alone in the studio.

I have—

I'm accompanied with 3 other people. I've got with me Liesel, Remco, and Andrew. Can you all introduce yourself? And can I maybe start with Liesel?

Hey, Koen. Well, it's always great to be here and back on a podcast talking about all things innovation. My name is Liesel McKay. I am responsible for partnerships and business growth for BBD Software. We are a software consultancy located in, in 5 countries and 6 years now in the Benelux, working with banks, scale-ups, and fintechs, helping them solve business problems using tech.

Excellent. Maybe next one, Remco?

Yes, thank you, Koen, and thank you for inviting me. It's really great to be here and specifically for this topic. I'm Remco Timmerman. I'm the lead for the partner management proposition for Rabobank. That means that we're responsible for attracting new partners and managing relationships with the current partners and try to broaden them, of course, and all in the open banking, embedded banking, banking as a service space, which is quite new For us, but we've been doing it for four years now. And my employer is obviously Rabobank, one of the biggest banks, if not the biggest bank from the Netherlands and worldwide. We're one of the biggest banks in food and agri finance. Food and agri finance.

Excellent. Happy to have you here as well. Last but not least, Andrew.

Hey, Koen. Thanks a lot for the invitation as well. So I'm Andrew Le Prest. I'm currently chief commercial officer over at Extent. Responsible for all things sales, partnerships, and go-to-market. Extent is a Belgian-based open banking company. So we offer white label open banking solutions to any kind of company that needs them. So that can go from retailers to fintechs, banks, small startups, large corporates, basically any, any company that wants to build something with cool open banking tools, they can knock on our door and we're gonna help them out.

Excellent. And for the smart listener, you probably already figured out that today we'll talk about open banking. That's the theme of today. And I would like to start with you, Andrew, because your organization went full on, full in on the open banking space. So what drew your company to do that?

Yeah, that is correct, Koen. So we are really a pure open banking company. We also position ourselves that way. So we offer only open banking infrastructure. We don't offer any kinds of solutions on top to not be competitive to our clients. Clients. And the story about Xten is actually quite interesting. So we started back in 2018 as a software house, and we actually started as a client project for a Belgian company. We started connecting to bank APIs, and throughout our life, we kind of pivoted a couple of times. So the first pivot was from a software house to a product company where we saw that open banking had a lot of potential. And that we could do a lot of things with the open banking infrastructure that we were building. The second pivot was from an open source nature to a closed source nature because the ideal world was, oh, we're going to give back control of financial data to everyone. You know, that was the big goal. And then we saw like, hey, we can still do that, but we can also make some money out of it. So how about we start doing that? Right. And then lastly, like we've, we've really been focusing from 2022 to 2023 on PSPs. and payments, but we've noticed that we have a lot of traction on the data side as well. So that's what we've been focusing on for the last year. So that's kind of the track of Xend and how we got into this whole open banking thing. Just because we saw there was traction, there was a need, it was a cool, interesting product, and kind of the mentality behind it of giving back control to data is something that really appealed to us.

Well, I would say that maybe for a bank, the story is slightly different because there is a regulatory point as well. So I was wondering, Remco, from your point of view, how has that journey been for you and what have you been seeing as the most significant impact for you as Rabobank?

Yeah, that's a real interesting one. So obviously we had to, for the first time, really open up our infrastructure to third parties, mainly driven by the regulatory and compliance stuff. But from the get-go, we already said this will be a strategic topic and we can We can kind of open the door a little bit, or we can flat out throw it open for everybody and try to develop more products, entice partners to work with us, and really embrace the full spectrum of what open banking can mean for us. And we did just that. So we don't only comply with PSD2, we also try and embed or develop solutions like embedded finance and improve other payment solutions, credit ratings, identity solutions, so the full package. And I think the biggest change has been, well, obviously from an API producer, we had to do a major operation to open ourselves up technically. But I think we are also one of the biggest API consumers in terms of using bank data to completely reinvent our credit scoring model. So usually you had to go for as a business client to the bank and ask for a loan, apply for a loan. Now you can do that digitally based on your payment data. And within 15 minutes, and can be faster if you click faster, you have a committed term sheet as an entrepreneur. And you know, based on the payment data and the input you delivered, that you are insured of a certain loan capacity and financing that we can offer you. And you can determine it all by yourself within 15 minutes, which is till this day quite unique in the Netherlands for such a big company. So, in my mind, that has been the biggest change based on PSD2.

Well, thanks for sharing an example because I think for a lot of people, open banking is a very famous term. But putting some actual examples next to that, I think that's great. You also mentioned PSD2. There's obviously PSD3, which is somehow coming. And I was wondering, Liesel, what do you see as happening there? What could we actually expect to see?

Well, before we go there, just to say I absolutely love when regulation causes innovation, right? So I love the fact that through this regulation, we're just seeing— I said to you, BBD loves to solve business problems with tech. And this regulation in particular has been one that's really driven banks and providers around banks and consumers to think about how can we use tech to really solve a problem that everyone is having. And I just love what the outcome of all of this is in the ecosystem as a whole. I think we're going to see more and more of it. With PSD3, we're seeing a huge step in incentivizing banks to even further shed these legacy infrastructures that they've been held back by and holding onto for years and maybe move forward with even larger scale digitization initiatives. Which is of course really great for us in BBD. A lot of what we do is, is look at how can we take legacy and modernize. And I think that what we're expecting to see is that we're going to look at new and innovative ways of doing that modernization. It's always of course important to remember that modernize doesn't mean throw away. Sometimes we're like hugely incentivized to think, oh, we're gonna buy this new shiny thing But oftentimes it's just a really good point to stop, take a breath, do a health check. We love a bit of a health check in BBD, as you know. Look what we've got, see where we are, and then work on what is the best way we can architect the change in a way that makes the most sense from an engineering perspective. And lots of cases, if you just apply clever engineering and modern technology on top of that legacy, we get to where we need to go faster. And the answer normally makes more business and financial sense. So I think that's the biggest thing we're looking to see is how do we use modern tech on top of legacy to get to this innovative space that the regulator is driving us to get to.

I like that statement, modern tech. So how does that actually feel to hear that from a tech provider on Andrew's side and on Remco's side?

I think that's, if I can take the word here, I think that's really nice to hear. For us also, we've been throughout the six-year journey that we've been doing this at Extant. It really felt like modern tech in the way that it was difficult to advance. There was a lot of evangelization to be done, a lot of education to be done. It's very new, so it really resonates with us that this is modern tech, and it's also. Yeah, something that is bringing real value to the table to real companies. So, and from our point of view, that is what modern tech should be doing, and that is why we're doing what we're doing today.

Well, maybe a little bit on the why we're doing things. I think at the end of the day, we're doing things for our clients. And if you put the client in the middle, we're here in a discussion with financial institutions. And I'm putting the client in the middle, that almost immediately directs me back to Remco. So how do you see that coming to you as a bank? And do you actually foresee that maybe the expectations of your clients may change because of these regulations/technology?

Yeah, yeah, definitely. So one of the things that I like most about the entire open banking movement is that it's all customer-centric. It's all based on improving customer journeys, making lives of people easier, and making it easier to consume banking products or embedded products or finance products in the broadest sense possible and making it also reachable for everybody. So that's what we try to do, at least with our entire open banking strategy. And what I see mainly in the embedded finance domain— So for embedded payments, payments has already been well accepted as being part of a customer journey, being part, for instance, for e-commerce. But for embedded finance, we're still making that market in the sense that we've made partnerships with, for instance, bookkeeping parties, ERP software parties, and we can supply financing on invoices through the system of our client's choice. And we see a substantial uptake in using that capability, but it's still customers getting used to the fact that they don't need to go to the banking office or they don't need to go to our website to apply for a loan, but they can do it in the system of their choice. And I think that that will be a significant change in the coming years, that people will get used to doing their banking stuff, their banking needs within the ecosystem of their choice. And I think we can make a lot more from there. than that we do it only on our island as a bank.

I'd like to pick on the fact that you say a lot more, because so far we've been talking about PSD2, PSD3. And as we all know, there is a limitation on the level of how far you go in terms of sharing. And I know, Liesel, on your side, we all know there is FIDA, there's more, there's Open Finance, it's called. So the fact that more data is opening up, what's your take on that?

Yeah, so the more we do, the more the world changes, right? So as we go from open banking, and like Remco said, that's just the first sort of toe dip into open finance, and we see this data sharing now being in insurance, investments, and other data. Minds are opening, right? And people are going to start expecting the behavior to exactly as Remco said, hey, I don't need to go to my bank. I need a bank where I am, and you need to be meeting me right here where I am, where I need you. And yeah, we're really, you know, there's a slower uptake up to now of open banking, but could there be a 2-speed world where people that are using it are just moving so much further ahead than those that don't? And as the world changes, people really wanting, demanding that we meet them where they are. What does that mean for the industry? I mean, we saw how, you know, loyalty changes in the, say, telco space a couple of years ago.

Mm-hmm.

Where customers now can just switch. It's not giving them the choice to go like, hey, who's meeting me really where I am? Because that's the place that I want to share my data. That's the place that I want to do business with. Everything is going to go more and more to ease of use, access, frictionless. Like, that's my word of the day, frictionless. Frictionless is your new best friend. Everything is just going to be about how do we get faster Closer to the clients, meet them where they are.

I'm wondering, Andrew, is that something that you actually also feel and hear when you talk to a lot of prospects in the domain of open banking?

Yeah, definitely. So that's really— I always say it internally also, right? We're not really selling solutions for the platforms that implement our open banking. We sell solutions that are going to benefit their final clients. So the goal is really to be as close as possible to that final client, to that customer, to the one who will be using the platform and making their life easier in any way possible. We've, we have, as I said in the beginning, a broad range of clients in different types of fields. We have some that are doing B2C, more on loyalty side, tailored experiences, helping people have more knowledge of their own finances to make better decisions. And then on the B2B side, like easier transfers of money across the globe, less fragmented data, better data, faster data for decision-making that is really having an impact on these companies and the users. The final users. Yeah.

Well, we're now on the shiny side of things. And yes, there is a lot of opportunity. There is a lot of things that are happening around our customers' expectations. But let's, let's go back to the point where we really need to implement. And I was wondering, because I can imagine for a bank that this can be a big change. So Remco, how did that change go? And what would be the biggest hurdles that you would define?

Yeah, yeah, that's, uh, we get that question a lot, obviously, as a bank. And I think, uh, the magic word here is legacy. And, and with legacy, people often think about technology, but it's also legacy in terms of culture and mindset. And so, yeah, we had, we had to do a lot to open ourselves up. Uh, but it's also our entire bank, it was aimed at delivering a platform, our open, our banking platform, or our marketing site websites and credit scoring tools, all from a perspective that we own the client journey from front to end. And I think that that was the biggest change for us to start freeing up capacity, building the technology needed, but also making a commercial model that's appealing for both the end customer and the partner ecosystem that you want to introduce and utilize as well. And that new entity that we introduced in the relationship with our customers being that partner, that partner or that third party that you introduce there, that's also kind of scary, right? Because we're introducing somebody who we don't fully control. We don't exactly know how they will manage our products and how they will implement our solutions in their customer journey. So will we still be the ones that are the fronting party for them? Will our brand still be positioned in the right way? So these were all questions that made it kind of scary to tackle this head-on. But I think from a cultural perspective, the bank really wanted to do this. They wanted to pioneer on this. And I think that that was the biggest challenge we had, but also the biggest success that we had is that this is being carried by the top management of the organization. And we want to exceed in this space. And therefore everything then trickles down into the organization and everybody gets in line in this direction. And that has been an awesome journey, to be honest.

Well, I think that you really picked the right words, I think. And change, there's a lot of change and open banking is not the only one. I think that there cannot be a podcast nowadays without using the word AI. Talking about AI, then I almost immediately have to think about you, Liesel, and then BBD, because there's obviously a global impact that you guys have working with so many banks on AI. So how would you actually see that? And potentially, what are other technologies or trends that could have an impact on this open banking?

Yeah, I mean, I think you know my view on this with AI is at some point we were imagining a world where AI could change our world, but we're now in a place place where we were with cloud a couple of years ago. Could cloud change our world? Is it going to be great? You're not doing anything without the cloud now. You're not doing anything without, say, the internet. You are not doing anything without AI from this day forward. If it's in your world in a small, medium, or large way, it's absolutely a trend. And I think it's just going to be so— it already is. It's so much a part of how we live our lives every day. It's silly to imagine that it won't change everything we do even in this space. I think some other trends other than frictionlessness is your new best friend, which really is for me the heart of the matter, is as we meet this client more and more where they are, their real user experience. And we've said a lot about UX and UI in the past, but everything is going to be about the user experience. Like, There's a big difference between okay user experience and great user experience. And if you can't imagine that difference, you haven't thought about this topic long enough. But that is going to become everything. And then I also see financial literacy. I think, Andrew, you sort of touched on this. And I think, Remco, I loved what you said about legacy being the way we think. Because it's not just how we think as the people building or as the the tech behind it or as the bank. It's actually the consumers are in legacy. And how do we educate them to move out of that? Of course, there will be a tipping point where it's obvious and everyone's moving. But in this phase, I think that financial literacy, that education around how the world has changed, how their life can be better, which has a bit of a marketing element to it, but it's also a financial literacy element. I think over the next year or so, that's going to be really, really important. from a trend perspective in the space.

Well, thank you for sharing that. It's a nice way of putting it. Andrew, I think on your side, since you're very close, well, engaged with the market around all the latest stuff, do you have any examples you could share perhaps around AI and open banking?

Yeah, definitely. So I think the people today that are kind of the first adopters of integrating this AI On a broad scale is probably a company that, or a bank that Remco is going to be quite familiar with. So there is the use case of Bunk Bank that has integrated Mastercard for open banking specifically. So they're working with Mastercard as a provider for open banking, and they are now deploying large language models and AIs to do exactly what we've been talking about here. So what they are doing is setting up a system in which final clients can pull data from all kinds of different environments, different accounts, different banks, and then putting that kind of AI layer on top of it to be able to consult the final clients in, in their financial decisions, in where they stand when they want to buy a house, when they want to get a mortgage, when they want to get a loan for a new car. So these are things that are actively being put into place now that are being tested with some of the first movers in the market. I personally strongly believe that this is something that the whole market is going to move to and that within 5 to 10 years this is going to become baseline, that all banks are going to have something in this regard to really, again, as Lidl said, tailor it towards the user experience, towards the user journey, and bring the maximum amount of value to them within one tap away in their smartphone, literally. So that is kind of how I've been looking at it.

Yeah.

It's a very good example, Andrew. But what is important at that point in time, it's how to stitch it all together. So the magic word API comes in on the table. I don't know, Andrew, maybe you can explain a little bit because I think your solution is really pretty much built around APIs.

Yeah, definitely. So I think without APIs, we wouldn't be here today. We wouldn't be where we are in open banking. Open banking is only what it is today thanks to these APIs, right? So what APIs are doing today is allowing us to securely get access to information or services that we need on, well, in the case of open banking, the bank side, without resorting to any unsafe or illegal practices like screen scraping or reverse engineering, things that were all too common before open banking actually existed. Well, for me, how I see it is that APIs play such a big role in open banking and will keep playing a very big role in open finance and even open data. Towards the future as they will allow companies like ours or other companies to access specific things in a safe and secure way without too much trouble. And to give like even another example, like we even have in Belgium the Flemish government that is offering APIs, open APIs such as geolocation APIs, geographic information on building plots in Flanders that allow companies to pull this data straight from the APIs and to use it within their platforms. And I think this kind of open banking in Europe at least is going to be that first step towards open finance, toward open data, where everything will be interconnected through APIs.

My guess is that instead of talking about open data, I guess data collaboration will be the new kid on the block. On the block, better. We're almost to the end of this conversation, and it feels like the 4 of us, we can have a conversation forever. But I'd like maybe to give the final word to Remco because it's very nice to have a bank around us as well. So I would like to use that opportunity maybe to give you the last word and maybe a clue of what we would like to talk about in your last couple of minutes, your minutes of fame, I would say. What do you see as the bank, as Rabobank, What do you think are the benefits for your clients, the fact that you're using open banking?

Yeah, well, that's almost stating the obvious, but I think our customers will benefit the most by us being there where they need us the most, being an integral part of their daily lives through the system or platforms that they use the most, on the way that they want to consume the products that they prefer. Kind of interesting what Andrew said about the APIs. Yeah, APIs is a very important one. But what we also learned is that you can also deliver a very interesting customer journey through an API. And so we first delivered all of those steps in a kind of detached way so that customers, our partners, could implement the entire journey themselves. But we've learned that if we deliver widgets and components, we can also kind of make it easy to integrate for partners and being live within 1 or 2 days. So it's both serving customers in the best way we can with the banking products that we have, but also being there for our partners and delivering the best service and best integration experience and the best partnerships that they can have. And together with the 3 of us in this new banking ecosystem, we can deliver the most value. That will be, I think, my aim for the future and Rabobank's aim for the future.

I think, Remco, on those wise words, I would like to sort of close off this podcast. And obviously, thank you all 3 for joining us today. Thank you all for— also for the audience for tuning in. And stay tuned for more information and innovation from our financial industry. Thank you very much.

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