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Open Banking today: an opportunity, not a threat

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Open Banking today: an opportunity, not a threat

By Paolo Spadafora, CEO Epiphany

Banks today are facing several challenges to become compliant with PSD2 regulation. The main goals of the second iteration of the EU’s Payment Services Directive (PSD2) are admirable: they intend to advance the security of the customers – and, as a consequence, to reduce fraud – by implementing a stronger customer authentication (SCA) for online purchases, in addition to establish a higher level of competition and drive innovation by opening up the payments market to new players, or third-party providers (TPPs), mainly via the application programming interfaces (APIs).

Paolo Spadafora

Paolo Spadafora

While the deadline has past, several countries are behind and have postponed because many banks were not ready yet. Other countries who met the deadline are experiencing pressure by Third Party Processors as exposed interfaces are superficial and do not allow TPPs to fulfil the requirements they have to implement their services.

It is therefore clear that the industry felt relieved when in June 2019 when the European Banking Authority (EBA) allowed national competent authorities (NCAs) to extend the deadlines for SCA implementation beyond September 14. The UK’s Financial Conduct Authority (FCA) was the first to announce plans to give more time. Other NCAs, including the Central Bank of Ireland and the Bank of Italy, were close behind.

Despite this further permission, at the moment, banks are going through three main challenges:

  1. Their outdated core banking systems slow down or completely impair a bank’s ability to deliver new services and/or products
  2. Regulation & Compliance requirements often have no technical specifications, and this makes them hard to fulfil
  3. Shifting from an independent mindset and model to an ecosystem mindset and model mindset is proving to be difficult.

Furthermore, “new” and “old” technology rarely work together and require Open Banking application programming interfaces (“APIs”). As a such, integrating these two poses a high degree of challenges and is both time and resource intensive.

Regulations are written by the legal professionals, but banks must translate these into functional & technical specifications, leaving room for misinterpretation and often re-work which inevitably cause delays. To reduce these risks additional effort is needed when teams are forced to adhere to more complex development process.

Many traditional banks today operate like the closed version of the Japanese economy in the 1600s, where Japan was a closed economy and society. This result in a stagnated economy and culture.

Banks take a more conservative approach and are generally concerned about external parties that can disrupt the way things are done, viewing change as big risk. This is why lenders see the PSD2 as a threat, rather than an opportunity. This risk-averse mindset causes them to take the “minimum viable compliance” approach, which does not and will not lead to open banking, nor will all of these factors have combined yield better experiences for banking clients.

In our point of view, a real collaboration between both third parties and customers is required in order to overcome these challenges, with the final goal to innovate and satisfy banking clients’ needs and preferences in a timely fashion. If this does not happen, banks will face disruption, disintermediation and- worst of all- complete irrelevance.

Lenders will greatly benefit by collaborating with multiple players and absolutely should leverage a network of contributors (TPP) in the design process to develop solutions to identified problems, as opposed to new products.

Open banking has 3 main players: banks (also known as ASPSPs), authorized TPPs and customers. The majority of ASPSPs have exposed API or data interfaces, however many differences exist across countries due to variations in the law transposition and lack in adopting standards for technical specifications.

Moreover, many banks customized their APIs even if they state they implement a standard.

This is an issue for the entire ecosystem to operate effectively and efficiently. More time and resources are needed to align different offerings across countries causing a deferral of Open Banking adoption for and by Consumers, and as such, a delay in securing a great customer experience. When consumers are not satisfied, further disruption emerges: an example is represented by BigTech taking their billions in capital and enormously trusting base and becoming banks themselves. This is where we are getting to, and what banks need to face: a third force of nature, the big tech.

Another important topic, unfortunately rarely discussed enough by the open banking community, is related to customer awareness. Open Banking is almost unknown to bank users: the EBA and connected institutions should force NCA to allocate resources to educate consumers and businesses, explaining the matter from all perspective and the benefits that it will bring to the entire community, and more, specifically choice and convenience.

We predict that if 2020 will be the year we see harmonization and tuning of the “PSD2 Infrastructure”, the end of 2020 or begin of 2021 will probably mark the beginning of Open Banking adoption.

Customers will start to see the benefits of Open Banking in the middle of 2020: personal finance management will manifest transparency, instant credit will improve customer experience to access credit, automated transaction reconciliation, better payment integration, and so on, will bring immediate benefits to SME boosting their performances.

Once this happens, banks will also see the results in terms of higher customer satisfaction and revenue.

Banks need to embrace open banking, including embracing of partnerships and new methods that accelerate innovation. Innovation fuels both growth and engaged customers. Open banking is a big change and many people don’t like changes; but change Is the reason we have evolved and still do.

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Siemens Healthineers gains EU nod for $16.4 billion Varian buy

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Siemens Healthineers gains EU nod for $16.4 billion Varian buy 1

BRUSSELS (Reuters) – EU antitrust regulators on Friday cleared with conditions Siemens Healthineers’ $16.4 billion acquisition of U.S. peer Varian, paving the way for the German health group to become a world leader in cancer care therapy.

The European Commission said Siemens Healthineers pledged to ensure that its medical imaging and radiotherapy equipment will work with rivals in return for its approval, confirming a Reuters story. The pledge is valid for 10 years.

“High quality medical imaging and radiotherapy solutions are crucial to diagnose and treat cancer. The efficiency and safety of treatment relies on the ability of these products to work together,” European Competition Commissioner Margrethe Vestager said in a statement.

Varian is the leader in radiation therapy with a market share of more than 50%. The deal received the U.S. antitrust green light in October last year.

 

(Reporting by Foo Yun Chee)

 

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Battling Covid collateral damage, Renault says 2021 will be volatile

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Battling Covid collateral damage, Renault says 2021 will be volatile 2

By Gilles Guillaume

PARIS (Reuters) – Renault said on Friday it is still fighting the lingering effects of the COVID-19 pandemic, including a shortage of semiconductor chips, that could make for another rough year for the French carmaker.

Renault reported an 8 billion euro ($9.7 billion) loss for 2020 which, combined with gloomy take on the market, sent its shares down more than 5% in late morning trading.

“We are in the midst of a battle to try to manage a difficult year in terms of supply chains, of components,” Chief Executive Luca de Meo told reporters. “This is all the collateral damage of the Covid pandemic… we will have a fairly volatile year.”

De Meo, who took over last July, is looking at ways to boost profitability and sales at Renault while pushing ahead with cost cuts. There were early signs of improving momentum as margins inched up in the second half of 2020.

The group gave no financial guidance for this year, although it said it might reach a target of achieving 2 billion euros in costs cuts by 2023 ahead of time, possibly by December.

Executives said they were confident the carmaker could be profitable in the second half of 2021, but that they lacked sufficient market visibility to provide a forecast.

Renault struck a cautious note, saying it was focused on its recovery but warned orders had faltered in early 2021 as pandemic restrictions continued in some countries.

The group is facing new challenges as the European Union tightens emissions regulations and after rivals PSA and Fiat Chrysler joined forces to create Stellantis, the world’s fourth-biggest automaker.

The auto industry endured a tough 2020 but a swift rebound in premium car sales in China helped companies such as Volkswagen and Daimler to weather the storm.

Auto companies globally have since been hit by a shortage of semiconductors that has forced production cuts worldwide.

“The beginning of the year has shown some signs of weakness,” De Meo told analysts, but added the chip shortage should be resolved by the second half of 2021. “We have taken the necessary measures to anticipate and overcome challenges.”

Renault estimated the chip shortage could reduce its production by about 100,000 vehicles this year.

SHARP HIT

The group was already loss-making in 2019, but took a sharp hit in 2020 during lockdowns to fight the pandemic, which also hurt its Japanese partner Nissan.

Analysts polled by Refinitiv had expected a 7.4 billion euro loss for 2020. The group posted negative free cash flow for 2020.

The 2018 arrest of Carlos Ghosn, who formerly lead the alliance between Renault and Nissan, plunged the automakers into turmoil.

In a further sign that the companies have been working to repair the alliance, De Meo told journalists that Renault and Nissan will announce new joint products together in the coming weeks or months.

Renault has begun to raise prices on some car models, and group operating profit, which was negative for 2020 as a whole, improved in the last six months of the year, reaching 866 million euros or 3.5% of revenue.

Analysts at Jefferies said the operating performance was better than expected. Sales were still falling in the second half, but less sharply.

Renault is slashing jobs and trimming its range of cars, allowing it to slice spending in areas like research and development as it focuses on redressing its finances. It is also pivoting more towards electric cars as part of its revamp.

It was already struggling more than some rivals with sliding sales before the pandemic, after years of a vast expansion drive it is now trying to rein in, focusing on profitable markets.

De Meo told journalists on Friday that the French carmaker will make three new higher-margin models at its Palencia plant in Spain, where manufacturing costs are lower, between 2022 and 2024.

($1 = 0.8269 euros)

(Reporting by Gilles Guillaume and Sarah White in Paris, Nick Carey in London; Editing by Christopher Cushing, David Evans and Jan Harvey)

 

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UK delays review of business rates tax until autumn

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UK delays review of business rates tax until autumn 3

LONDON (Reuters) – Britain’s finance ministry said it would delay publication of its review of business rates – a tax paid by companies based on the value of the property they occupy – until the autumn when the economic outlook should be clearer.

Many companies are demanding reductions in their business rates to help them compete with online retailers.

“Due to the ongoing and wide-ranging impacts of the pandemic and economic uncertainty, the government said the review’s final report would be released later in the year when there is more clarity on the long-term state of the economy and the public finances,” the ministry said.

Finance minister Rishi Sunak has granted a temporary business rates exemption to companies in the retail, hospitality, and leisure sectors, costing over 10 billion pounds ($14 billion). Sunak is due to announce his next round of support measures for the economy on March 3.

($1 = 0.7152 pounds)

(Writing by William Schomberg, editing by David Milliken)

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