Think tank and banks innovate to offer open banking

In Africa there’s a saying, “If you want to go fast, go alone. If you want to go far, go together.”

That’s the philosophy behind my organization, Consorzio CBI, a pre-competitive think tank promoting collaboration and digital innovation among 450 banks in Italy and financial service providers throughout the European Union (EU). Some 2 million corporations have used our interoperable CBI Services to dialogue with their banks to manage treasury operations and electronic bill presentment and payments.

Of course, we also want to develop digital infrastructure to help our community thrive in the future. Consider, for example, our work on the second Payment Service Directive, or PSD2. Issued in 2015, PSD2 provides a common legal framework for the EU payments market. Consorzio CBI is helping our members capitalize on PSD2 by developing a shared infrastructure for transactions and compliance.

Encouraging open banking

PSD2 aims to encourage open banking services by improving payment security and consumer protection, stimulating innovation and competition, and leveling the field for all players in the payments market. It could transform traditional banking by enabling consumers to request account information and payment services not just from their banks, but from fintechs and other qualified third parties.

Consumers benefit because PSD2 will lead to more services for payment and account management while ensuring information security and compliance with GDPR legislation. Banks and fintechs gain the opportunity to define new services by accessing machine readable consumer information exposed through open APIs. But upgrading a bank’s systems to comply with the directive’s complex regulatory architecture requires investments. We estimate that if Italian banks upgraded individually, it would cost the industry between 300 million and 400 million euros.

Learn more about Banking and Financial Services solutions

Collaborating with CBI Globe

In response, Consorzio CBI has developed the CBI Global Open Banking Ecosystem, or CBI Globe, a single gateway to open banking that offers centralized PSD2 services for consortium members and other international banks. Banks in the role of account servicing payment service providers can use the platform to identify and connect to other banks, fintechs and third parties offering payment and information services. We expect the collaborative infrastructure will reduce PSD2 compliance costs by 40 percent, considering all the issues involved.

CBI Globe offers more than cost reduction, however. It will include APIs for orchestrating strong customer authentication and for defining a level-one help desk for fraud management. It will feature an independent workspace through which banks and fintechs can connect one to one and create new services for the digital consumer. We are also pursuing innovation beyond the B2C market. Currently, the platform handles retail services only. In the mid-term, we envisage covering bulk corporate transactions as well.

Piloting the PSD2 platform

How close is CBI Globe to PSD2 readiness? We are developing guidelines in order to help banks understand the mandatory APIs and to stress-test their communication interfaces. From November 2018 to February 2019, banks will pilot the platform in collaboration with fintechs in Italy, France and other EU countries. Then, starting on March 14, 2019, we will guarantee PSD2 compliance for banks and fintechs that adhere to CBI Globe. By September 14, 2019, use of the PSD2 interfaces will be in force for the banks, but the CBI Globe rollout is planned for June. This will allow member banks to benefit from the so-called fallback exemption, based on the final decision of our Competent Authority (Bank of Italy).

If collaboration is the key to PSD2 success, it’s also at the heart of our development process. McKinsey & Company contributed to strategic cost analysis, Cambridge Management Consulting and IBM Services helped us write API implementation guidelines, and technology company Nexi Payments assisted us with technical development of the CBI Globe solution.

Our PSD2 journey shows the truth in the saying: together, we will go far. Thanks to Consorzio CBI members and our development partners, we are closer to fulfilling the promise of open banking in the EU and beyond.

Watch Liliana Fratini Passi discuss PSD2 in the EU: