By Liliana Fratini Passi, Managing Director, CBI

Data are the fuel of new economic paradigms. From a data monetization perspective, the latest business models are built on the centrality of customers’ information as a critical element to increase the revenues of Payment Service Providers (PSP).  

Therefore, incumbent and new PSPs have started offering financial services to a variety of stakeholders, including public governments, corporate and retail customers, with the aim of maximising the opportunities stemming from advanced technologies. These include, among the others, Application Programming Interfaces (API), Cloud computing, Distributed Ledger Technology (DLT), the Internet of Things (IoT), and Artificial Intelligence (AI).  

Hence, regulators around the world have elaborated legislative frameworks to help these innovative trends securely develop. This is what happened in the European Union (EU) with the Payment Service Directive 2 (PSD2), which renewed the Union payments regulatory framework. On the one hand, this piece of legislation enhanced the security of online transactions, imposing the use of Strong Customer Authentication (SCA) for users willing to accede to their online bank account or initiate a payment. On the other hand, the directive paved the way for new mandatory functionalities, such as account information and payment initiation services, to be performed by Third-Party Providers (TPPs), namely non-bank PSPs.

Needless to say, the massive change provoked by the PSD2 forced traditional banks to adapt their business models and update their IT architectures. The situation has made it easier to understand the value of collaborative solutions that could support the efforts performed by traditional financial intermediaries to achieve compliance with the PSD2. Against this background, Italy showed to be a best practice.  

CBI, the industry utility of the Italian banking sector comprising more than 400 PSPs as shareholders and customers, launched in 2019 an API-powered PSD2 gateway, CBI Globe. The latter allowed banks to save around 40% of necessary investments to be compliant with the PSD2, which would have been, otherwise, on each PSP.  Thus far, 80% of the Italian banking market (around 300 PSPs) has adopted CBI Globe to meet the requirements of the PSD2, achieving the exemption from the fallback solution by the National Competent Authority (i.e. Bank of Italy).  

The CBI’s PSD2 gateway enables banks to securely share their customers’ online bank account data with more than 180 domestic and foreign TPPs. The platform has facilitated, so far, the evolution of the Open Banking market in Italy: since its launch, CBI Globe has registered more than 200 million API calls.  

After having overcome the “compliance phase”, banks have started partnering with Fintech and start-ups to further innovate their business models, offering services that go beyond the mere “banking” products. In Italy, banks have begun operating as Account Information Service Providers (AISP) and Payment Initiation Service Providers (PISP) thanks to the updated offer of CBI Globe, which implemented in 2020 an active functionality to allow financial intermediaries to play the role of TPPs. In the new Open Finance scenario, banks, Fintech, and start-ups have further strengthened their cooperation to attract new customers, reduce costs and produce customized services to address the needs of the range broad of users utilizing financial products.  

This new phase also coincided with the Covid-19 crisis, which paved the way for a fostered digitalization around the globe. The opportunities stemming from advanced technologies have induced CBI to develop Open Finance value-added services to support public governments and the private sector in carrying out their activities, despite the international health and financial crisis.  

Thanks to the participation of the Italian banking community, CBI launched in 2020 CBI Check IBAN, an API service that allows public governments and corporate to check online the data (IBAN code and fiscal code or VAT number) provided by a natural or legal entity to obtain a fiscal bonus or subscribe to a service. Thus far, the public administration has performed more than five million checks to guarantee the correct disbursement of economic resources to citizens and corporates suffering the financial consequences of the Covid-19 crisis.  

Taking into account the fertile soil that advanced technologies are finding in the financial services domain, I believe that the future of the financial sector will be marked by a further impetus on digitalization. This aspect should let us think of the relevance to guarantee the security of every online transaction we make, thus increasing the trust of consumers towards innovative solutions and new market players. Legislations around the world would also need to safeguard the implementation of the level playing field principle, thus preserving banks’ intermediary capacity.  

Should these conditions be met in the upcoming months, the Open finance market will be able to make the most out of the current impetus provided by advanced technologies, thus creating a mature market.