Open Banking Observations by Andreas Lennevi, Mendix
After a delightful #TBSCONF23BXL on May 16, we sat together with Andreas Lennevi, Enterprise Architect for Digital Transformation at Mendix and one of the panellists in the panel “Building Blocks for a Successful Open Banking Landscape”. Mendix is a leading enterprise low-code application development platform. They allow you to convert a spreadsheet into an app, create an organization-wide app portfolio, modernize an entire core system, and everything in between. That made us curious.
Welcome Andreas. On May 16, you were one of the panellists at The Banking Scene Conference 2023 Brussels in the panel “Building Blocks for a Successful Open Banking Landscape”. We also raised polls for the audience. One question was: “Who was open banking made for: Fintechs, incumbent banks, or Bigtech”. 50% voted for Fintech. Would you agree with that answer?
Andreas Lennevi: The question was missing one option, in my opinion: the consumer. I believe the question was targeted to the banks in the audience who are questioning if it’s for them or Fintech, and they feel it is for Fintech. But I believe it would be better for them and all parties involved if they started seeing it as a way of reaching more customers with new and old products.
In my opinion, open banking is at the service of the consumer. These services will evolve, and they will improve and eventually stimulate people to switch to banks with the best financial products or services. Consumers will get more instant and secure access to loans and banking services via new channels and ways of working.
In that respect, I recommend that the banks look at open banking as an opportunity instead of a challenge because you need to be there when the revolution starts going mainstream. Go way beyond what the regulation says, and make it as convenient as possible for developers and third-party providers to connect. Work with third parties to find new products, use cases, and services. Banks might not own the end-to-end customer relationship, but it will benefit the bank to look at it differently.
I also think banks could think of Open banking as a thicker layer of functionality, a new category, Retail Banking, Corporate Banking and Open Banking, where they collaborate with 3rdparties in a rich and functional way. Maybe not just building the APIs, but building new workflows targeting new product categories, maybe in a template Mendix app that 3rd parties can start from and integrate with.
You shared in that panel that you work with a major aggregator to help a telco build a Superapp. Can you explain a bit more about that project?
Andreas Lennevi: Yes, we are working on a Superapp. Superapps basically bundle a massive amount of functionalities in one single mobile app so that it becomes like a home, a place where you can manage your daily life. Superapps are not very common in Europe, but they are very successful in Asia. So most European people are not so used to it.
We’re helping to build one with Mendix. This client wanted to go to market very fast with many functionalities, so they chose to work with Mendix. They had a good React Native framework before, with high code, but to evolve a lot of functionality fast, they needed to switch to Mendix and low code. Mendix orchestrates the connections with a large amount of 3rd parties like telco, route planning, ticketing for public transport and events, parking, neighbourhood, energy planning/switching, booking restaurants and more.
The banking part is planned for release 2. We are using one of the major aggregators to gather transactions data and creating a wallet functionality. It also integrates with loyalty and carbon footprint 3rdparties The aggregator makes the integration challenge a lot easier.
In another poll, we asked whether open banking fulfilled its expectations. 55% said it “hasn’t yet” but remain optimistic, saying it will improve once we have the basics right. What’s your take on this?
Andreas Lennevi: I definitely think so, and the regulators will not give up until they reach a critical level of acceptance. If the industry doesn’t do it by itself, they will get pushed into it. That scenario is not as fun as doing it yourself.
I think it hasn’t reached a critical level yet, but it is coming. But as you know, tech trends come exponentially: they start slow and then suddenly fire up. I don’t know when to expect that moment, but I think it will definitely swing up in the next five years.
Revolut is an excellent example of a financial institution that is getting traction. You see the commercials everywhere and hear more and more people using it.
But it is not a bank.
Andreas Lennevi: The question is: do you need to be a bank? Revolute helps my son make purchases online – and me to park and charge my car in places where my regular debit and credit cards do not work. For me, it enriches my experience a lot.
My colleague Paul Higgins also showed me Check24, a German comparison site. You can find everything you want on those pages, from property to hotels, telco offerings and energy, and bank products and services. With those types of comparison sites, I think switching bank accounts will become more frequent in a relatively short time because you can save money, and with open banking adding data for accurate comparison and also switching will get much easier for consumers.
In the panel, you also spoke about a Swiss customer that you are helping in their open banking journey to build faster APIs. What surprised me was that their business case was to double their customer base in a year or two. How will they make a sufficient difference from their peers to convince these prospective customers?
Andreas Lennevi: I think the business case is built on the network effects. This bank has a global presence, and they believe that the network effect will gain them as many customers in one or two years as they got in the last 100 years by having excellent APIs and collaborating with many third parties. I think this relates to the many “un-banked” people around the world, where these new players give people with no access to banking now – a chance to take part in the global financial system. At the core is also that customers do more things online only and are thus cheaper to serve, and the mass effect can happen.
In the end, when the revolution tips over, The Facebook Effect, when things go big: if the service is much better and cheaper than others, people go in hordes for better service. It will take time in the developed banking areas like the Benelux, where everybody already has an account and a mobile banking app, but the day it happens, it can happen relatively fast, and the banks with the best network and services, and lowest costs, will win that race.
All right. Reflecting on the conference, what were your main takeaways from the panel you joined?
Andreas Lennevi: My big takeaway, at least from the Belgian side, was that when we talk about open banking, the banks are very focused on the problem instead of looking at the opportunities. I felt like the banks do not connect Open banking with new opportunities, which is unfortunate. They seem to treat open banking as a compliance exercise, as a mandatory job, a technical problem.
Banks feel they have already invested in a banking app, so why should someone else do this? In a way, I understand their reasoning, and Belgian banking customers don’t easily switch banks. They still need the chicken with the golden eggs in open banking, and that’s yet to come. But the 3rd party services will be richer, more specialised, more varied, more consumer-oriented, and integrated into other parts of people’s lives – so in most cases it’s a compliment rather than a competitor to the existing mobile banking apps.
In defining new products or markets and benefiting from this change, the banks should probably bring together business, legal, and IT people, make a market plan and treat it as a genuinely new segment of banking. Now it is time to bring product people to the open banking team. These people working on open banking should be treated as a department. Maybe corporate banking, private banking, retail banking and open banking deserve to be treated at the same level as a separate business line.
One last question, why should banks contact Mendix to step up their game in open banking?
Andreas Lennevi: I think that currently, there is the perception that open banking is about developing and managing APIs, and of course, Mendix can help with that. We are very good at integrating both ways, from 3rd parties to access banking services and for banks to provide banking services – and in both cases, were are very fast to change – so in an area that is about innovation and evolving fast, Mendix should be able to bring great value to this new sector.
On the banking side, preparing and managing data as part of your third-party interaction is key to making open banking successful. This exercise is much more than just building APIs. Mendix is a full-stack application development platform which can provide that for you.
In the pure-API area, we compete with organisations like Axway and Mulesoft, which have partly ready pre-setup solutions. But I think banks risk getting stuck in an API thinking instead of re-engineering the area with extra functionalities with new products using new workflows. E.g. to take a loan for a new Bike for less than 2000 Euros, maybe that can be given instantly on some simple parameter like the average amount on the account in the last year or any other new adjusted rules and workflow.
Banks could re-think what the new way of working means while providing more and safer business for them at the same time. Maybe they create a new type of account: an Open Banking account – with another set of rules – which is in a modern system – not necessarily in the old systems. Maybe this eventually starts IT migration towards newer, leaner solutions adapted for online first use cases.
Working with Mendix allows banks to minimise the changes in the back-end systems. Banks working with us can do all the conversations for these new product offerings on the Mendix platform. They can store front-end data to limit the number of calls to the back-end systems. This implies that the back-end systems no longer limit you from providing good APIs and new banking services. That’s where Mendix can help. Mendix is a platform to build fast and change fast. And we have a full-stack platform with database logic, UI, and APIs. Whatever you need to do, you can do.
Banks could also create a 3rdParty Template Mendix app and put it in the Mendix Market place – that has a locked down part for the API calls and process parts that can not change and an Open part which the 3rd parties can adapt for their solution and use-case. The locked-down part can be independently updated by those banks, and as long as the integration parameters stay the same, the 3rd party logic is not affected.
For third parties and Fintech, we can build the Mobile and Web apps for the new use cases and provide any integration or any type of API or mobile or web client that interacts with banks, comparison sites or aggregators. The future is bright and exciting in this area.