Open Banking, which allows the banks to exchange their clients’ financial details amongst themselves and third-party service providers, is one of the hottest trends of this year that increasingly more countries partake in, Ukraine included.
This is the point of view expressed by Nykyta Izmaylov, investor and co-owner of sportbank.
Mr. Izmaylov pointed out the exchange of data on current payments, transaction history, use of various financial services (from deposits to insurance) only happens if the client allows this information to be shared.
Nykyta Izmaylov says the first Open Banking experiments date back to the 1980s, when 2,000 Germans took part in the “My Bank in The Living Room” online-banking project.
“Even then there were disputes on the subject of the secure exchange of financial information, something that customers always have to be talked into. After all, the banking business has always had the concept of banking secrecy, which cannot be disclosed to outsiders, and even more so without the consumer’s consent. This was the case 40 years back, and British banks faced the same troubles as they launched the first Online Banking just under 10 years ago”, says Nykyta Izmaylov.
According to sportbank investor, the public comes to understand the potential of Open Banking, as the new fintech projects and financial applications emerge, designed to make it much easier to keep one’s finances in order.
Nykyta Izmaylov lays out the main benefits of Open Banking:
“First off, the maximum simplicity of banking and financial services. All you need to do is to pick out one app, with all your banks, service providers, and other relevant companies. Second, banking transactions and payments are faster than ever – it only takes seconds to move the money. Last but not least, the providers constantly reduce the tariffs for their services, as more and more free-of-charge services flood the market. All of this unfolds amidst the reinforcement of security measures and ongoing improvements of the financial data protection instruments, as the professionals learned how to deter fraudsters and hackers.”
Mr. Izmaylov also pointed out that global regulators stiffen up their requirements for banking institutions, making them the responsible parties in charge of their clients’ funds and financial details safety, which guarantees the security of services on offer.
Speaking of the successful foreign experience, Nykyta Izmaylov reminded the first Payment Service Directive was developed by the European Commission back in 2007. The document laid out the basic payment rules, and it also granted the non-banking organizations access to the market. According to Nykyta Izmaylov, it is they who then drove the development momentum.
The founder of sportbank also mentioned that European statesmen introduced a new, updated rulebook in 2018; PSD2 stipulated the enhanced security measures for money transfers, and most importantly, it spelled out a new requirement to have Open Banking implemented: the bank must (obligated, cannot refuse to comply) provide banking details to a third party via API if a client authorized it.
Since then, many countries work tirelessly to raise the bar of Open Banking.Ukraine is no exception. In 2001, the Law “On Payment Services” was adopted, which potentially paves the way for Open Banking, while the National Bank of Ukraine elaborated the “Concept of Open Banking” in 2023. Neobanks, like sportbank, are ready to actively engage in the said projects, armed with all the global experience in the field. Nykyta Izmaylov, investor of sportbank, says the first Open Banking project is to be launched in Ukraine no later than Q3 2025.