What it takes to scale Open Finance and AI in Europe

Speaker A: Foreign. Welcome to Open Banking Expo Unplugged, bringing you the brightest minds in open banking, open finance and beyond. Hello and welcome to the Open Banking Expo, um, Unplugged podcast. I'm Ellie Duncan, head of content at Open Banking Expo and my guest for this episode is Joris Henson, who is founder and co head of, of Deutsche Bank's API programme. Joris is a long standing contact here at Open Banking Expo, so you may well have seen or heard him speak at our uh, Open Banking Expo UK and Europe show in October. He's also one of our Open Banking Expo Awards judges, so it's great to have him on the podcast. And we're going to be talking a little bit about FIDA today, as well as open finance more broadly and AI in open banking, which is something of a buzzword at the moment. So welcome to the podcast, Joris.

Speaker B: Thank you, I'm very happy to be here.

Speaker A: So for those who aren't familiar, can you tell uh, our listeners a bit about not only your role but also Deutsche Bank's API program which you've spearheaded and overseen over the past few years?

Speaker B: Sure. It's funny, I think last year I celebrated my 10th year in uh, the open banking space. So we launched the whole API program in uh, 2015 actually with the idea we thought that the regulation PC2 in Europe is coming and we wanted to open beyond the scope of the regulation regulation. So we thought about this whole open banking model as an opportunity right from the start. So we started to open different data sets from credit cards, saving loans and then further expanded it to wealth management space uh, with investment data. We have data for corporate clients and yeah, you can say that over the past years uh, we built a nice ecosystem of customers. We have uh, 85 customers right now and we continuously expand services, you can say. So it's a continuous transformation within the company. And while there was not really an awareness about what APIs are, you can say that this has uh, changed uh, nowadays and it's totally uh, normal to talk about APIs and processes that can be embedded in other platforms with the help of APIs. But nevertheless, I mean whatever's uh, there, there's still a lot of transformation going on and it's, and new topics on the horizon.

Speaker A: Yeah, as you say, it's a continuous journey really. And it's interesting, I mean you mentioned being 10 years into this journey. I mean you must have seen over that time sort of attitudes change to open banking as well as obviously other banks and financial institutions and countries actually implementing open banking Right, Yeah.

Speaker B: So uh, after all this time I uh, feel like it's really like a bubble uh also in terms of people that, that you started. One of the challenges we had in the beginning was definitely around that there was not an awareness what open banking means. And it felt to people we've been talking to it felt more like the concept of giving data out for free in a very uh, insecure way. And that was something people had to learn and understand that it's actually an opportunity. And I think the first partnerships helped to make that more tangible and to understand. Okay, okay. What we are doing with this fintech we would not have done ourselves and it's uh, a great product and people started to understand the concept. I think it's way easier to talk about this from today's perspective than back then was certainly challenging but now I feel like it's nice to see um, how open banking progresses in many different ways. If you look at the uk, I mean with the smart data bill now and what you do around sandboxes, certainly amazing. An event like the Open Banking Expo that brings together all the enthusiasts around open banking, uh, data and products is certainly a uh, good thing to recharge the batteries as well.

Speaker A: Yeah, I think you're right. The discussions have certainly moved on and you know we've got past that initial fear as you said about opening up your data and you know those concerns around losing customers and uh, all that kind of thing and we've seen those fintech bank partnerships being embraced and we've seen some really positive outcomes from those. Something else that I know you've been heavily involved in more recently is fida which is a European Union initiative. First of all Joris, for those who aren't aware of fida, can you bring us up to speed on what exactly it is?

Speaker B: FIDA translates uh, to Open Finance framework for Europe. The idea is that uh, banks, uh, insurances mainly will provide secure access um, um to data. The scope goes far beyond PSD 2. It includes saving products, investment products, insurances, loans. So it's quite a broad scope uh, um, um that the regulation plans to implement. It's all centered around customer consent. So that's a big part, um, a big part of the regulation talks about to empower the customer and how um, important is for the customer um to take uh, the data into a different context and to create transparency. FIDA also plans to introduce so called schemes uh, to monetize the data. So I guess that's also new compared to PC2 so those schemes would be Set up as um, you could say like also a way to define the data standard but also the access, uh, criteria, contracts etc. So it's kind of a very market driven approach that uh, FIDA foresees. The current status is it's I think been discussed for like three years now. It's a uh, lot of back and forth. There's a huge criticism around the broad scope of the implementation or the broad scope of fida. There are suggestions to implement a phased approach to start with one scope and then after a time add more data. And there's I would say um, a huge discussion around the model of schemes because there's this fear that we could end up with a lot of fragmentation and many, many different schemes in different countries for different products like saving scheme and then have a certain insurance scheme all in the same countries. And since uh, banks and insurances need to join a certain amount of schemes, I think at least one in the country, um, they would be forced to deal with this complexity. Um, so that's basically the discussion right now and we will have to wait and see. It's currently in the so called trilog phase uh, where um, yeah, the law is being discussed. We have to see how that moves.

Speaker A: Now it's interesting because I think that's something that Europe has had to contend with quite a lot, isn't it, with open banking? Is that fragmentation? Uh, I guess because you are, you know, you're made up of so many different countries. You know we're talking about Europe as if it's one homogenous mass that all operates in the same way. But obviously you have different financial services industries and uh, ways of working and then different regulations within those. So eventually though do you hope to see uh, once, once FIDA sort of gets over the line, do you hope to see it solving that, that fragmentation pain point and actually working more sort of cohesively.

Speaker B: I mean that would uh, be ideal I think to um, see less fragmentation and more of a common standard because it would help to certainly uh, create a bigger space for opportunities for products to be developed. Because at the end of the day that is what really matters are the products and uh, how the customer can work and use financial um, and insurance data in a product. It's very interesting because um, when we saw uh, FIDA, uh coming or this discussion we thought okay, that's probably nothing we can solve as a bank ourselves. That's something where we would like to see what other banks and insurances think. And we started an initiative here in Germany which We in the beginning called the FIDA Roundtables. Um, it's a format we set up with a local startup ecosystem hub called TechQuarter here in Frankfurt. And we invited all the different banks, insurances, tech companies, consulting companies to talk about what does FIDA actually mean for us? What are the opportunities, potential products. And that was very interesting. We also just released six uh, white papers about the work and one outcome is there are technical ways to help to avoid fragmentation. Yeah. So there are ways to do so. I found that quite interesting.

Speaker A: Yeah, it's great to hear actually about those roundtables. Um, something that you said was you've done in Germany. Do you know of any other um, EU countries that have taken that same approach?

Speaker B: I'm not quite sure, I don't think so. I know that the Netherlands were quite active probably, but I think it's uh, to me it seemed to be pretty unique. And uh, the other unique thing was that obviously we gathered people from API programs or who are more probably uh, working with data. But it was very nice to see um, from, from the early stages where we just talked about, okay, what does FIDA mean to a more proactive view of what other possibilities that we could create for customers. I found that pretty, pretty interesting because that's why I said earlier, uh, at the end of the day what matters most is that the customer can what is a convincing product. Yeah. And to see ideas around. Okay, what could be potential products. That was a, ah, very nice thing to have this discussion for.

Speaker A: Yeah. Are there any open finance use cases in particular that you think will be extremely beneficial to consumers or maybe small businesses in Europe and that really excite you given their potential?

Speaker B: Perhaps the less exciting one, but quite obvious one is this idea of having a 360 degree of your financial and uh, insurance situation. So to say one um, person, ah, or one participant framed it like you have couch enabled processes because at least in Germany you have a lot of insurance documents or banking products, uh, filed, you know, as a paper version and then when you want to change or switch in insurance you have to get uh, where did I put this file? You know, and then that uh, with this new regulation this could be digitized and, and could be made much smoother for the customer and could uh, also be reused. Talking about SMEs in onboarding processes or for loan processes. Yeah, so it was very interesting to see like there were many ideas around, you know, on the retail side, less ideas on the corporate side because it feels more like to be a very specialized area and the other thing we saw is that m, the insurance people who joined um, discussions were very open and enthusiastic. Think about, okay, we have to bring insurance and banking data together. Um, this is where we create a real benefit beside probably obviously changing uh, motor insurances. That would happen every year, maybe in Germany.

Speaker A: But uh, yeah, yeah I think you're right. It's um, perhaps as you say it's the less exciting use case but it's the one that has the most potential and to change people's lives really and to change how they think and approach their finances and as you say, remove all that paperwork and manual based sort of um, side of things. Something that we can't really ignore is the deployment of AI in open banking. Something of a hot topic at the moment. And actually kind of adding on to this point about seeing everything in the round. I uh, think we're seeing increasingly, aren't we, how AI can potentially be used to take that even further. Right, so where do you see the real opportunity then when it comes to using AI in kind of structured financial data?

Speaker B: It's interesting because one of the white papers that we have released is talking about FIDA or open finance and AI for instance. This 360 degree view is uh, the ideal starting point to combine with AI and to serve the individual contexts of customers. And for instance, okay, am I able to afford this vacation or I would like to buy this house and seeing my financial health and the situation, okay, uh, what could be the plan or am I over or underinsured and stuff like this. So I think combining AI with uh, this kind of structured data uh, is a key for potentially very successful product. I mean like in this whole space we've been talking about contextualized banking for a very long time. But I think this really has the potential to be this contextualized product that could look different for every customer. So I think it's nice. And this discussion about open finance and AI also took us to um, this conversation about aren't those structured interfaces not better than customers feeding PDFs files or use screen scraping to feed data into an AI tool? So that was the other discussion we had. And um, you can say a conclusion from those roundtables is structured data is um. Yeah, well open finance in general is the key to future AI products.

Speaker A: Yeah, I guess it's that hyper personalization isn't it, of uh, financial services and the opportunity set is fairly obvious then for consumers, but actually uh, it also provides opportunities, doesn't it for banks and fintechs and other financial institutions? How are you approaching it at Deutsche Bank?

Speaker B: Yeah, I think one of the starting points of the API program was that we realized there are many possibilities and opportunities out there and they create partners, uh, potential partners or companies that already build fantastic products for all those, uh, very specialized contexts. And one response that we have is to partner and to further open up and continue to expand our API offering, uh, in order to tap into the space and obviously invest more time in understanding what those future opportunities can actually be or look like.

Speaker A: And actually just coming back to my point earlier about, uh, you being a judge for the Open Banking Expo Awards, one of the new categories this year is Best Use of AI in Open Banking or Open Finance. What would you be hoping to see in a category like that? Uh, and you know, do you think it's really important that we kind of start to acknowledge that, uh, the innovations in that space?

Speaker B: Oh, definitely. And uh, I'm already looking forward to this category because I can say I learned a lot from uh, in the past, like seeing all the use cases and ideas of how open banking is integrated into smaller and bigger products. And definitely it will be interesting to see, okay, how AI is combined with structured data, uh, what are the use cases, Are they customer facing? Are they more like, uh, infrastructure products integrated within the process? So I guess it will be very interesting to see the ideas and I mean, like, okay, the industry is moving fast, but I think it's a very nice place to also get inspired and see, okay, what are others doing and to go back home again with fresh and new ideas. Just to advertise uh, the award a little bit. But I really think that's key benefit.

Speaker A: Just keen to hear from you about more broadly, um, how at Deutsche bank you're helping to shape and influence the kind of shift that we're seeing obviously across Europe, but elsewhere as well. Of course, this, um, kind of regulatory and technological shift, as you mentioned there, AI is to moving and innovating at such a pace. Right. It seems that sometimes we're reacting to it rather than staying one step ahead. So for you at uh, Deutsche bank, what's really important as you think about that?

Speaker B: Well, generally speaking I feel it's important to be open like this network, those roundtables, uh, that we conducted, the release of the white papers. This is all about sharing knowledge, to be open, learning together. I think this is very important, uh, in terms of moving forward. The other thing we plan on doing is building real prototypes in a sandbox. So the same partner we had to set up the roundtables the TechQuartier, they are launching the first sandbox, or at least the first sandbox I'm aware, in Germany actually it follows the UK uh example also, uh, technology wise I think. And we plan on um, doing joint challenges with uh, other institutions to build prototypes and make open finance plus maybe AI more tangible. So that you can see, okay, this is the potential, those are the products that we could build and uh, hopefully then that's the starting point uh, for the future development of open finance in Europe. At least one part of an inspiration

Speaker A: for this journey that's really exciting to hear. I mean, yeah, as you alluded to the UK certainly, uh, our financial services regulator, the, the FCA has you know, used sandboxes and very successfully. I mean for you, what, what does a sandbox enable you to do? Uh, I guess and how, how do you kind of embrace that opportunity?

Speaker B: So I mean like I really admire what uh, the UK is doing in this space, uh, I have to say. So what I'm hoping for is to really make open finance tangible by using test data and be able to kind uh, of like kind of simulate this potential future open finance world to get stage where you can see real products. So that's basically it's just real products that I would like to get out of it because I think while maybe the small bubble of open banking or open finance enthusiasts knows what the benefit could be, we need to also address uh, a larger audience of decision makers. Ideally probably we also be able um, to do the first test with customers and get um, the voice of the customer and see. Okay, that's something they would love to see as well. Great.

Speaker A: Well we will definitely um, watch this space and see what comes out of Germany, but also of course Europe more broadly. And we're delighted you're going to be speaking once again Open Banking Expo UK in Europe later this year, aren't you Joris? So um, what do you look forward to the most about that event?

Speaker B: Well, it's always nice to meet familiar faces. I like there are great people um, who work in this open uh, banking space. It's always nice to hear and listen to what challenges they face success or like successful events in their life and work life. But I'm also looking forward to um, maybe seeing the first results from the actual um, UK sandbox challenge that is going on, uh, seeing interesting award uh, nominations and probably get more of an idea. Okay, where is this open finance in AI uh, moving in the different institutions in Europe.

Speaker A: Great. Well we can't wait to have you there once again. And Joris, thank you so much for being on the podcast today.

Speaker B: Thanks for having me. Thank you.

Speaker A: My thanks again there to Deutsche Bank's Joris Henson. He came on to bring us up to speed about not only the bank's API program, but its work as part of feeding into this new regulation in Europe. Uh, Feder all about, uh, unlocking open finance opportunities. So great to hear from him about the progress being made there, where that's got to, and, of course, what's next when, uh, we're thinking about AI in open banking. So, uh, we'll look forward to seeing and hearing more from Joris later in the year at our Expo. And if you'd like to tune in to our latest episodes, then you can do so you can catch up on our website and in all the usual places. Until next time. Goodbye.