Open Banking – Where we Stand Richard Peers Microsoft ...across the world through regulation and market initiatives Open Banking is Gaining Traction…

North America Europe Asia • • • NACHA API Standardisation Working PSD2 regulates in the EU to grant TPPs** access to payment § Monetary Authority of Singapore Group (100 banks, PSPs and IT accounts for account information and payment initiation “Finance-as-a-Service” playbook to § companies to launch 16 APIs) • CMA (Competition and Monetary Authority) regulated the 9 largest UK boost Open API adoption • US CFPB* pushed for customer- private banks to form an Open Banking Implementation Entity • Hong Kong Monetary Authority plans authorized access to data as an to regulate tier-1 HK banks to open § alternative to screen scraping up APIs • Open Banking Developer Portals and • Several Open Banking related APIs launched by several banks GovTech initiatives in India, China, • Fintech and Open Banking bill passed Singapore

in Mexico §

Latin America Australia § • propositions to allow • Australian Treasury Department to customers to access account push for Open Banking regulation by information through Social Media July 2018 Platforms to view balances and Africa • NAB and CBA among the first banks transactions globally to release Developer Portals • PSD2 is also being watched closely. South Africa may follow • API Banking use cases for financial inclusion gaining traction in Nigeria

*Consumer Financial Protection Bureau – regulatory agency to oversee financial products and services that are offered to US customers **Third Party Providers – such as Payment Service Providers, Account Information and Payment Initiation Providers § Initiatives driven by national or supra-national market regulation Source: Accenture Open Banking for Business Survey 2018 Open Banking | Market Update Open Banking Source: Accenture Open Banking for Business Survey 2018

ACCOUNT PROVIDERS THIRD PARTY DIRECTORY SME Business 18 34% CMA9 9 OPEN BANKING DIRECTORY Personal – Finance Management 13 25% 300 CMA9 Subsidiaries 4 Personal – Credit Scoring 5 9% days since the Total volume Other EU Banks/Building Socs 4 Registered as start of managed of TPPs on OB TBC (Unknown – no clear proposition) 4 8% 53 16 AISPs and PISPs rollout (13 Jan 18) Other EU/Global Banks 3 Directory 22 Payments 3 6% Challenger Banks 2 Total Personal – Savings & Cashback 3 6% Are registered Are registered CMA9 OTHER 35 as AISPs (only) 2 as PISPs (only) Financial Institution 2 4% 22 CMA9 Banks & Other UK Banks Developers – API Services 2 4% Account 9 Building Socs 4 & Building Socs Consent & Identity Management 1 2% Providers AIB CYBG [Clydesdale & FCA REGISTER (ASPSPs) of Ireland Bank, ] SME Business 3 25% Extra TPPs on Registered as HSBC UK The Co-operative Bank 12 FCA Register 6 AISPs and PISPs Personal – Finance Management 3 25% Cumberland Building Society Payments 2 17% Nationwide Building 53 Non-UK Based Banks TBC – Unknown 2 17% TPPs on the Open Santander UK Are registered Are registered 3 (EU & Global) Banking Directory The Royal Bank of 3 as AISPs (only) 3 as PISPs (only) Personal – Credit Scoring 1 8% Scotland ABN AMRO Bank Wealth Management 1 8% Northern Bank Bank of Cyprus UK [] ICBC London [Industrial TIME OF REGISTRATION – ALL TPPS CMA9 and Commercial Bank of 4 Subsidiaries China] 14 9 65 Marks & Spencer 8 8 7 TPPs registered UK Based Challenger 5 Bank [HSBC] 4 4 3 3 on the FCA 2 Banks & Company [RBS] Register Revolut [RBS] January February March April May June July August September October NatWest [RBS] Accenture Report on Open Banking in Commercial Banking Figure 2: Payments and accounts are key in the first wave of Open Banking globally Types of Service Open Banking UK PSD2 NACHA* Mexico HKMA** Singapore Australia New Zealand Payment initiation Payment status Payment account information

Product information

Product opening Fraud & risk reduction Customer insights Credit scoring Other deposit accounts Loans Insurance

Regulation and APIs existing (CMA) or in September 2019 (PSD2) Regulation, Government or Market initiative to provide first APIs in 2018-2020 More traditional scope of regulations *NACHA API Standardization Group initially plan to publish APIs on Payments, Accounts Information, Account Validation/Tax Payments **HKMA Open API regulation initially plan to push for APIs on Product Information, Product Opening and later on Transactions, Account Information (bank, loan, mortgages, credit card…) Source: Accenture Open Banking for Business Survey 2018 1 2 3 4 Create a 360-degree Monetize APIs Establish revenue- Do banking as a view of the client sharing ecosystem’s platform or as a service

Figure 4: Half of banks expect Open Banking for corporates to drive five Figure 1: Corporates expect Open Banking to give them greater banking top 10 percent of their revenue growth access and a larger reach When percentage of banking revenues growth does your bank expect to What are most significant benefits to your organization of using an Open derive form Open Banking for SME and Corporate clients over the net 3 to Banking Ecosystem platform? (%) 5 years? (%)

1 3 3 3 3 6 5 6 6 15 15 15 15 27 28 27 25 29 29 35 Global NA Europe APAC 18 Global 13 NA 15 Europe APAC 43 46 23 54 66 66 20 22 17 21 22 18 26 16

To gain access to convenient and To reduce complexity and implementation 0% growth Between 10% and 20% growth innovative banking services costs for bank connectivity Less than 5% growth More than 20% growth To allow us to reach more To reduce the cost of client acquisition Between 5% and 10% growth clients and partners To optimize efficiency of SME and My organization does not see benefits to corporate processes using an Open Banking ecosystem platform

Note: N=100 Note: N=660 Source: Accenture Open Banking for Business Survey 2018 Source: Accenture Open Banking for Business Survey 2018 Chart 11: Current primary business models and Projections for 2022

Manufacturing bank: Developing 14% “There is a belief that products with distribution led by others 14% there will be a significant Distribution organization: Focused on 14% pull-back from a full- most efficient distribution and services of stack organization, products created by other organization 17% supporting the reality Marketplace Organization: Offering products 18% that many firms believe created internally and by outside organization 21% they can no longer be ‘all Full stack bank: Focusing on all three areas of 33% things to all people” developing, distributing and servicing of banking products 27%

Segment-focused organization: Focused on small 20% set of segments building best-in-class services 21%

0% 10% 20% 30% 40%

Current 2020 Source: Efma-Infosys Finacle Digital Banking Report Survey 2018 Digital Transformation Growth levers

Profit Cost Growth 8 Microsoft Digital Bank & Microsoft Graphs https://fdata.global/about/purpose/ Supply Trading Chain Loyalty Finance

Payments Future Branch World UX Digital & Intelligent Knowledge Engagement Wealth Ledger Mgmt

User Knowledge Work Scalable Automated, Data Knowledge Architecture, Driven & AI Open Plat f orm infused Business New Products 5: Geo/Segment/ Products New Business line Services Customer Marketplaces journeys

Open Banking Open Banking Investment Bank Commercial Bank Cards Commercial Retail The end-user experience 4: Reusable business services/capabilities e.g. Transaction Cycles

• Marketplace Decrease costs Systems of Adobe/SAP/D365 ODI market and audience insights & campaigns engagement • LinkedIn next generation sales-targeting product providing insights that will help sales organizations plan and execute their go-to-market New revenue Increase growth strategies • LinkedIn Sales Navigator for relationship management and new business Systems of development , to target, understand and engage), and therefore drive differentiation Partner eco- Geographical new revenues and increase NPS spread Systems systems of record Diversification Business agility

System of Systems of New products Product Systems of Reference innovation transformation intelligence The Business Need The Business Outcomes 3: AI, Data and Integration 1: Legacy Systems 2: Digital Enablement Cloud Hub Open Banking Open Banking Investment Bank Corporate Bank Cards Commercial Bank Retail Bank

v v

PARTNERS INCLUDE Credito Agrícola embraces “Open Banking”

The challenges The results “Microsoft has all the tools we want to use. Microsoft • Open systems to foster a strategy based on partnerships has been with us in this transformation journey as one of Crédito Agrícola is a private bank with the largest branch • Provide digital services using the API ecosystem our core partners with people and tools to support us. network in Portugal. In 2016, there were 821 units (branches • Lead in the core communities providing digital services Microsoft technology is more open to introduce specific features we want to introduce and leverage in our or automatic teller machines) in isolated areas where no other • Modernize operations driving DevOps transformation bank institution has presence. Crédito Agrícola is one of the strategy.” Dr. Jorge Baião leading Portuguese financial groups, with net assets over EUR Chief Information Officer, Crédito Agrícola 16 Billion. • Industry: The solutions • Market: Portugal {API} • Target Customers: Consumer and Corporate Market • Product Used: Azure API Management, ADFS, Application Insights, Event Hub, App Service, Visual Studio Online API Management and Strong Customer Business and Establish DevOps Integration Authentication Operational DevOps Baseline, enabling (Api Design, Versioning, Dev (oAuth 2.0, OpenId, Multi- Power BI Portal For Business and Continuous Integration, Portal, Transformation, factor,2nd Factor App, Social Application Insights For Continuous Delivery and Operational Monitoring Infrastructure-As-a-Code Microsoft helped Crédito Agrícola achieve a... Protection, Configuration) Identities/On-Prem Federation)

lower End-To-End development Faster Increase Foster Want to learn more? Business and costs time-to-market release quality Partnerships Read : Operational Microsoft on Open Banking Visibility

Azure-Generated Results: Universities Banks • Accelerated innovation Co-Innovation • Flexible build environment • Scalable infrastructure • Reactive performance • Hybrid connectivity • API-ready Co-Validation Co-Go To Market • End-to-end fintech solution Open Collaboration Technology Environment: • Microsoft Azure • Azure Active Directory

Consultants • Azure API Management FinTechs, • Azure Container Registry Co-Development Co-Location Developers, ISVs • Azure Cosmos DB • Azure Kubernetes Service (AKS) • Azure Marketplace • Hybrid Cloud System Integrators • Open Source Open Banking – what it means to Paul Bowen

Open Banking – what it means to Mohan Naidu

Open Banking – what it means to Richard Peers

Open Banking – what it means to Thomas Paar

The Azure API Management Accelerator Sandbox accelerator Figure 1: Schematic of the Digital Passport ecosystem A standardized and secure digital Authorized Users mechanism for sourcing, exchanging and maintaining customer KYC and onboarding information. Visibility of the Government Accountants level of provenance and trust that is Digital Passport associated with customer data — with the customers themselves contributing Personal Data Utilities Other Industries to keeping their data up-to-date, and a

Company Data “network effect” created through the participation of cross-industry Banks Telecommunications organizations, such as FIs, utility providers and government agencies

Third Party Vendor Appendix RTS and SCA Status

RTS SCA comes into force PSPs to ask customer for Design and Interpretation Sept 2019 more information in order Issues Main aim is to reduce fraud in payments to verify their identify Friction free UI will be winners before a payment is made Some TPP’s resisting re-direct Exemptions being advocated by FCA to This ‘strong customer authentication’ will ensure quality standardized API’s be a requirement unless an exemption is used (e.g., for low value payments)