Ismail Chaib of TESOBE on the Era of Open Banking

Ismail Chaib and the Open Bank Project have been working on open APIs for banking since before the word “fintech” was even a thing. In the early days he had to explain to bankers what API was – now they know, but open APIs are still a rarity. The Open Bank Project is located in Europe and was a firsthand participant in much of the work that has been done to make bank data available to third parties. This issue is still contentious for banks, who are responsible for safeguarding customer accounts. Many bankers don’t see much advantage in opening accounts, especially when business cases for doing so are uncertain at best. In this episode, Chaib describes what has happened in Europe and the rest of the world, and what might happen in the U.S., where the approach is largely market-driven.

Read the full transcript here:

Phillip Ryan [00:00:00] Hello and welcome to this episode of Bank FinTech Fusion. This is Phillip Ryan with CCG Catalyst, and I’m joined today by Ismail Chaib of TESOBE, based in Berlin, which is better circles probably for Open Bank project, which is one of the things it does and Ismail will tell you a little bit about that. So, Ismail, welcome.


Ismail Chaib [00:00:23] Hello. Hi, thanks for having me. Pleasure.


Phillip Ryan [00:00:26] Thank you for coming. So how did you get involved in financial services? Did you come from a technology background or is there something in particular that brought you into the fintech part of the world and also let people know what TESOBE is about, and Open Bank Project?


Ismail Chaib [00:00:43] Sure, yeah. So, again, thanks for the invite. I’m the Chief Operating Officer at the German based company and the company behind the Open Bank Project, as you mentioned, which is a leading open source API management solution for banks. So what we do is we help incumbents, banks, expose APIs, expose data and work with fintech companies around the world. And really, I think I get into that kind of by by chance and I grew up in Algeria, in North Africa. Then went to study in France and while I was in France, I met with the founder and CEO of the Open Bank Project, Simon Redfern, and he was telling me all about this crazy idea that was back in 2010. So I think the word fintech didn’t really wasn’t, I think back then. And so he was telling me about all these crazy ideas of APIs and opening up the banks and banks working with startups and so on and so forth. And I was like listening to him very carefully and saying, this is crazy, this will never happen. I want to be part of it. And that’s that’s that’s somehow how I got into this. I come from a technology background.


[00:02:07] I saw what technology can do. I had the company doing APIs in the telco industry before that. So I really sort of believed very strongly about the potential opportunities opened up by technology, by APIs and so on. And yet the financial industry looked like this very archaic and slow moving sort of beast. So I think for us, the vision or one of the kind of early drivers for building this was really like, how can we make this a little bit more technology, a bit more modern, I guess. And how can banking leverage all this new technology that exists out there?


Phillip Ryan [00:02:56] The first thing I remember with Simon, I think I met Simon in 2012 or so when he had the the sort of he’s a musician. Right. So we had the musical right for your bank account and it’s still around. It’s still online. And I think people stumble onto it and they’re like, what is this? But that was I think it was an early demonstration of of API.


Ismail Chaib [00:03:17] Yeah. So that was exactly. So again, we’re in 2010, 2011. Really, bankers do not understand what an API is, let alone open banking. And so we were like really scratching our head, how can we explain this in kind of in a fun way, in an engaging way. And as you said, Simon is a musician, I.T. guy, but also a musician, a composer. And so we said, OK, why don’t we do a singing back? So take your transaction. They can play a music piano note out of it. So if money comes in, it’s a high pitch note and if money goes out it is a low pitch note and yeah that got us a little bit of attention. So that was a fun thing. It actually was done in a hackathon over the weekend. So that was nice to hear from this from that area for sure. I think actually you’re right and people can still look at it at singing bank dot com. You can you can actually play around.


Phillip Ryan [00:04:28] Yeah check it out. It’s interesting that the industry is finally coming around to APIs and we’ll talk about this more. But I read a trends piece, five trends for 2020 and one of the trends was APIs like as if it’s something coming from outer space. That it’s not something that’s operating all around us every second on the Internet. So I think there’s still a lack of familiarity in the industry with with APIs, unfortunately. But I know that’s part of your mission, is educating people on that.


Ismail Chaib [00:05:05] Yeah, absolutely. And I think if you talk to some some folks at banks, they will tell you what we have for twenty years. And to some extent, they’re probably right. I mean, API as an interface between two software products has been around for years. What is new today is that this is its open APIs, these are APIs and these are connection points between the banks, the legacy system and external provider and third party providers, fintech or otherwise. And that opens up new opportunities. It opens up new challenges. And that’s that’s very much a new thing.


Phillip Ryan [00:05:46] Right. So what is the most important lesson that you’ve learned in your career, whether at TESOBE or not what’s the thing that’s maybe had the biggest effect or impact on you?


Ismail Chaib [00:06:00] Wow, that’s a good one. That’s a deep one that we think. Well, I think what’s really both for in a in a professional context and also maybe personal one is this idea of what to empathy, I think, like trying to have empathy with regard to the other person. And what is it like to be you. And this is kind of a guiding principle that I try to use nowadays and really trying to understand whether that I’m in front of fintech company, a bank in a small bank, big bank, et cetera, really, what is what’s their reality and how do they look at things? And, yeah, I think it opens up a lot more opportunities and kind of shed light on blindspots. So that’s a cool guiding principle. What is it like to be useful?


Phillip Ryan [00:06:59] Yeah, I think the world would be a better place if more people thought that way. And it’s it’s something that’s missing so much in not just in tech, but really in every industry. I think they don’t put ourselves in place of the other person enough.


Ismail Chaib [00:07:16] Right? Absolutely. I think also in a commercial setting. Right. If you can offer something which is a lot more contextualized, a lot more relevant to your customer versus just giving you the same thing to trying to provide the same thing to everyone. Right.


Phillip Ryan [00:07:37] What’s the greatest challenge facing TESOBE and Open Bank Project today?


Ismail Chaib [00:07:42] Greatest challenge? I would say so I think let’s put it sort of phases. So when we were talking earlier about how we all started and I think the biggest challenge of that time was education was trying to explain what is what’s open banking, etc, etc. why it is important. I think today we have there’s a lot more momentum, as you said, around these stoppings. Right. So people are more interested and they wouldn’t necessarily roll their eyes when you talk to them about APIs. But I think because I mean, we’re based in Germany, right? In Europe, as you know, there is this new piece of regulation which basically forces all the banks to open their data to prove third parties. And I think what I see as a big challenge here is that people really stick or the financial institutions really stick to the letter of the regulation and do not necessarily see the value or see how they can capture the value beyond just compliance. Right. So how do we really realize the full potential of banking? So to me, that’s that’s a key challenge today. So it’s great that people are doing APIs, but if they’re doing it just for the sake of regulation and just in the kind of limited scope of regulation, that’s not really our vision. Right. I think a much, much bigger opportunity to go beyond regulation. And that’s kind of another struggle today.


Phillip Ryan [00:09:17] But you’ve seen some great changes, right? The regulation came about after you guys were already doing your thing. So you’ve already seen in a way, you’ve seen massive progress. I mean, the US is very far from any of this kind of regulation.


Ismail Chaib [00:09:33] Oh, yeah, absolutely. I mean, it’s it’s very different from 2010, that’s for sure. I mean, and to be honest with you, like I mean, we knew it will go this way. We knew early on that it’s kind of inevitable for financial institutions to open up. I didn’t expect it to be that fast and that regulation will catch on. And today, it’s not just in the European Union. There is forty seven countries around the world that are either have adopted open back their regulation or are considering it. And I think this is this is immensely important. And this is amazing how fast this is this trend sort of catching fire globally. And unfortunately, as you said, the US is not part of these countries. But I don’t know, maybe things will change in the future. But no, it’s radically different today how things are changing, but my point is it’s also it can be regulation is really good that we’re very much in favor of that. But it can also be a trap if what it only does is just enable banks to offer some APIs no one wants to use, if you see what I mean. Right. So I think there are risks. Right. Regulation is not going to solve everything. I think it’s a great start, but it’s definitely not something that will solve everything.


Phillip Ryan [00:10:55] Right in some banks have asked for delays and there are exceptions right. To before they’re going to comply. Hasn’t that happened? Or maybe that was in the U.K.? I was reading about that, right?


Ismail Chaib [00:11:05] Yeah, no, I mean, it’s happening. It’s happening everywhere there are delays and the APIs are not so reliable in the end. So there are challenges for sure. And but that’s why technology companies like ourselves, like others are in the market really to help these banks solve these. The challenges that come from deploying APIs, deploying open APIs is no easy feat for sure. It’s plenty of challenges to do to deal with.


Phillip Ryan [00:11:39] All APIs are not created equal, right?


Ismail Chaib [00:11:42] Absolutely. Absolutely. Can’t agree more.


Phillip Ryan [00:11:45] What is key to banks and fintech companies working together effectively and successfully?


Ismail Chaib [00:11:53] Well, I think, first of all, they need to understand what success means for both sides. I think the discrepancy between expectations between the two I think is a key failure factor. Let’s put it that way. But I think what typically what we see in the engagements we do and we work with the likes of HSBC, BNP Paribas, and we have eleven thousand developers, fintech developers around the world using our APIs to build financial technology applications.


[00:12:30] And to me, what’s really important is to have the right technology in place, to have some sort of safe space, kind of to borrow some of the lingo from a non tech environment. So I think like having things like sandbox environments, fintech competitions, really safe, safe spaces, safe environment controlled environments where both the bank and fintech can try the relationship risk free is really important. But then I think above all, what you also need is, is an alignment in culture between the two entities and some some form of sponsors that can really take a leap of faith in the fintech and and make sure that things are happening.


Phillip Ryan [00:13:20] Is it really is it more of a cultural challenge for most banks than a technological one, or is it both?


Ismail Chaib [00:13:28] I think I mean, the of technology is something you can solve. I think the hardest challenge is the culture. Right. It’s what is most, most difficult to address.


Phillip Ryan [00:13:43] Right. What currently developing or or future technology do you think has the greatest potential to benefit the financial service space?


Ismail Chaib [00:13:55] My bias, if I say APIs.


Phillip Ryan [00:13:59] But tell me tell me how and how it’s going to how they’re going to evolve over the next few years.


Ismail Chaib [00:14:05] Right? Well, I think I mean, it kind of jokes aside, I really do believe that this trend of openness and being able to me as an end user, being able to access my data on my own terms and do whatever I want with it is here to stay. Right. So whether it’s driven by regulation, as we were saying or driven by customer expectations, behavior and so on, that is definitely something that is here to stay and APIs is part of how you solve that equation. APIs is a nice way to share data. I think we will see a lot more development around authentication. And how can you secure the access and share data with third parties. Today we have things like open ID connect, and things like that. But I think there’s a lot more development in that particular area. Where do we store data? That’s also something, I think, where we will see more developments.


Phillip Ryan [00:15:15] Ownership of data I feel like that issue is really coming and it’s going to be a big one.


Ismail Chaib [00:15:21] Absolutely. Absolutely. I think that’s really the key, the key to to all of this. So the philosophical question or sort of underpinning of all open banking is the who owns the data? Is it the bank or is it me, the end user? If it’s the end user, well, I should be able to access it and do whatever I want with it. And so I think that’s that’s definitely the key question kind of in the future. And technology touching upon that would be would be very much welcome.


Phillip Ryan [00:15:51] Yeah. So how do you see open banking developing in the US? I’m sure you saw the news that Chase has its own sort of proprietary data agreement, that they’re requiring all third parties to sign onto. And so in the absence of federal or any kind of regulation, the banks are basically making their own rules. Is this is going to slow things down or is this an inevitable step along the way?


Ismail Chaib [00:16:19] I mean you have Chase, but you also have obviously plaids who just got bought by Visa. Right. And that’s also an important factor. What’s Visa going to do with that now? We don’t know, but I think that’s definitely an important actor in that space. I think I mean, I’m not going to kind of try and make predictions here, but I think in the US it’s really sort of up for grabs. I could see a scenario where I think you guys have an election coming up. Right. So I think that will have an impact on the subject we’re talking about here. If you have a Trump administration, that’s probably going to be one can assume that will be like a hands off, continue to have a hands off approach and kind of leave it to the market to leave it to the bank to do stuff. Actually, there is there is a lot going on in the US today with an open banking, like with the banks trying to do trying to do API standards is something called Nacha. Different stuff really happening and it’s really market driven.


Phillip Ryan [00:17:28] Financial data exchange


Ismail Chaib [00:17:31] Yeah, exactly. Exactly. FDX is another one and it’s kind of in New Zealand, for instance, there’s a similar kind of initiative.


[00:17:41] So it’s really market driven and the banks, the financial institutions coming together and trying to issue API standards, I think there’s pros and cons to this approach. But then if you have a like I don’t know, Bernie Sanders say will win the elections and you might see a very much a hands on approach towards something banking with a mandatory regulation and things like that. And that’s definitely going to change things and provide a different environment. So I don’t really know where things are going. I think it will happen whether it is pushed by regulation or not. But I would see more and more financial institutions opening up. The problem in the US also is you guys have got over eleven thousand financial institutions, all in all with credit unions and so on. So it’s that that comes with its advantages and inconveniences as well.


Phillip Ryan [00:18:37] Right. So how can Open Bank Project help banks in the US? And maybe also you can explain to bankers who may not understand how can open banking, help open banking in general, help the banks themselves.


Ismail Chaib [00:18:55] So, OK, let me try. How can open banking help and then I’ll talk a little bit more about the o Open Bank Project? Well, I think it really depends on who you are and what you want to achieve as a financial institutions. But open banking definitely is a way to accelerate. FinTech partnership is definitely a way to bring new products, improve products of value added services to the market faster.


[00:19:25] So there is this idea that we no longer, as a financial institution, as big as can you be, you’re no longer to provide and address all the needs requirements of your customers. It’s just too much going on and changing so quickly that you can’t address everything.


[00:19:45] But if you partner with third parties to understand those micro segments who are popping up, then you will have much more leverage. You’ll be able to bring new products to market faster. You’ll be able to bring better products, and you can improve the customer experience and you can reach people that you want that you don’t reach in like normally. So, for instance, in our community, another example of an app is someone who built an app for visually impaired people.


[00:20:18] So instead of like seeing the the balance, it would speak the balance to you. And so this is something obviously very interesting for a micro segment, right? Visually impaired people, not something your typical credit union will be spending effort and resources onto to deliver.


[00:20:40] So by partnering with someone, you can get the benefit, you can get the upside of serving your customers better or serving more customers without having the downside of investing resources and having the skills and money and so on and so forth to do it. I think another advantage of open banking, which some people are trying, some doing it successfully, some other kind of still exploring, is that you can actually monetize your data. And I think the US is a great example of that. Right. So glad of this data and monetize someone else’s data, actually, financial institutions that monetize that very successfully. So, yeah. So I think in general it’s a way to speed up things. It’s a way to reach more customers and then it’s a way to make more money with using data.


Phillip Ryan [00:21:35] Right. And so on and about Open Bank Project.


Ismail Chaib [00:21:39] In terms of Open Bank Project, as we were saying, it is not easy to deploy open APIs and to actually make those fintech partnerships happen and make them successful. So what we do with the Open Bank project is we offer you the technology that helps you financial institutions deploy on this financial institution, deploy APIs, connect with your legacy system, abstract away all the complexity of your legacy, and then instead have a set of fintech and fintech friendly and modern APIs and the developer experience that goes with it and all the tooling that goes with it, the monitoring, the monetization, et cetera. And so that’s what we do really like. Helping the financial institutions exposes APIs in the right way and help them access fintech developers who want to partner again.


[00:22:31] We have over eleven thousand developers who are using our APIs globally. And yeah, so that’s what we do. We also offer safe spaces. So we offer sandboxes where financial institutions can test APIs and with test data in the cloud so really secure and risk free experiments and the technology is open source. So if you go to the Open Bank Project, dot com or on GitHub, you can actually see the source code, you can download it for free, you can use it for free and and so on. So it’s really giving away the code base so that people can try. And then later on, if you’re ready to go in production, our team will be happy to help.


Phillip Ryan [00:23:20] And you’ve done this all over the world, so you can also give examples of things that have worked and have not from the banks all over the world that you’ve worked with, which I think is also could be helpful to the US banks in particular.


Ismail Chaib [00:23:33] Yeah, absolutely. And in the US, we have a couple of customers. So end of last year, for instance, we deployed the sandbox environment and did a hackathon with the Citizens Bank, for instance. Quite, quite successful one. No, but definitely, definitely lots of learning. And I think because we’ve been also running for so much time, we’ve done all the mistakes that are possible, that are imaginable so that our customers today won’t want to do that.


Phillip Ryan [00:24:06] And so where will we see you this year? What what events are you planning to attend this year where people might run into you?


Ismail Chaib [00:24:13] So we’re going to the US next month. There’s a conference call INV Demo, which is happening in Seattle where we’re going to be. We also always attend money2020, Sibos and we do our own conference. We we have a conference called API Days London that we organized. And that’s going to be November in the U.K., November of this year.


Phillip Ryan [00:24:42] We’re Sibos this year.


Ismail Chaib [00:24:44] Sibos is going to be in Boston.


Phillip Ryan [00:24:48] Boston. Oh, yeah. All right, great, Ismail, thank you so much for joining me today.


Ismail Chaib [00:24:55] Great, thank you. And again, for more information, Open Bank Project dot com, you’ll have all the info.


Phillip Ryan [00:25:04] Yeah, I’ll put all the information below this recording. So thank you, everyone, for listening. And if you enjoy this podcast, please subscribe on Apple Music or wherever you listen to your favorite podcasts. And again, I’ll put all the information about Open Bank Project along with this this recording. So thank you and take care.


Ismail Chaib [00:25:24] Thanks Phil. Thanks, everyone. Take care. Bye.

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