Managing Financial Transformation: Open Finance Innovations from CBI

In a world characterized by technological disruptions and ever-evolving regulations, the financial services sector has experienced a profound metamorphosis. As the globe grapples with the ongoing digital revolution and the challenges imposed by the global pandemic, the industry has witnessed an extraordinary shift from conventional models towards more interconnected and open systems, according to The Fintech Times. 

Liliana Fratini Passi, the Managing Director of CBI, an interbanking institution specializing in cross-border digital payment services, offers a captivating insight into the journey from open banking to open finance. She sheds light on the collaborative endeavors, innovative strategies, and transformative potential that are shaping the future of financial services.

«The financial services industry has undergone significant technological changes in recent years, with a ‘revolution’ driven by new paradigms based on ‘open’ models. The COVID-19 pandemic has further accelerated the adoption of information technology across critical infrastructures, production processes, and the daily lives of citizens. This has not only prompted financial institutions to increase their investments in innovative technologies but also spurred the development of legislative regulations to bolster security,» explains Liliana Fratini Passi.

Open banking gained prominence in Europe primarily due to the regulatory push initiated by the Payment Service Directive 2 (PSD2), which aimed to create an environment conducive to innovative ‘open’ models within the financial services industry. Consequently, open banking started to gain ground in the Italian market, with major banking players updating their offerings to include basic open banking services. This was in response to mounting pressure from digital banks, fintech companies, and non-banking entities exploring open banking’s boundaries to discover new revenue streams, such as utility providers integrating payment initiation services into their systems.

These initiatives fostered a dynamic landscape where stakeholders frequently collaborated within an ‘open’ framework to reduce time-to-market and stay competitive by offering cutting-edge services and a seamless user experience.

Transitioning from open banking to open finance has become a recent trend, propelled by the proliferation of APIs and the introduction of new regulations. Open finance represents an extension of open banking, encompassing broader sharing of financial data, not limited to payments, among various players in the financial services sector. This enables third-party access to a wider array of services and products, along with the development of more sophisticated offerings tailored to customer requirements.

The Global Open Finance Report, co-authored by CBI in collaboration with PwC Italy, predicts that the open finance ecosystem will empower customers with a single point of access to a comprehensive suite of financial functionalities needed for daily operations. This will be made possible by advancements in data analytics and will include functions such as managing savings and spending across different bank accounts, monitoring diverse investment portfolios, quick access to loans, easy comparison of offers from both banks and insurance providers, and much more.

The experience of the Italian financial industry underscores that collaborative ecosystems, exemplified by CBI, are the most efficient means to achieve compliance and continuous innovation through joint action.

CBI, a public limited consortium company, converted into a benefit corporation in May 2023, signifying its commitment to sustainability. Comprising 400 banks and other intermediaries as shareholders, CBI focuses on developing infrastructures, innovative services, and ecosystems for the financial and banking industry. These services, including digital payments, open banking, and open finance, are ultimately extended to a wide range of clients, catering to the needs of businesses, public administrations, and citizens in an increasingly competitive market.

CBI stands out for its ability not only to develop innovative platforms and services but also to aggregate various actors in the financial ecosystem, leveraging the advantages of the ‘network economy.’

The evolving landscape of payment technologies is creating opportunities for disruptive innovation. CBI emphasizes the need for a flexible, modern, and transparent approach to meet market demands. To this end, CBI has supported Payment Service Providers (PSPs) in meeting PSD2 requirements by creating a regulatory technology platform called CBI Globe. Additionally, two years ago, CBI introduced ‘CBI Globe – Active Functionality,’ allowing PSPs to play an active role as third-party providers through a single access point, reaching the entire Italian banking market and major international API platforms across the Single Euro Payment Area.

CBI is committed to investing in integrated and sustainable technological innovation and digital skills, resulting in a range of new value-added services (VAS). One such service, ‘Check IBAN,’ offers a growth rate of 120 percent weekly and has gained substantial market penetration. This service verifies the correspondence between Tax Code/VAT Number and IBAN Code, serving as an effective tool against fraud.

More recently, CBI introduced the ‘Check IBAN Cross border’ service, extending the Check IBAN service to customers outside Italy. This enables real-time checks on international entities and supports cross-border corporate transactions. Additionally, CBI has developed ‘Name Check,’ a Confirmation of Payee (CoP) service that validates the ownership of an IBAN in relation to the payee’s name, enhancing payment market security, stability, and efficiency.

CBI’s ‘CBI GO’ simplifies the onboarding process for corporate and retail users by offering strong authentication (SCA) and data transfer capabilities. This service streamlines data sharing between intermediaries and businesses based on individual needs.

While open finance is still relatively new in many countries, numerous stakeholders are expanding their offerings beyond open banking, moving toward a more comprehensive open finance ecosystem, as outlined in recent documents from the European Commission. CBI, as a trailblazing company and industry utility supporting a more effective financial ecosystem, has forged new partnerships in the open finance sector and remains committed to exploring collaborations that drive sustainable impact.