With the Federal Reserve exploring how to streamline FinTechs’ access to the payment system, a new wave of financial services competition could be on the horizon. This week’s look at the latest in open banking initiatives explores how financial institutions (FIs) are readying their systems — with the help of FinTechs — to retain a competitive edge.
The Federal Reserve Ponders FinTechs’ Future
The Federal Reserve could be taking steps toward a much more open and competitive financial services landscape as it considers allowing FinTechs to gain access to the payment system directly. The Fed announced last week that it is inviting comment on the proposal to develop guidelines for allowing non-banks to access accounts and payment services, rather than relying on bank partnerships to facilitate that connectivity.
“With technology driving rapid change in the payments landscape, the proposed Account Access Guidelines would ensure requests for access to the Federal Reserve payments system from novel institutions are evaluated in a consistent and transparent manner that promotes a safe, efficient, inclusive and innovative payment system, consumer protection, and the safety and soundness of the banking system,” said Federal Reserve Board Governor Lael Brainard.
Sherpa, Juniper Connect FIs To Real-Time B2B Payments Tool
Sherpa Technologies and Juniper Payments are teaming up to build out real-time payment solutions for FIs, initially focusing on B2B payment capabilities with the partnership. The companies said they are creating a real-time B2B payment module for banks, with Sherpa providing access to The Clearing House’s RTP network.
The initiative also focuses on connecting smaller community banks to the real-time payment infrastructure. “With Sherpa providing network access and an open payment hub and coupling with Juniper’s enhanced digital experiences, financial institutions can realize the benefit of a dynamic and flexible payment platform to meet their current and future payments modernization requirements,” said Sherpa’s CEO and President Keith Riddle.
Jack Henry, Finicity Drive Open Banking For Community FIs
With a focus on smaller community banks, Jack Henry and Finicity are pairing up to drive the adoption of open banking functionality. The partners said in a recent press release that Finicity, a Mastercard company, will lend its Banno Digital Toolkit for community FIs, enabling customers to retain control of their financial data and connect that information to third parties via API.
“At its core, open banking is a philosophy centered on empowering the consumer – as a result, it elevates the position of the financial institution providing the access,” said Steve Smith, head of global open banking at Mastercard and CEO of Finicity.
Railz Lands $12 Million For Bank Data API
Also looking to help FIs allow their customers to unlock banking data is Railz, which attracted $12 million in venture capital funding led by Nyca Partners. The company announced last week that the Series A funding, which also saw participation from Susa Ventures, Vestigo Ventures, Entrée Capital Global Founders Capital, Plug and Play Ventures, N49P and Hack VC, will be used to build out its sales and engineering teams. Railz focuses its services on enabling third-party FinTechs to access customer bank data to bolster its own offerings, which include lending, cash flow management and trade finance.
Oracle Modernizes Mashreq Bank Operations
In the United Arab Emirates, Mashreq Bank is working with Oracle to strengthen its digital operations across the Middle East and Africa. The companies recently revealed that Oracle’s Transaction Banking platform will be integrated into the FI to modernize a variety of services, including banking, payments, trade finance, liquidity management and virtual account services.
Their announcement pointed to the bank’s need to support capital diversification and business financing across the region as a key motivation behind the digitization partnership. “Transaction banking is undergoing a period of profound change,” said Joel Van Dusen, group head of corporate and investment banking, Mashreq.