Europe's PSD2 data-sharing mandate is inspiring banks such as BBVA to form unconventional alliances.
Many banks are looking for ways to manage PSD2 and open banking, which requires data sharing between banks and third parties such as fintechs or digital payment companies.Large American banks such as U.S. Bank, JPMorgan Chase, Citigroup and Wells Fargo have all entered data-sharing pacts with fintechs to expand financial planning, verification software and document aggregation, among other services.
Rather than limit itself to working with smaller fintechs, BBVA is exploring the potential of working with Amazon to take advantage of the e-commerce giant's scale. BBVA expects to one day offer banking services through Amazon, but for now is testing the waters with merchant clients to sell goods on Amazon.
Early merchants include El Celler de Can Roca, a Spanish restaurant, which has produced a line of sustainable products made from recycled materials, including aprons and other kitchenware. Another merchant is Rocambolesc, a Spanish ice cream merchant, which will sell chocolates and other candy from Jordi Roca, Racombolesc’s confectioner.
With these merchants, BBVA is attempting to address a challenge facing most banks. PSD2 and other open banking movements are accelerating a trend toward consumers using non-banks for payments and other financial services, threatening banks’ traditional hold on these functions, according to an oped for PaymentsSource by Lars Sandtorv, CEO of WeaWallet.
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Amazon, which did not return a request for comment, has dabbled in financial services with mixed success. It attempted to compete with Square years ago with a mobile POS device called Amazon Register, but shut down the service in 2016. More recently, Amazon worked with Synchrony to develop a secured credit card that offers rewards on par with mainstream cards.
In announcing the Amazon pilot, BBVA said it already sells 60% of its financial products through digital channels, and Amazon would provide an added channel for bank-supported payments and other staples of mobile and online banking.
“The open banking initiative in Europe drives banks to build a solution that meets EU requirements, which is unlikely to deliver any short-term revenue and may even put smaller institutions at risk,” said Tim Sloane, vice president of payments innovation at Mercator Advisory Group. “BBVA has taken the strategic approach and is looking to leverage API technology to deliver an integration that expands its reach and changes the way consumers think about banking.”
Most bank-fintech integrations rely on APIs as well as complex IT projects that strain legacy bank systems.
That technology challenge could push more banks to broaden the scope of third party collaborations to include e-commerce platforms, which can provide a relatively inexpensive way to bundle financial services and payments.
"Because the U.S. doesn’t force banks to build a minimum set of APIs, banks in the U.S. tend to gravitate toward strategic relationships with corporates, integrating the banking system to their corporate clients to improve efficiency and deliver higher levels of service,” Sloane said. “U.S. banks should look at this BBVA move and start thinking more about strategic relationships and branding opportunities as BBVA has done.”
There is an opportunity for banks to sell products through Amazon and other e-commerce platforms, such as point of sale financing and insurance, according to Ron Van Wezel, a senior analyst at Aite Group, adding the bank gets access to huge merchant base of Amazon, while Amazon gets a commission.
But there is also a drawback, as Amazon’s brand could overshadow or compete with the banks.
“If Amazon becomes the ‘storefront’ of the banks, consumers might prefer to use Amazon’s portal over the bank’s, disengaging the bank from the customer relationship,” Van Wezel said.
Some banks are willing to take this risk. For example, Uber's cobrand card issuer, Barclays, allows consumers to apply for and manage their card account within Uber's app.
BBVA was not available for an interview on Thursday due to holiday scheduling. In an earlier interview with PaymentSource, Susan French, head of product for BBVA Open Platform, said the bank's third party fintech collaborations can produce competition as fallout, but added it's a way to expand the bank's market.
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