Open Banking Review 2018. Part I.: Patience Brings Roses.
At the time of the startup boom maybe it is generally known as the four-year-rule. That from an idea to growing business it takes four years of hard work. From the perspective of human life, four years is not a short period. It follows that anyone who wants to succeed must be very patient. How patient is the innovation team from the biggest Czech bank? Let’s check this in our annual report in the following three-part story…
The first time I heard this rule was also in connection with the world-famous conference 4YFN (Four Years From Now) focused on connecting the world startup and corporate scene. The name caught my attention and I started searching what it means and why.
Oliver Brown from 4YFN answered me: “We have worked with many startups over the years and still to this day, 4 years stands out as a year that a business can really start to take off after hard work and learning from their previous mistakes.” How much truth is in this? Let’s check it out… 🔎👀
As mentioned we are the innovation team from Česká spořitelna and we are dealing with research and development (R&D). So, the year 2018 was for us the proof that the rule works. It follows that 2018 was characterised by the preparation of harvesting crops which were planted four years ago. I am talking about Open Banking and everything connected with…
Planting Roses 🌹
In September 2014 (four years ago), Head of innovation team of Česká Spořitelna, Honza Sechovec, mentioned in his speech at WebExpo Conference an idea about “WebAPIs for everybody”. He painted a picture of a world in which all developers and startups will be happy. Happy because they can easily integrate their applications with bank(s) and use services such as payments (of course not only). And what about the bank? It also feels happy! Because their clients are satisfied and the degree of loyalty increases. And during the year 2018 the dream has started becoming true..
Ok, I will stop being utopian. Just give a chance to the background of this story and let’s start to summarize results of the year 2018…
Launch of Erste API Hub
Erste API Hub represents a developer portal where you can, in 2 minutes, start developing apps using bank APIs. Since March there has been a self-explanatory option to choose a bank (among banks of Erste Group) and try its APIs in the sandbox.
Focus on developers experience (DX) was the key goal of the portal, therefore, it was passed by huge user tests by our UX designers whose belong to our team (more details about our user experience for 2018 you can find in the third and last part of this series).
So, the fact that we are trying to make the developers happy has been confirmed and our work paid off — at the end of the year we became finalists of the international competition Developer Portal Awards 2018 in the category “Best new DX innovation”. If you are curious how the one of the best DX portals of the world looks alike, there is the link. 🤓
FintechCloud — Happy Developer, Happy Life
In case of that you want to enforce a completely new idea in a bank, you have three options in general:
- Push it by force 💪— by regulation of management board
- Punk style 🤟— ask forgiveness rather than permission
- Stakeholder management 🤝— to educate stakeholders and compromise to make it beneficial for all parties
Yeah, we have learned from several previous mistakes and chosen the third option. If you have experience from a big-sized corporation, you can probably imagine what a long and hard way we have come during this year.
For those who have not yet heard about Erste FintechCloud — it is “an extension” of Erste API Hub. In the short explanation video (1 min) you can register the proclamation “Security is our top priority!”, therefore, FintechCloud offers a secure environment where you can transform your ideas into a plugin using prepared licencies, components, SDKs, libraries etc. and consume almost all the bank’s data in the simplest way possible.
Maybe it sounds like a turning point in cooperation with banks and third parties. For developers and startups it means very big progress and useful help. For clients it does not represent any big change. Why not? Yes, they will see from their perspective in bank apps a lot of extensions. But no further installation is needed.
In December we are introducing to our pilot clients our first story, Paystory, the Czech startup which we found in a hackathon less than four years ago. A new plugin will be located within the Android app Poketka (more details in next episode of this article — part II.) and can enrich your transaction history with a lot of interesting information.
The next gentlemen for shaving (= next prepared plugins) will be for example parking in Czech cities, tickets to public transport or cryptocurrency ČS Crypto (more details in the next episode as well).
Two Fundamental Building Blocks of Opening of Banks — PSD2 and APIs
If you have read this Open Banking article up to here, you probably understand the issue PSD2 very well. If not, in brief: the PSD2 is an EU regulation just about opening of banks though APIs.
We are really proud of our solution to PSD2 which is an example of how well it is possible to transform a legal requirement into a meaningful result. As proof and appreciation of this is that Czech Open Banking Standard (driven by us) is accredited by the European Bank Association (EBA) as one of seven standardization initiatives in the EU (ie. indicates the direction).
The directive was approved by the European Parliament in October 2015. The first PSD2 payment was realized in January 2018 and the first third party (the app Richee by Creditas) was connected to us in September 2018. Nowadays the law is in force but the technical standard (and practically the whole PSD2) will enter into force in September 2019. So, those magical four years from approval into force.
The second building block is our Web API layer… The bank is usually not a software house. In spite of this we upgrade our own Web API technology to the new (fifth) version in spring of this year. Nowadays we are on the same level as other professional solutions and it is one of the most important systems in the bank. Interesting to watch how much the world is changing, isn’t it?
“George. Have you met before?”
If you are living Central Europe, you can not avoid getting to know George. But for sure, George is the new internet banking system for retail clients of Česká spořitelna released in several waves during this year. Worth mentioning that I have received a lot of positive feedback and you may notice it is a big step forward.
All of George, of course, is not the work of just our team. But it is notable that the first analytical meeting was in May 2013, just four years ago. Exactly in the same time as the Web API layer was born. On the basis of this interesting finding, there is one thing for sure. George couldn’t run without our precious APIs…
Digital Identity AKA Bank ID
Two years ago our agile team inspired by Scandinavian countries started proofing of the idea and technology of digital identity.
Proof of technology brought us successful results but there was another challenge ahead of us — to explain and then enforce the business concept which took 95 % of the time and energy of the whole PoC.
By some miracle (or thanks to the good idea) several months later the representatives of Czech banks (including ours) and the State Office met together, agreed on cooperation and created a working group dealing with this topic.
Back to the four-year-rule: on this basis at the end of 2020 we can look forward to finished solutions that allow us, via bank identity, access to government systems. 😌
KYC — Do You Know Our Customers?
In the last post it is also worth noting KYC (Know Your Customer) API, business that uses (not abuses) trust in the bank. Our client (with his permission, of course) will verify his identity and we will forward information to a third party that it is him. Purely online business models can now leverage from verified identity.
As we mentioned in the tweet below, it is a huge step towards Open Banking This activity educates our bank in selling non-financial services as well. In other words, it is a starting point for thinking about what business we can make more easily than just loans or mortgages.
I suppose that you are asking when did it all begin with KYC ? The first meeting with Sazka, our pilot partner, started in May 2017 — two years before rollout. I have an idea — what if we shorten “Four Years From Now” to “Two Years or Less…”? 🤓
Summary
You have read the first part of the series about the successes, failures and patience of the innovation department in Česká spořitelna which was preceded by a thorough search. On this basis, I found that there was something about the four-year-rule. And not only in our environment… There are several examples across the world:
- YouTube, iPod or the Internet itself reached 50 million users after four years (Angry Birds Space after 35 days 🤷🏼). [Source 1, 2]
- In 1997, Steve Jobs returned to Apple and began making profit again after a small bankruptcy. In 2001, the first Mac OS X was released. [Source]
- Writing the script of the famous Czech movie Pelíšky also lasted four long years. [Source]
- American aircraft manufacturer Aero Zun will construct by 2022 a hundred aircraft with hybrid drive, primarily driven by an electric battery. The goal is to reduce emissions, noise and long times for airport check-in. [Source]
- “It took me four years to paint like Raphael, but a lifetime to paint like a child.” ― Pablo Picasso. [Source]
- Beer motorcycle 1000cc Yamaha engine was built in four years. [Source]
And the last note — as Wil Schroter says in his article about how long it will take to have a successful startup:
“Year four and beyond — where the magic happens.”
And what about you? Did you find similar “magic” examples in your world?
In the second article of the series you can look forward to an annual report on prototyping and innovations. I promise that it will not be so positive... 😇
