Trovata Execs Comment on Role of Open Banking, Variable Recurring Payments, Other Fintech Trends in Banking

Trovata, which automates cash reporting and forecasting via wholesale (and was set for the UK, and EU launch after a $27 million round in June 2022), recently announced the appointment of Lisa Gutu as VP of Business Development and Vladimir Pintea as VP of Open Banking Engineering.

Trovata, the Fintech in automating cash workflows through multi-bank API data aggregation for corporate finance and treasury teams, has made these new appointments in order to expand their platform with thousands of new bank integrations and Pay by Bank services and to broaden their reach from the U.S. to the UK and EU marketplace.

Lisa Gutu and Vladimir Pintea have shared insights with Crowdfund Insider. Our conversation is shared below. 

Crowdfund Insider: Please tell us a bit about Trovata and the challenges the company looks to address.

Lisa Gutu: We believe that Trovata is the next-gen platform for businesses to freely manage cash. By leveraging Open Finance connections to more than 50 corporate and over 2,000 open banking APIs globally, Trovata aims to serve as the bank-agnostic, cash management platform for any business.

Finance and accounting teams should have full visibility of all their bank accounts, balances, and transactions in real-time. Using AI and machine learning, the Trovata platform provides its clients with tools to analyze any inconsistencies and forecast their finances in minutes instead of hours or even days.

Crowdfund Insider: Why do you think there is not so much innovation in the SME and corporate space?

Vladimir Pintea: The tools used by finance teams have not been modernized in a long time. Most of the workflows are still managed in a spreadsheet, heavily relying on manual data collection and file exchanges. Finance and accounting departments are overwhelmed due to a lack of resources, and automating workflows can help them to work more intelligently.

With the rise of the Open Data and Open Finance movements across the globe, fintechs are coming up with new products designed with SME and corporate clients in mind, often collaborating with banks to provide a unique offering to businesses and helping companies to automate existing processes and cut costs on administrative tasks.

We expect this positive trend to continue in the years to come, ensuring entrepreneurial growth and a thriving business ecosystem. It is no secret that 99% of business in Europe is driven by Small and Medium Enterprises.

Crowdfund Insider: As a global company, operating now in the US, UK and EU, what would you say are the biggest Open Finance differences?

Lisa Gutu: Open banking is just over four years old and it already gives us a sense of how banking services will be delivered in the future. While the UK and EU are the twin birthplaces of open banking for consumers and small businesses (called retail banking), we think the US has pioneered open banking on the corporate side for mid-market and enterprise companies (called wholesale banking).

The UK and EU are moving faster behind regulatory standards, while the standards for bank data distribution and delivery in the US are left up to the banks themselves, which use SWIFT and follow 40-year-old legacy file formats and bespoke SFTP gateways. However, whilst these territories and market segments are quite different, a global tipping point of both speed of adoption of modern APIs is approaching and we believe that convergence toward common standards is coming.

Crowdfund Insider: Open Banking is believed to be commoditized in the long run, but what is the state of the APIs across the markets where Trovata is present right now?

Vladimir Pintea: Open banking is all about empowerment. There are companies that are heavily focused on data aggregation, which they use to empower the fintech ecosystem. Regulated standards, including PSD2, drive this forward. However, whilst data access was once novel, aggregation is becoming commoditized.

The next waves of innovation will be the more advanced services built on top of the aggregation service providers. Even though PSD2 mandates banks to open access to any payment account, there are just a few APIs across Europe that work well for Corporate clients (which are generally businesses with more than $20M turnover per year). However, due to complexities of authentication and limited scope of account access, the current Open Banking standards are not meeting the real needs of these clients.

Therefore, the corporate ecosystem is nearly nonexistent, but it’s going to explode onto the scene in the next 12 months with private/premium APIs and VRPs coming into play. The early corporate use cases are in “Treasury” applications today, but the demand is extremely high for a modern cash forecasting and analysis application, and the need is universal for nearly all companies worldwide.

What are the latest updates in Open Banking that helps with its adoption and where do you think the market is going?

Lisa Gutu: One of the main inconveniences both for businesses and consumers was 90-day reauthentication rules with their financial institution. This created friction, especially for businesses with financial data scattered across different accounts, banks and even entities and countries.

Being able to aggregate all the data from across the globe and automatically analyze it, allows financial teams to see the bigger picture, better manage the cash flow and make more accurate business decisions. The FCA has proposed several modifications to the guidance in “Payment Services and Electronic Money – Our Approach’ and the Perimeter Guidance Manual”, including Article 10 of the UK- RTS.

Starting from the 26th of September 2022, open banking users in the UK will be able to simply re-consent every 90 days to confirm their willingness to continue sharing data with the Third Party.

The regulated third parties will now be responsible for the consumer data sharing, removing the need for a cumbersome process between the consumer, the AISP, and the bank. This means consumers will experience less friction while retaining control over how they share data with multiple apps and services.

In the EU the debate around the 90-days re-auth took a different turn and we expect it to be changed to require a 180-days consent by the open banking users instead. We shall see more later this fall.

Another major change in the legislation is the introduction of Variable Recurring Payments (VRP). Customers can give long-lived consent to licensed third parties to initiate payments on their behalf based on a specific set of instructions. Such payments will happen instantly and won’t require any additional human interaction which makes it a complete game changer in the payment space.

The Competition and Markets Authority (CMA) mandated the top 9 UK banks to develop VRP APIs to enable open banking users to sweep money between their own accounts. The deadline for Sweeping APIs was due just a couple of days ago, on the 31st of July and we expect to see more pilots coming up in the fall with an uptake in the usage during the next year.

Businesses will be able to provide just one consent to a third party to move money between their own accounts depending on their automated cash forecasting, like in Trovata. You can set a rule as a business to sweep money between your accounts if a balance goes below a given amount to avoid any overdraft fees or a missed payment due to insufficient funds in an account.

Another use case for businesses is moving excess funds into an account where they can generate interest. Right now there is £100 billion pounds tied up in the UK’s business current accounts alone earning little interest. Imagine what a benefit it can be for companies in the long run.

Crowdfund Insider: How would VRP impact the payment space in general?

Vladimir Pintea: VRPs allow you to subscribe to a service directly from your bank account via an instant payment. It is easier to set up both by the business and by the end-customer or other businesses. Hence it is expected that a good part of card-on-file and Direct Debits will be replaced by VRPs.

This will enable businesses, besides the obvious use cases of subscription management and recurring payments of their retail clients, to automate so many more processes around invoice/bill payments to and from various vendors, saving costs on administration and having overall a better cash flow management.

However, this is still far from being figured out by the industry, as there are major concerns about the actual implementation, management of liabilities and disputes between the involved parties. Commercial VRP APIs will require bilateral or multilateral agreements between banks and third parties to limit the risks and protect the end consumers and will also specify the fees paid by TPPs for using such APIs.

Hence, the industry should agree on a common approach, ensuring that it is beneficial for every party involved and it is still a more secure and cheaper alternative to the existing payment methods. VRPs are also limited to the UK only, meaning that it will take some time to see real implementations in other geographies.

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