Open Banking

The promise of open banking (Open Banking) arrived late to Israel, but now that it is here, it is changing the way financial systems operate.

Take, for example, a bank account — every company, regardless of type or size, manages a bank account (or several accounts).

In the old world, bookkeeping had to perform reconciliations manually or semi-automatically. Since the open banking reform came into effect, bank transactions are captured automatically in the system the moment they are created, and they can easily be linked to the relevant document (tax invoice/transaction, demand, etc.).

And this is just one example, without even mentioning bank transfers, payroll, etc.

The main innovation here is not only the savings in manual actions, but also the integration between systems, which allows the entire organization to participate in business processes without being dependent on the organization’s finance unit.

The digital transformation of the banking world can be divided into three stages:

1. Digital Banking (DIGITAL BANKING) – broadly speaking, banking in Israel is already past this stage. Today, almost all actions can be performed without going to the bank’s physical branch.

2. Open Banking (OPEN BANKING) – the stage that began to take place in Israel starting in 2021, in accordance with the Bank of Israel’s guidelines (and contrary to the banks’ wishes). This stage makes it possible to perform the actions that were already possible in stage 1, but this time not through the bank’s website, but via interfaces (API) based on the European NextGenPSD2 standard, allowing bank customers to perform actions and view data through third-party systems. For companies, the change will be reflected in their existing ERP systems — everything will happen without the need for MASAV or the bank’s website — reconciliations, transferring and collecting funds, etc. For private customers, the change will be reflected through aggregators that can present all of a person’s accounts in one place without the need to authenticate with each bank account separately.

3. Open financial system ( OPEN DATA / OPEN FINANCE) – a stage that we hope will begin in Israel soon, as is happening in advanced OECD countries. At this stage, banking information moves from the bank’s control to the customer’s control, and the customer can grant access to their data to other financial institutions. This enables easy switching between banks and access to credit. Broadly speaking, it provides very great flexibility in everything related to the banking world.

In the CloudERP system, we have been implementing the open banking reform from the moment it became possible in Israel, so that through the system organizations can automate every financial process — viewing transactions, bank reconciliations, supplier payments, customer collections, approvals, and more.