Last years we’ve seen how the technological revolution in the IT sector has come to stay, and we have been able to check the impact on our day by day.
In this article, we’re going to explain how from technological and financial evolution, new ways of interacting with existing players have emerged. This includes “Open Banking” as a new model of relationship with clients offering them new products and services; developing alliances with third parties to bring these new proposals to the market.
“Open Banking” is being progressively adopted worldwide, due to different initiatives from both regulators and key market participants.
Main regulators with an important representation in the sector are:
- Revised Payment Services Directive (PSD2).
- Banking Industry Architecture Network (BIAN).
- European payments interoperability (The Berlin Group).
- Euro Retail Payments Board (ERPB).
The “Open Banking” initiative is based on two paths: opening payments to non-banking entities and making easy new alternate business models, as well as promoting customer protection.
Benefits from this initiative for the banking sector are:
- Creating new channels and identifying new business models to reach new customers
- Managing the “Data” to have a complete vision of the customer and creating new customized value proposals
- Continuous innovation with the help of external suppliers or “Third Parties”
Although the initiative in recent years “has not yet reached its maturity”, it’s being checked that it’s getting to a “very powerful innovation stage” where the customer is focal point of the business and the sector itself has called this new initiative as “Open X”
The evolution of the sector focused on this “Open X” initiative is based on the creation of an integrated marketplace, with specialized roles for different actors, which will allow a fluid exchange of data and services, which will improve the customer experience and will boost the product innovation between different sectors.
This marketplace will allow the following advantages for the customer and the sectors that want to evolve their business model using new channels:
- Customer experience. We are moving towards a customer-centric philosophy, where customers are getting value, and are demanding more and more customized services and products.
- Transparency of the customer’s “Data”, based on the customer’s grants about who, how and when can use his information.
- Banking transactions “Payments” may be generated from other sectors using the new interoperability models based on APIs which are supported by regulators and banking consortiums (BIAN, PSD2, ERPB …)
- Improve the relationship with the customer in real time using new technologies that allow us to analyze the context with a high level of customization
At this point, APIs play a key role, as they allow third parties to access banking systems and data inaccessible ‘till now.
In this case, standardized APIs are not very common. This situation is solved by BIAN consortium allowing us to improve interoperability and scalability, as well as the speed of integration (and therefore, the famous Time to Market)
The following logical step would lead us to the APIs monetization strategy, either in a pay-per-use model or using different subscription models.
In this way, “Open X”, will be the way used by the banks to adapt themselves to customer needs, and not to be prepared for that future right now, will result in the loss of customers and consequently the loss of market share.
Of course, not everything is a bed of roses and each philosophy or movement has its own detractors. In this case it was not going to be less, since the concern for privacy (increasingly established among users), and the use of information continue to be the most important issues to take into account, due to the fact that banking sector is subject to a regulatory framework to facilitate access to their information, which could be used by large technological companies with the ability to analyze and enrich information in a few seconds, to reconfigure the sector and leaving large “players” out of the market.
In order to avoid big technological companies playing in the market re-configuring the sector, large banks corporations are demanding not only the creation of regulators and consortium but also a governance model that allows to define the new “game rules”..
For the implementation of a model based on “Open X”, any sector that wants to “collaborate” should focus on:
- Information Management and Information access, using an “Identity Management y Access Management” solution to assure the information access.
- Implementation of an API Management strategy to manage internal and external resources in accordance with the technical and business interoperability standards proposed by the regulators and consortia in the banking sector
- Real Time information analysis using monitoring solutions to guarantee the service availability and Observability to make easy the business taking decisions and definitions of new products.
- Using architectural patterns and integrations strategies with the information systems in a banking entity (Fraud detection systems, Payments platforms, transactional…
In the banking sector, related to this initiative, new product are beginning to emerge such as:
- Concentrating payment methods in an single card device (Curve.com)
- Discounts and promotions access using strategies like “cross selling” y “up selling” in the Retail and Insurance sector
- Providing “Bank as a Service” platforms that allow other sectors to offer banking products inside their own service catalog
In our next articles we will see various topics using technology applied to business needs, like:
- How to create a marketplace (for the banking sector)
- Management of customer information using the SSI o r Self sovereign identity
- Promoting the evolution of the banking and insurance sector.
- DEFI or Decentralized Finance
- Evolution from PSD2 to ERPB