Why open banking is less about data and more about CX
TODAY’S banks are global financial entities, and they’re working hard to build an open banking ecosystem.
The deadline set by the European Commission in the 2nd Payment Services Directive (PSD2) is approaching, and banking outfits like HSBC and BNP Paribas are working hard to open up their APIs to developers in order to comply.
The aim of the PSD2 is to prepare bankers for the open banking ecosystem of the future, through open APIs that are accessible to specific categories of regulated (fintech) entities. But the impact of the PSD2 is global, and is complemented by similar laws, directives, and guidelines in the APAC region.
At the recent Asian Financial Services Congress in Singapore, Tech Wire Asia heard about the good, the bad, and the ugly of the open banking system from several analysts, but there were two key takeaways for everyone:
- The focus of opening banking is not entirely about data
- Embracing open banking will deliver a better CX to everyone
Open banking is less about data
To be clear, nobody is saying open banking is not about data. It clearly is. It’s about sharing data to help the financial services ecosystem become more efficient, create smarter products, and provide more intuitive solutions to customers across the world.
To be honest, it’s not a new technology for banks either.
“Banks have been sharing data internally using APIs for years. They understand the technology. What’s being asked of them now is to open up their APIs to share data with other service providers in the market which can help create something better and beneficial for all stakeholders involved,” explained Senior Research Manager Anuj Agrawal.
Over the past decade, banks have used APIs quite extensively. Core banking systems developers have used it to move data from one division of the bank to the other — in a secure and efficient manner. Banks have also shared data via APIs in the past with business partners such as suppliers and resellers in order to better integrate with them.
The next stage, therefore, is to work towards a more open model of sharing data via APIs with external partners and developers who can help build innovative products and solutions.
The Monetary Authority of Singapore has done some incredible work in this space, in a bid to accelerate the growth of fintech companies in the region. It’s something that has helped the country gain some serious credibility in the space and helped bankers and startups alike.
China’s work with APIs too has helped leaders like WeChat and AliPay collaborate with banks and create phenomenal ecosystems in the country — that are expanding globally now, with both of the players establishing a footprint in other parts of the APAC and the US and EU.
“Open banking is not about sharing data. It’s about making better use of data, maybe by collaborating with external partners, to reach out to a new segment of customers, improve operational efficiencies internally,” emphasizes Agrawal.
The reality is that banks will have to re-think how they deal with the changes in their ecosystem. Embracing the open-banking ecosystem will be a great way for bankers looking to delight customers and fast-track their digital transformation journey.
Open banking’s focus is a better CX
Open banking is bound to help banks provide a better experience to customers. They’re expecting it.
According to a recent survey by Accenture, corporate banking customers of banks in the APAC expect open banking to enable a more convenient and innovative banking system, allow them to reach more customers and partners, and optimize the efficiency of SME and corporate processes, among other things.
IDC’s Agrawal evangelizes the benefits of open banking and points out that the idea is not only a novel one but is something that can deliver immediate operational efficiencies and cost savings to banks. It’s in their interest to take the lead and get onboard with open banking.
“Banks need to change their mindset, they need to educate themselves even if it means just looking at the pioneers and learning — open banking can really benefit banks across the world, irrespective of size or scale.”
“They need to look at it from a fresh perspective after understanding that it isn’t about compromising on customer data. Instead, it’s about accelerating their digital agenda and delivering more customer-friendly services that transform the market.”
To be honest, open banking is here and banks (and other organizations) need to accept it and collaborate effectively. The ones that do it sooner will gain more than the ones that choose to drag their legs on this initiative.