APAC racing towards Open Banking
The Open Banking movement is gaining momentum globally and while Europe is the “front runner”, Asia Pacific (APAC) is quickly catching up. In fact, in F5’s “2020 State of Applications Services Report – BFSI edition,” we had surveyed over 480 respondents from the Banking and Financial Services Industry (BFSI) globally and found that nearly half of organizations providing banking services in APAC are planning to implement or have already implemented open banking initiatives — making it abundantly clear that the interest to further accelerate innovation in the burgeoning digital finance landscape is growing.
Growing customer expectations, coupled with increasing competition from new entrants and support for open banking regulations, are shaping APAC’s race towards open banking. Incidentally, the race is further bolstered by the COVID-19 pandemic that has hastened the speed of digital transformation across the board. In my interview with Daniel Martin on CNA938’s Life&Style segment, we discussed at length about the various opportunities and hurdles that BFSIs are facing in this region and beyond – sharing some key insights here for your reading pleasure:
The starting line
In order to understand the open banking landscape in the region, it is important for us to first analyze what is driving the adoption of open banking initiatives. The first and most important one? Consumers. Consumers are now familiar with the ubiquity, convenience and ease of use provided by the products and services of web giants like Amazon, Uber and Facebook. And so, they now expect and demand for around-the-clock personalized products and services (all at competitive prices) from all services. BFSIs are not spared as well and now need to transform their customer experience to one akin to an Amazon.
The other important element would be technology. As consumers’ demand for convenience and experiences evolve, solutions such as cognitive intelligence, data analytics, mobile and social technologies can now be leveraged to boost differentiation between products and services, enhance customer experience, as well as create new revenue streams. In fact, the supply-and-demand effect has led to the rise to fintechs and tech challengers leveraging digital platforms to offer customers faster, personalized banking experiences.
Now that we have established the context, what are some the open banking challenges that BFSIs are faced with?
The hurdles to overcome
While government regulations and compliance issues around open banking can be a tricky aspect for BFSIs to adhere to, those aren’t the only challenges they have to contend with.
First and foremost, modernizing IT can be a huge challenge for most, as legacy infrastructures increase the complexity of introducing new technologies. On top of this, the sheer volume of APIs and data usage coming through can heavily impact infrastructure uptime, availability, and cost of development as well. Integrating legacy fragmented systems often requires additional capabilities and as a result, BFSIs need to have an aggressive approach toward IT modernization, processes, and infrastructure to support the long-term success of its open banking strategy.
Secondly, prioritizing security could also be a challenge for BFSIs. Organizations must assuage consumer fears around the possibilities of fraud or data breaches when adopting open banking initiatives. However, the evolving threat landscape today does not help them in inspiring confidence amongst their customers.
Case in point, according to F5 Curve of Convenience 2020 report, consumer trust in banking apps are on a downward trajectory across APAC, declining from 79 percent to 63 percent just over the span of two years.
Thirdly, despite having so much data passing through its systems, BFSIs have not always been effective at monetizing data to be profitable for all parties. This is unlike the web giants that have made monetizing data an art and a science. To effectively compete with these new data driven entrants, BFSIs must build capabilities to be able to successfully evaluate critical data assets to generate actionable insights.
Reaching the finishing line
Open banking will continue to gain momentum as it enables BFSIs to gain new revenue channels and monetization opportunities, a broader customer reach, and to accelerate digital transformation by moving banks closer to the digitally connected ecosystem and consumers.
Consumer preferences is a rapidly evolving beast and demand for greater personalization will only grow. BFSIs must rethink how their current offerings and services can meet those demands. Open banking can help to deliver enhanced and customer-centric banking experiences. If these organizations fail to innovate, they run the risk of not only losing their customersbut also their competitive advantage in today’s digital environment.
What is the state of open banking in APAC and how can BFSIs succeed in its open banking initiatives? Head on over to read the F5 commissioned Twimbit’s “Embracing the Open Banking Opportunity in Asia-Pacific” report.