'Openness Banking': Re-imagine Banking of the Future
Liberalization of Banking and Finance for Open Synergy, Better Possibilities.
Authored by Ajith Thadani, Head of Application Innovation Services, N-able (Private) Limited
Customers today expect banks to provide similar breakthrough features and services they routinely receive from companies on the leading edge of digital innovation. To compound the BFSI domain, the FinTech's have taken the banking industry by storm. The influx of innovative technologies, cloud banking, and sophisticated processes have led the traditional and incumbent banks to rethink and realign their modus operandi.
But existing siloed banking systems and applications, banks have acquired over a period for special purposes, have not delivered the modern capabilities to contest the experience offered by the fintechs and to take advantage of new technologies and application management approaches. As a result, banks have an overwhelming challenge to support rising market expectations, and this may soon expose banks to additional risk and liability.
To be successful, the bank of the future will need to embrace emerging technology, remain flexible to adopt evolving business models and place customer centricity at the centre of every boardroom discussion.
Now, the wave of open technologies and Open Banking had been embraced widely by FI’s. While Open Banking continues to gain traction all over the world, foundations are being laid for the next wave of financial innovation: ‘tech gurus’ believe that Open Finance will usher in an increasingly competitive financial services sector, which inevitably leads to greater haste in the development of new products and services.
Historically we have decerned, one innovation unfolds to another, or products and services evolve over time to better serve the user, similarly data sharing principle in banking has brought to light countless new market opportunities such as Open Banking or even open finance. Historically and due to nature of industry, Banks retained all facets of the banking value chain within banking domain and favoured to handle all end -to-end of banking within the banking system. Nevertheless, this model has significantly changed, where banks strive to co-create end to end customer journey with 3rd parties.
Open Finance will see the extension of the core Open Banking principles, of utilizing customer payment related and bank account data securely share with regulated 3rd parties, into the realm of consumer credit or lending or mortgages and even investments. Open Finance will therefore extend the capabilities of open APIs in finance, to entities beyond traditional banking such as FinTechs, FI’s building societies, 3rd party lenders, buy-now-pay-later (BNPL) providers or even retail lenders etc.
Open Banking or Finance creates a win-win proposition for parties involved as it facilitates co-creation of innovative products and services to create customer centricity, whilst it enables distributing the banking value chain amongst more contributors to seemly connect the technology and financial domain dots therefore providing a wide spectrum of benefits to end customer such as:
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Whereas for the service providers Open finance ads value through;
We currently have seen only the tip of iceberg, of the true potential Open Banking and Open Finance, and with more traction and wider acceptance, we will see how financial inclusion and unification can bring in plethora benefits.
Seamless user experience being a key ingredient for customer centricity; service providers need a cohesive strategy by connecting the dots of technology, processes and experience. As technology is the primary binding factor in this ecosystem, an agile and dynamic technology team is essential to be competitive.
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