Modernize Banking Operations with Open Banking Standards

Modernize Banking Operations with Open Banking Standards

To maintain strong relevance in the market and to extend immersive experiences to customers, banks are looking at revisiting and redefining their business models. Open Banking Standards act as accelerators in the digitization drive for banks, says Srinivasan Panchapakesan- Executive Vice President & Global Head- Amaze? and Cloud Transformation Delivery.

As the custodians of people’s finances, banks have always been necessarily conservative and risk-averse in their approach, even as they fight an ongoing battle to retain and grow market share in a highly competitive environment. In the wake of the COVID-19 pandemic, the acceleration of digital transformation has altered the expectations of customers, putting pressure on traditional banks to reimagine their products and services to ensure customer satisfaction. Modern technologies like containerization and microservices are turning banks into digital powerhouses, with innovative, revolutionary banking products and services. As technology-enabled banking operations move to the cloud and user experience threatens to make or break customer loyalty, banks are making a quick transition to new business models. In the process, they’re also realizing how technology enables them to reduce their capital expenditure, and helps them achieve improved performance, scalability and elasticity.

Open Banking across the World:

Banks across the world are adopting open banking standards (such as NIAN, PSD2, IFX, CUFX, and ISO), with most countries authorizing AISPs and PISPs through a regulatory body, while some like Australia are allowing only one type of authorization. But, there’s no doubt that every bank in the world is navigating to open banking standards, whether to reach their retail customers or to offer them engaging experiences and stay resilient in the market.

Open Banking Standards

Open Banking standards are acting as a catalyst to the banks’ drive to digitize. As they move customer financial data to the cloud and offer innovative products and services, banks improve user experience in myriad ways, gaining the following benefits:

·??????Much faster and easier inter-bank payments.

·??????Optimized & standardized banking operations.

·??????Banks turn agile. Can offer continuous delivery.

·??????Banks evade the stranglehold of legacy systems.

As regulated service providers access consumer account data using APIs, security risks from new and known attack vectors need to be identified and countered on an ongoing basis, while authenticating genuine users and transactions. Powered by open banking standards, banks are able to establish consent workflows along with other registration and accreditation processes to protect consumers better when offering APIs that integrate multiple external services with customer bank accounts.

Banks can partner with two types of service providers, in this ecosystem.

?Account Information Service Provider (AISP):

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An AISP is authorized to obtain or retrieve read-only access to account data from banks and other financial institutions. They have helped digitalize a number of paper-based banking transactions. They offer a single interface to customers, and manage their accounts for analysis and aggregation without the authority to log on to any of the accounts they manage or utilize the user data for anything other than to provide the promised services, like multi-banking apps, financial forecasting, loan application or credit platforms.

Payment Initiation Service Provider (PISP):

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PISPs are independent of any affiliation to a specific bank and can get a read-write access to customer accounts and can initiate payments into or out of those accounts. They get to choose the banks they work with, enabling customers to pay invoices and make instant payments from one bank to another. PISPs act as financial management tools or business solutions, making the transfer of money instant, easy and convenient.

Types of Partnerships between Banks and Fintech Partners:

Key partnership opportunities are now open to both sides.

·??????Fintech tests and uses a bank’s catalog of APIs supported by open banking platforms.

·??????Banks seek out Fintech partners using APIs to extend non-competitive product range.

·??????Banks incubate early-stage Fintech, and acquire the new product and APIs once built.

·??????Fintech offers banking as a service, using a bank’s infrastructure & core functionalities.

Open Banking Practice @ Hexaware

As a part of Hexaware’s digital banking practice, we partner with leading banks, fintech players and financial services organizations to drive holistic digital transformation of their businesses by creating innovative ecosystems. For over two decades, we have delivered disruptive and complex business solutions in digitalization across the globe. We enable real-time payment technologies and help incumbent banks embrace open banking standards and improve customer service by sharing their technology platforms with new Fintech players, opening up consumer-consented data, and collaboratively building an innovative, mobile-first suite of financial services.

Digital enablement helps banks gain competitive advantage, transform customer experience and grow their business. Their inflexible legacy systems which lack a flexible architecture require modernization, while they adopt cloud security, compliance and cloud-native architecture to leverage the full benefits of cloud ecosystem. Our proprietary cloud replatforming product suite amaze? acts as a catalyst to ease your cloud journey, while offering substantial time and cost savings. Your core applications get modernized, allowing straight-through-processing as we delineate an API journey most suited to your existing business and IT landscape to transform you to a Connected Bank. We leverage the strengths of your core systems (at minimal cost) and build API economy-based revenue streams for your bank while reducing time to market without any added credit risk or operational risk and the ability to build new revenue streams by creating sustainable service models for traditionally underserved markets.?

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