Introduction
Banks have reached a critical window of opportunity to roll out Open Banking and drive API innovation.
Whatever the cause—whether it is the move by banks to a more agile platform based model, the increasing demand for personalized services from customers, or the rise of fintech service providers—it is clear that the momentum towards open APIs is now irreversible. Soon it will be the norm to obtain account information and manage payments using thirdparty applications that connect directly into bank systems via public domain APIs—a development which promises to fundamentally transform the payments experience for end-users ranging from individual consumers to global corporations.
Innovation in technology and the platforms driving their adoption are two sides of the same coin. Banks have the potential to be platforms connecting customers to the latest in financial technology by adopting Open Banking and connecting to the prevailing digital ecosystem.
Banking APIs are the life lines of an efficient Open Banking system enabling integration of third-party innovators, corporates, and banks. Robust APIs empower banks to effortlessly adopt and offer, Payments-as-aService. For open banking to take hold, financial institutions need to see the value for their businesses, and not feel that they are taking on additional risk or compliance burdens. Incumbents and new entrants must collaborate. Customers must feel assured that their data is secure and is being shared appropriately for their benefit. To remain competitive, incumbent financial institutions will need to embrace the opportunity presented by open banking. And given the jumpstart that open banking has received from regulators, the time to do so is now.
But embarking on this endeavor alone is choosing the more difficult path for banks. Although some are creating their own ‘developer portals’ or have small teams of data specialists or AI experts, the advantage this can bring a bank could be considered small. Instead, embracing the fundamental ‘open’ nature of open banking and embracing an ecosystem business model through a platform approach using open APIs, banks can introduce solutions from Fintechs and their partners to extend their service offerings, as well as developing new and innovative solutions in timeframes measured in weeks not months.
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