Many bank CIOs are convinced of the transformational value of Open Banking. Increasingly, banks acknowledge that Open Banking platforms are the industry’s endgame. While mainstream adoption of Open Banking may be 5-10 years away, some aspects of Open Banking, such as open APIs, are expected to reach mainstream adoption levels in the near future. In Europe, an early adoption of APIs is necessary for banks to comply with PSD2, but it can also provide an opportunity for banks to get a head-start and catapult into Open Banking.
Open Banking will be introduced as a transformational opportunity for banks, with new monetization models and unique triple-win situations.
Leaps in technological progress - particularly driven by the mobile platform - have led consumers to expect a seamless multichannel experience and a consistent, global service. As a result, one of the main challenges for banks has been to transform their existing service models to meet customer expectations, while keeping costs down.
New entrants and changing customer expectations are transforming the banking industry. Banks are in danger of losing not only the customer interaction, but also the entire customer relationship. Combined with the implications of PSD2, this creates a perfect storm scenario for banks.
Open Banking transformation paves way for the adoption of open APIs, which in turn presents strategic opportunities where external service providers build on top of banks’ data and architecture. Open Banking help banks bring engaging services to market faster and cheaper than they would be able to themselves. Moreover, Open Banking enables banks to bundle stand-alone services under their own roof, and helps banks their role and relevance in the future.
By providing the necessary tools to third-parties, banks can alter the speed and ease with which third-parties can add value to their platform and its ecosystem members. Indeed, which tools a bank decides to provide and which APIs to open may be one of the main distinguishers in future Open Banking strategies. Through orchestrating network effects and resource complementarities, a bank can harness the power of partners and generate value for all members of its ecosystem.
Open Banking strategies offer many opportunities for banks, but it may be challenging for a bank to decide which opportunities to pursue. Should a bank embrace the role as a fintech app store, a member in someone else’s ecosystem, or find relevant partners to serve niche and local markets?
We encourage banks to envision how they want to position themselves in the future Open Banking landscape, and we suggest that banks formulate Open Banking strategies that align with their visions. An Open Banking strategy should not be a half-hearted initiative, but a clear and concise company-wide endeavour.
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