It has been almost two months since the implementation of PSD2, and the Open Banking revolution in mainstream banking is yet to be seen. Christian Ball, head of retail banking at GFT, looks at what banks need to do to deliver the benefits to their customers – and themselves
With many struggling to get the right procedures in place to just be compliant with PSD2, it is clear that banks still need to tackle the practical aspects that need to be considered as they prepare to grasp the opportunities that will be presented to them in an Open Banking environment.
In this article, I will go over the steps that retail banks must prioritise in order to really make Open Banking a reality.
What it means
It sounds so simple, but as a term that has been bandied about for so long, Open Banking no longer has a clear definition.
Firms need to ensure that they gain the right level of knowledge and insight as to what Open Banking could encompass, alongside thorough market research and customer insight, so they can create a definition that works both for them and their users. Again, considering this is such a new term, there is not yet a huge amount of historical knowledge for companies to make the concept easier to adopt.
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One place where we can look is the European banking market: BBVA and Fidor are two banks that have been leading the charge in developing new banking processes, and innovations such as the BBVA API Market and Fidor’s Open Banking app are becoming lighthouse projects for other banks looking to innovate their existing processes.
Once banks have an idea of what they want to be able to provide to their customers, they need to then make sure they have the ability to make that happen. Open Banking requires agility, speed and bank-wide co-operation.
In light of this, firms need to embrace more of an entrepreneurial spirit than ever before, addressing the key pillars of culture, technology and monetisation.
The right culture
The crux of it is that Open Banking is a whole new concept. In order for it to work, it requires a whole new way of thinking.
Organisations will need to be both technologically and business-enabled, and in order to achieve this, teams will need to become hybrids; they need to be more agile, and better equipped with a mix of skills and people. This approach is a complete challenge to traditional financial services methodology – cutting across siloed structures and allowing banks to prioritise improvements like never before.
Technology is absolutely vital to for any Open Banking strategy. Financial organisations need to ensure that they are fostering a working culture that will mean developers actively want to work with them, otherwise they will lose out to the fintechs and challenger banks.
For many organisations, thinking of ways to attract the right talent may well be low down their list of priorities, but this approach needs to be radically changed if banks are to make a success of Open Banking.
Finally, organisations need to have a clear plan of how they want to measure Open Banking.
The processes that are required for banks to become more agile may well end up making an institution more cost-effective – a key example being cloud storage.
Similarly, once banks have open APIs in place effectively, they could well be able to drive additional sources of revenue from this valuable data.
Banks need to decide what they most want to measure when it comes to Open Banking, and make sure they have the processes in place to support this.
Revolution of the future
The reality is that Open Banking is more than just a new department pursuing a new opportunity. This topic is more wide-ranging; it is technical, it is infrastructural, it is about agility.
Open Banking is about creating value in ways that banks have never previously considered. Those firms which fail to embrace the opportunity risk being left behind – not only by their traditional competitors, but also the innovative tech firms who are happy to provide ‘financial looking’ services that were once the sole domain of the bank.