Banking enters its era of openness

Open finance is enabling big banks to innovate and adapt at greater speed, and facilitating a new banking ecosystem, powered by APIs, that will transform the customer experience

The banking sector has had to evolve significantly over the last decade, but the pace of change is only accelerating. The global financial crisis signalled a need for something different, which combined with the emergence of powerful digital innovation triggered a surge in small upstarts seeking to disrupt incumbents with niche, differentiated services across the banking spectrum.

Spoiled by slick experiences from the likes of Amazon, Uber and Deliveroo, consumers desire instant gratification and personalised services from their banks too. Their expectations, however, are more likely to be met by the newer market entrants that, unburdened by legacy infrastructure or vendor lock-in, can innovate and adapt to trends in a faster, more agile way.

“Technology enables banks to deepen their relationships with consumers and create a stickier, more customer-centric service, but they need to find a way to deal with legacy,” says Liad Bokovsky, open finance specialist at Axway, a tech company which gives heritage IT infrastructure new life to help organisations to digitally transform. “With lots of new competitors focusing on products like mortgages, insurance, banking or foreign exchange, big banks have to figure out how to deal with that, viewing technology as a symbiotic relationship.”

The key to innovating fast enough to keep up with customer expectations is through open finance, which is about using and sharing customer data in a holistic way to enable a better service. Open finance is a vision for a much bigger ecosystem that includes more information about the financial status of an individual, but also connects with other platforms and companies. A smartwatch, for instance, can tell you about both your health status and your spending status.

We are going to see all sorts of companies implementing different APIs in the open finance ecosystem

Nationwide Building Society has created an incubator programme, Open Banking for Good, to help people avoid getting into debt. By utilising data and embracing the principles of open finance, which is about achieving a 360-degree customer view, the programme enables people to better see if buying something or taking money out the bank might get them into trouble, by using tooling that can help them avoid financial traps and pitfalls.

Axway powers digital transformation by integrating all the legacy and modern technology applications in banks, with application programming interface (API) management that allows them to build marketplaces and ecosystems, which help them to grow. The company also removes complexity for developers of banking applications by automating their processes so they can concentrate on transformational frontend tasks rather than legacy integration at the backend.

“Customer churn is a very expensive cost for banks. Providing a better customer experience keeps people loyal and reduces that churn,” says Anthony Badger, financial services lead at Axway. “But it is very hard for big banks to introduce new innovative financial products. Many of them are not going to change their backend, those systems of records. We provide a way to integrate with them so they can adapt and respond more quickly to new trends and customer expectations. Our middleware is an innovation layer that exposes this data to consumers.”

The sheer breadth of the open finance ecosystem is exemplified by Axway’s work with a leading automotive manufacturer resulting in financial integration, which means when somebody purchases a car they can simply press a button to get insurance for their first seven days, without having to provide any more information.

In the future, these drivers will also be able to subscribe to a service whereby their car can find, choose and pay for their parking space, or order and pay on their behalf when going to coffee drive-throughs. The financial ecosystem will be such that, for some customers, it might not even begin with an interaction with a financialservices organisation.

“We are going to see all sorts of companies implementing different APIs in the open finance ecosystem,” says Badger. “Banks will invite companies to be part of their ecosystem – a co-creation of APIs – and there will be a unified catalogue of all APIs available. But banks won’t be like an island, they will also be part of other ecosystems. There will be more integrations between organisations and more offers available to consumers.

“Axway will help organisations create those catalogues and co-creation capabilities, and expose these assets in a secure way. We are part of the core journey for both the customer and the financial services companies.”

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