2020's Essential Reading:  'Zeitgeist'

What it takes to move the needle on Open Banking from 1.0 – 3.0 and beyond. 

Will 2020 become the year of truth for Open Banking? Will it take more regulation, better technical standards, more pressure from watchdogs or? What do we, as we cross the Rubicon into unchartered territory, need most? More excel spreadsheets and forecasts while juggling new pricing and business models? We don’t think so…

Apart from courage, clearly reading the sign of the times is the most important guide for any player in the financial services domain going forward – incumbent or fintech. Successful adoption of Open Banking is about relevance for the end user, and that has everything to do with feeling society’s pulse.  If 2018 was Open Banking 1.0, and 2019 2.0, what will 3.0 bring?

Banking heroes: the IT department

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Banking heroes: the IT department

Inside-Out bank focus & Outside-In partner focus: less risk, less cost, more speed

Now that we have hit the start button on Open Banking there has been plenty of debate and discussion around who will be the winners and losers. The majority of the discussion centres around the open ends, the security & data concerns and how regulators & banks are not ready for this brave new world. So once again, we swap out the opportunity for the threats for they are now top of mind. However, one then risks losing the strategic focus. I, for one, firmly believe that Open Banking is an opportunity, and not just because of the most obvious reason: the customer will most likely trust banks over other third party providers, not to mention the hate of hassle and change.

There are some other very real benefits that will arise from banks being forced to API enable their core systems and expose their data. With a track record of over 25 years in the payments industry as a product technology supplier to banks, I have experienced that the biggest area of risk, cost and difficulty was always in integrating the product into each and every unique set of systems. The idea of a ‘one size fits all’ payments solution, particularly in the area of domestic low value payments is hard to execute on an operational level. Each bank has its own version of a so called standard platform, whether that is BACS or Faster Payments in the UK, SEPA in Europe, ACH in the US, and the list goes on. This issue is compounded by every new asset that needs to be integrated into the core, be it CRM, fraud detection or..

The cost for a bank to implement solutions is high, it takes a long time and the risk of failure is omnipresent. The majority of money spent has not been in paying licence or maintenance fees to the vendor, but is in fact the systems integration fees often paid to a third party to shoe horn the product into the bank’s somewhat antiquated unique core infrastructure. Estimates range that well over 50% of project cost is attributable to the integration.

Focus on Inside-Out for banks

So, perhaps an as yet relatively little discussed major benefit of Open Banking, and in particular API enablement of a bank’s core systems, is the delivery of an abstraction layer that if done correctly and comprehensively should deliver an outcome that radically reduces the cost, risk and time for product implementation. This requires banks to think beyond open and to embark on a complete API enablement of their core systems and expose as much data and as many APIs as is possible. Banks IT departments should be tasked to concentrate on the inside-out whilst delivering the obvious needs of compliance, resilience and availability at the most efficient cost rate.

Focus on Outside-In through partners

In doing so they will pave the way for long term fruitful partnerships with technology companies – established and fintechs - who can concentrate on providing the outside-in services. Such a model presents a win-win. The technology company can leverage the banks’ API systems, whilst utilising their regulatory status, but most important of all get access to the banks’ millions of customers. In other words the bank becomes a distribution platform. In return the bank effectively creates an R&D pool of technology partners where the risk and cost is transferred from the bank’s balance sheet to the balance sheet of the technology companies, and, at the same time the time and cost of integration for these products has been slashed compared to the ‘good old days’.

Banking heroes

In order for the banks and their innovation labs to move forward and embrace Open Banking they have to reinstate their own internal heroes – the IT department – with a clear and focused task: keep the bank’s systems secure and operationally fit at the best possible price. That alone is a mammoth task in today’s world of cyber security risks. Hold the fort without being asked to do that other job as well that is almost contradictory to that task: innovate fast and agile with new and unproven technologies. If the bank’s IT department get a chance to work with fintech partners and truly exchange expertise on risk and operational practices versus new tech, a solid foundation is built for all to be rewarded in their jobs, and have a sound technological eco system. An eco-system where experience meets curiosity, where operational focus meets innovation.

Inside-Out winning with Outside-In

Banks have their heroes already and they reside inside: the IT department – let them build winning teams whilst keeping their eye on the ball: security, low cost of development, operational excellence and low risk. We appreciate this requires a very open and collaborative mind set to be a success, but it also demands support from the top and the business line. Guarding the bank is no mean task and creating a secure infrastructure for ‘others to work in’ is an Olympic achievement. Together with the business they can then open up new and revenue sharing services whilst deploying the skills, tech and expertise of the fintech community.

Mark Hartley

ABOUT THE AUTHOR
Mark Hartley

Before founding BankiFi, Mark Hartley has held a wide range of general management, sales, innovation and strategy roles in the technology industry for the financial services segment since the early nineties in the APAC region and Europe, most recently at Clear2Pay and FIS. His vision around open payments lead to the creation of the Open Payment Hub, the ‘stable’ product that lead to the acquisition of the company in 2014 by FIS. A renowned innovator and thought leader on the subject of Payments & Open Banking, he served as strategic Advisor to the Board of Nationwide Building Society.

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NFI Nordic Finance Innovation – Doing Digital

Event launching Chris Skinner’s latest book. Conny will present on Doing Digital with Purpose – in a new world order.

February 12, Oslo, Norway

Open Banking Excellence

A discussion on Banking as a Platform with Mark Hartley, Founding Partner BankiFi

February 20, London, UK

The SME Open Banking Revolution

An Experian / Finextra webinar – BankiFi outlines why SME need and deserve it the most and why banks can make this happen.

February 13, Finextra webinar – free registration

UK – NL Cyber & Fintech Summit

As an Anglo Dutch company BankiFi is very fit to present at this bridge building event. Topics around PSD2, Fintechs and more – free registration

February 20, The Hague, The Netherlands

Money2020 Asia

With Asia and in particular Singapore, Australia and New Zealand moving swiftly on Open Banking Conny will be at Money2020 to meet with the banks’that get it’. Please connect for a meeting: conny.dorrestijn@bankifi.com 

March 23-25, Singapore

De toekomst van het betalingsverkeer

THE national conference on the Future of payments and transaction banking is being chaired by Conny connecting banks, PSPs, merchants and corporate customers. 

April 7, Amsterdam, Netherlands

Impact ’20

Digital and business model innovation in a digital age – Conny will speak about Banking in a New World Order – with Purpose

June 3-4, Krakow, Poland

Open Banking and SCA Forum

Conny moderated and chaired this two-day event in Amsterdam,  4/5 February 2020 with an international host of banks presenting.

 

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