Open Banking

Overview

The banking industry is witnessing a significant transformation as new technologies and business models reshape operating paradigms and customer interactions. While banks were once pioneers in adopting technology, they now lag behind other industries in terms of digital transformation.

To remain competitive, traditional banks must embrace modernization to deliver relevant, captivating real-time customer experiences and withstand challenges from new players. On the other hand, emerging banks seek to leverage modern design, personalized offerings, cost-effectiveness, and responsive customer service to entice customers. Regardless of their position, all banks must be diligent in selecting technology providers and advisors to ensure a successful modernization journey.

What defines “open banking”:

Open banking is a financial practice that allows third-party financial service providers to access and utilize a customer’s financial data with their explicit consent. It is made possible through the use of open application programming interfaces (APIs) that enable secure data sharing between banks and authorized third-party providers.

With open banking, customers have the option to grant access to their banking data to external financial services, such as budgeting apps, payment providers, investment platforms, and other fintech companies. This data sharing enables these third-party providers to offer personalized and innovative financial products and services to customers.

Open banking aims to foster competition, innovation, and customer-centricity in the financial services industry. It empowers consumers to have more control over their financial data and access a broader range of services from various providers. Additionally, it encourages collaboration between traditional banks and fintech startups, driving advancements in the financial technology landscape. However, it also emphasizes the importance of data security and privacy, requiring robust measures to protect customer information and ensure consent-driven data sharing.

The Outlook

Customers are becoming more demanding, driven by their experiences in non-financial industries. As a result, banks are facing the challenge of meeting these rising expectations. To achieve this, they must adopt a sustainable and modern banking platform that is built on the following four key principles:

Redefinition: The core system serves as the vital center of the bank, housing essential customer, account, and transaction records. However, as time has passed, the core has taken on additional responsibilities beyond its original purpose. Presently, it is expected to seamlessly engage with customers through various devices, providing real-time services 24/7. By adopting a modern core, your bank gains enhanced agility and a customer-centric approach to operations.

Cloud Based: The allure of reduced expenses, scalable resources, and pay-as-you-go models has led numerous banks to migrate non-critical applications, like customer relationship management or email, to the cloud. As cloud security and regulations advance, banks are exploring the possibility of using the cloud for their mission-critical applications, including core processing. The growing interest lies in embracing cloud-native applications to further enhance their digital capabilities.

Digital Uptake: In today’s business landscape, companies like Amazon, Facebook, Google, and Netflix have elevated customer experience and service to unprecedented heights. In order to stay competitive, banks must also deliver a compelling and seamless customer experience right from the initial contact. An exceptional account opening process, combined with smooth and effortless servicing, personalized insights, and valuable advice, will foster the most crucial element of all: customer loyalty. A modern core serves as the fundamental bedrock for achieving exemplary and consistent customer experiences.

Constant Adaptivity: Banks across the globe are confronted with an increasing number of intricate regulations, and many of them have to comply with multiple regulations in various jurisdictions. With a modern, cloud-enabled core system, banks gain the ability to swiftly adapt to regulatory changes in global locations without impacting the core code. This empowers banks to navigate the evolving regulatory landscape with greater ease and efficiency.