Open Banking is a banking initiative that was developed to improve dynamic market competition, stimulate innovation, and give end-users better and more convenient services. Through the use of APIs (“Application Programming Interface”), customers can grant consent to licensed third-party providers, to use their banking data to offer them with better products and services.
With new players like fintech companies and start-ups entering the market, consumers will have more options to choose from. It will undoubtedly affect the demand for banking products. Banks will have to improve their technologies and make efforts to ensure that their services are competitive in terms of price and customer experience. A little fear for the future of banks is obvious – they are unlikely to get down to discussions about the accessibility of Open API. Nevertheless, banks must evaluate some of the benefits that the implementation of Open Banking may bring through collaborating with API-based Fintechs.
In November of last year, Roland Berger published a focus report on Open Banking titled “Adapt Or Die? Why PDS2 Has So Far Failed to Unlock the Potential of Open Banking”. Prior to this study, they have recommended several steps of action that need to be taken by banks before confidently approaching Open Banking.
The 5 pre-steps recommended are:
- Going past the obvious reason of the bank ensuring regulatory compliance, banks need to have a sound strategy on how to leverage and monetize Open APIs. To do so, they must recognize that adopting an Open Banking approach will enable them to understand their customers and enhance their current products and service.
- Implementing “transformational” changes within the institution’s system takes time. Banks need a plan with a reasonable timeline to integrate all the various dynamic elements that will allow for a smooth transition. Therefore, to improve time-to-market banks need to adopt easy to plug-in solutions to accelerate their transition.
- Banks need to identify their strategic assets, which will most likely require them to have a dedicated cross-organization team. What does this mean? Fundamentally, banks need to identify specific data assets – what they can add value to and where they can improve. This is done to allow for a wider scope of understanding of the organization to curate a strategic plan that optimizes development of their assets even further.
- Talk to your consumers and educate the public – a shift in consumer mindset would take time, hence when banks are going through significant changes, they need to make sure their consumers understand and are aware of the benefits that come with these changes.
- Develop your Open Banking customer service model now. This will help you plan to manage and resolve customer complaints effectively. Your response time and customer care commitments will be critical and differentiate you from others.