Open Banking ecosystems present customers with the opportunity to view multiple account details from different financial organisations to access all their financial information in real-time and in one place, most commonly an app. However, it is reliant on these different institutions being able to surface and share data in a timely manner and this is something that some banks currently don’t have the infrastructure in place to do. This is largely due to the fact many operate using legacy technology and data architectures that have grown in complexity overtime, all of which makes it difficult to access and share data quickly. Consequently, this can lead to a customer depositing a sum of money into their account or a change in interest rate and not being able to see it reflected on their open banking app for several hours or even days. As a result, their perception of the app or the delivery of the open banking service, and by consequence the bank’s brand value, is likely to diminish.
So, how can financial institutions improve their ability to offer open banking?
In order to overcome these difficulties and gain a competitive edge, banks must reduce the complexity of their architecture so that they can surface data through shared APIs and deliver it to their customers, regardless of who they bank with. This is something that challenger banks that aren’t burdened by legacy systems and operate in a more agile manner are able to do more easily. However, as the vast majority of people still have at least one account with a traditional bank, there is a significant amount to be gained by being able to adopt a more agile approach in which they aren’t held back by outdated tech. Ultimately, by reducing the complexity of their infrastructure thereby reduces risk and consequently cost, making financial institutions more agile.
A vital component of open banking ecosystems is its ability to provide real-time data for customers. For banks to offer this they must not only reduce the legacy infrastructure but also introduce new systems into their organisation. Data management platforms that feature AI and API management will be instrumental in enabling banks to not only simplify their infrastructure but also to create a more open ecosystem that offers real-time access to data. This real-time access to data will result in customers being able to make more informed and faster financial decisions, thus a bank delivering more true perceived value to those customers.
Additionally, adopting a data management platform to simplify their data architecture will increase agility and enable financial institutions to get open banking to market quicker. This will provide them with a more competitive edge which will offer them the potential to not only retain their existing customers and attract new ones.
Ultimately, open banking services allow financial institutions to provide added value to their customers, enabling them to have a clear and up-to-date picture of their financial transactions and ensuring they are able to make better financial decisions. However, in order to offer open banking, banks must be prepared to remove complexities from their infrastructure and adopt new technologies that make use of AI and APIs in order to integrate, share and access data in real-time. In turn, this will allow traditional banks to offer a proposition that allows them to better compete with challenger banks.
(Disclaimer: this is a personal blog & views expressed are not necessarily those of my employer, InterSystems)