How to get started in Open Banking

Author: Simon Cadbury

After much discussion and debate, Open Banking finally became a reality last month. The European Union now requires all member states to transpose PSD2 into law, and nine UK banks (referred to as the CMA9) have been mandated by the UK’s Competition and Markets Authority to provide authorised third parties with secure access to their current account transaction data. Financial organisations must now get ready to open their services and share data with third parties.

In reality, Open Banking arrived with a whimper rather than a roar – six of the nine mandated financial organisations failed to make the necessary changes in time for implementation. What’s more, media coverage has been overwhelmingly negative, focusing on the perceived security risks as opposed to the benefits and opportunities now available to consumers. Battling these misconceptions is crucial, and making a success of Open Banking will need the industry to clearly demonstrate the positive potential of PSD2.

Frustratingly, for those of us who have followed the development of Open Banking, the benefits are clear: for third parties it is access to new data and customers, whereas for the consumer PSD2 brings more choice, more flexibility, and greater monetary management. As for banks… well, they will be the ones leading the charge in superior customer experience.

For banks, this is a chance to evolve; to change their status with customers from being purely transactional – money in, money out, loans, mortgages, and so on – and form a longer, more fulfilling relationship as the platform on which consumers live out their financial lives. Banks can become the foundation of a wider ecosystem, becoming even more valuable to consumers and gaining a much deeper insight into their financial behaviours – insight that they will ultimately be able to monetise.

Embracing Open Banking

For financial institutions, Open Banking presents a daunting change. The industry has traditionally been characterised as ‘reluctant’ when it comes to the rapidly shifting technological landscape, and the thought of allowing third parties to access consumer data initially sent shivers down the spines of many banks.

However, when done correctly, PSD2 represents a tremendous opportunity. Here are four key considerations when making your first foray into the world of Open Banking:

  1. Put customer outcomes at the core of your Open Banking proposition

At its heart, Open Banking is about the customer, and delivering a service that suits them – rather than one that is limited by the decisions of their chosen bank. Flexibility, choice, and convenience are critical factors and should be incorporated into your plans from the very start.

  1. Collaborate across ecosystems

Consumer financial needs are becoming increasingly complex, with many using multiple banking services to arrange their finances.  In line with these demands, banks must shift their business models to become more collaborative, engaging customers across multiple digital ecosystems. Open Banking will undoubtedly accelerate this.

  1. See it as an opportunity, not an obstacle

Embracing Open Banking is about more than ticking off the criteria for PSD2. The banks that will be most successful in its implementation will be those who follow the spirit of the law, rather than just the letter. Banks would be best advised to embrace the operational model prescribed by PSD2, rather than see it as a regulation-driven cost of doing business.

  1. Embrace the API economy

 Investing in APIs to turn Open Banking into an accepted operational model is the logical first step. This is easier said than done; finding the balance between openness and complete security is a significant challenge – and possibly something that is beyond your in-house expertise. Bringing in expert advice could prove invaluable in the long-run.

Already the most astute banks are investing in APIs, proper security, and other digital foundations to create these platforms. ING’s Yolt was the first third party to successfully connect into a CMA9 bank, Santander has incorporated Open Banking into their global strategy, and Australia’s Macquarie Bank has announced plans to make it easier for customers to share their financial data. The international element is important to note, with several regions set to follow the UK’s lead.

Customer experience is the ultimate winner

 PSD2 enables organisations to change their status with customers from being merely transactional, to becoming a trusted advisor – a win for the banks, who will retain their customers, and for customers, who will have a better banking experience.

Furthermore, it enables them to introduce new services to help the customer have a better, digital, customer experience. While third party businesses, with new and innovative ideas, finally get a more substantial seat at the table.

However, financial organisations can only find success if they embrace PSD2 and are willing to open their banking platforms and collaborate with third parties. In the battle for the customer, a high-quality experience will be the defining factor, and those businesses that embrace PSD2 will come out on top.

 

26 Feb 2018

Author: Simon Cadbury

After much discussion and debate, Open Banking finally became a reality last month. The European Union now requires all member states to transpose PSD2 into law, and nine UK banks (referred to as the CMA9) have been mandated by the UK’s Competition and Markets Authority to provide authorised third parties with secure access to their current account transaction data. Financial organisations must now get ready to open their services and share data with third parties.

In reality, Open Banking arrived with a whimper rather than a roar – six of the nine mandated financial organisations failed to make the necessary changes in time for implementation. What’s more, media coverage has been overwhelmingly negative, focusing on the perceived security risks as opposed to the benefits and opportunities now available to consumers. Battling these misconceptions is crucial, and making a success of Open Banking will need the industry to clearly demonstrate the positive potential of PSD2.

Frustratingly, for those of us who have followed the development of Open Banking, the benefits are clear: for third parties it is access to new data and customers, whereas for the consumer PSD2 brings more choice, more flexibility, and greater monetary management. As for banks… well, they will be the ones leading the charge in superior customer experience.

For banks, this is a chance to evolve; to change their status with customers from being purely transactional – money in, money out, loans, mortgages, and so on – and form a longer, more fulfilling relationship as the platform on which consumers live out their financial lives. Banks can become the foundation of a wider ecosystem, becoming even more valuable to consumers and gaining a much deeper insight into their financial behaviours – insight that they will ultimately be able to monetise.

Embracing Open Banking

For financial institutions, Open Banking presents a daunting change. The industry has traditionally been characterised as ‘reluctant’ when it comes to the rapidly shifting technological landscape, and the thought of allowing third parties to access consumer data initially sent shivers down the spines of many banks.

However, when done correctly, PSD2 represents a tremendous opportunity. Here are four key considerations when making your first foray into the world of Open Banking:

  1. Put customer outcomes at the core of your Open Banking proposition

At its heart, Open Banking is about the customer, and delivering a service that suits them – rather than one that is limited by the decisions of their chosen bank. Flexibility, choice, and convenience are critical factors and should be incorporated into your plans from the very start.

  1. Collaborate across ecosystems

Consumer financial needs are becoming increasingly complex, with many using multiple banking services to arrange their finances.  In line with these demands, banks must shift their business models to become more collaborative, engaging customers across multiple digital ecosystems. Open Banking will undoubtedly accelerate this.

  1. See it as an opportunity, not an obstacle

Embracing Open Banking is about more than ticking off the criteria for PSD2. The banks that will be most successful in its implementation will be those who follow the spirit of the law, rather than just the letter. Banks would be best advised to embrace the operational model prescribed by PSD2, rather than see it as a regulation-driven cost of doing business.

  1. Embrace the API economy

 Investing in APIs to turn Open Banking into an accepted operational model is the logical first step. This is easier said than done; finding the balance between openness and complete security is a significant challenge – and possibly something that is beyond your in-house expertise. Bringing in expert advice could prove invaluable in the long-run.

Already the most astute banks are investing in APIs, proper security, and other digital foundations to create these platforms. ING’s Yolt was the first third party to successfully connect into a CMA9 bank, Santander has incorporated Open Banking into their global strategy, and Australia’s Macquarie Bank has announced plans to make it easier for customers to share their financial data. The international element is important to note, with several regions set to follow the UK’s lead.

Customer experience is the ultimate winner

 PSD2 enables organisations to change their status with customers from being merely transactional, to becoming a trusted advisor – a win for the banks, who will retain their customers, and for customers, who will have a better banking experience.

Furthermore, it enables them to introduce new services to help the customer have a better, digital, customer experience. While third party businesses, with new and innovative ideas, finally get a more substantial seat at the table.

However, financial organisations can only find success if they embrace PSD2 and are willing to open their banking platforms and collaborate with third parties. In the battle for the customer, a high-quality experience will be the defining factor, and those businesses that embrace PSD2 will come out on top.