Preparing to be open in open banking

If I had to sum up a theme from my second day at Sibos, it would be open banking. Sibos is an annual week-long event that bills itself as a “premier business forum” for the financial community to gather and collaborate around payments, securities, trade, and cash management. At this year’s gathering in Sydney, Australia, a number of sessions have focused on initiatives around open banking and open APIs.

Several of the live polls throughout sessions at Sibos have focused on customer relationships – putting the customer (and partner) at the core, and building initiatives around that to become a more open banking institution.

Some of the numbers? Fifty-one percent of an open banking plenary audience said customer relationships outweigh the importance of customer data as an asset to incumbent institutions. And to win in an open banking environment, 59 percent believe completely new business models were needed (with collaboration with fintechs the next closest at 28 percent).

Wrestling how best to provide new experiences to be innovative, APIs were recognized as a key vehicle to get there.

Quite a few seem to agree that being a more open bank could lead to a host of innovations resulting in different kinds of banks being formed. For example, I wonder about an identity bank, rethinking the safety deposit box to be a new kind of well-protected asset; or transitioning financial advisory services to operate more like a Fitbit – helping you monitor progress toward your financial goals.

New models, more access

Looking backward, the banking business model used to be organized sector by sector - while the new business model that is emerging cuts across sectors – creating new ecosystems, where payments, for example, are becoming part of a tailored made service, as Philippe Henry (HSBC) noted.

Thinking through what services consumers want to pay for, many could agree that convenience and simplicity rank high on the list. To find such efficiencies, banks seem to be examining their supply chains, to see where it makes sense for them to provide the service – and where they may be better off relying on partners in the ecosystem to do so. Some, like Mark Buitenhek of ING, indicated they were doing both.

APIs are a means to exchange data – so in fact, the data is the relationship (Marshall McLuhan references aside). A platform that provides value enables more seamless data exchanges. So whether or not the data is in a data center, virtualized, or in any public cloud, banks seem to be seeking ways to be better prepared for their ecosystem future – which includes a means for allowing fintechs and banks to meet in different places – centered on the needs of the customer.

Jennifer Boussuge of Bank of America Merrill Lynch stressed, during the “re-engineering international payments for a fast, digital age” panel, that the bank is simply providing access when directed by the customer. Ultimately, she says, they are open and willing to make the information available, but only when it’s directed by the customer.

With financial institutions allowing more access to consumer data, a more fluid market could be built – one that bridges capabilities, scales to the data volumes, and permits data to be communicated in a hybrid cloud environment.

One danger incumbent banks may feel they are facing is being left behind. Actively re-engineering policies, processes and people into a more agile, adaptive organization is seen as viable way to embrace disruption in financial institutions.

With a future that is simply too hard to predict at this early stage, some banks are looking at different ways to be prepared, like the new API offering from the Open Banking Project announced on October 21st – led by Tesobe and in collaboration with Red Hat. And my colleague Eric Marts will be sharing how to create an agile open banking platform at Sibos on Thursday Oct. 25, fully recognizing that APIs are not enough. Learn more about both the business and technology of open banking in our guide about the financial services API economy.