One of the driving forces behind this disruption is application programming interfaces (APIs). Although some financial institutions such as Citi are using their APIs to open-up their data, processes and other business functionality to an ecosystem of customers, employees, third-party developers and vendors, many however are still entrenched in their traditional operating models. Non-banking players such as Google, Apple, Facebook, Amazon and Alibaba (GAFAA) – to mention a few – are unleashing the power of technology by developing platform-based business models which represent over $2.6trn in market capitalisation worldwide.
According to the 2016 Accenture Technology Vision for Banking, 84% of bank executives believe platforms will be the “glue” that brings organisations together in the digital economy. By 2018, sharing proprietary data with third parties will not be an option for banks.
In South Africa, financial services institutions are embracing digital and creating APIs for external collaboration. However, this approach is very slow and measured.
GAFAA and FinTech companies are offering consumers seamless digital experiences by integrating multiple ecosystems. Banks are not immune to new experiences that are blurring the lines between different industry sectors and meeting flexible, changing consumer expectations. Consumers are rejecting banks’ traditional, rigid command-and-control structures.
Being an open bank means operating like a platform company, with a business model that connects people and processes with assets and a technology infrastructure to manage internal and external users’ interactions. A successful open bank needs to:
Seeking out differentiation
Banks must spell out the business goals that will drive API creation, consumption or both as they seek out how to offer differentiated services to their customers. To do so, banks need to design engaging API experiences that appeal to developers through user-friendly developer sites, enhanced self-service capabilities, good API documentation and “sandboxes” for testing and monetising APIs. They also need new operating models for new value delivery.
New operating models are needed to take into account organisational structures that blend together product development and IT operations to enable open banking. An effective IT architecture should include a developer portal to manage the relationship between the bank and its API users, a business administration portal, and an API getaway for reducing API-related risk – enforcing identity and access management and security.
Mind-set and culture are vital to driving customer benefits from open banking. Strong C-suite support backed by a sound mix of different layers of knowledge and expertise will be critical. Finally, to manage partner ecosystems effectively banks needs fast decisions based on a large amount of data from API users. Artificial intelligence tools can help to reshape and adapt the process as it executes in runtime.
Digital disruption is the driver that enables banks to keep pace with customer demands. By adopting the right digital business model, banks can take advantage of open banking to unleash new business value.
