In today’s era of disruption and transformation, open banking represents a fundamental shift in the concept of banking. Turning it into an industry where customers can offer their data to third parties, in return for more personalised services.
In the Asia Pacific region, this is happening at high speed. By 2020, 99 out of 100 executives at large banks plan to invest in open banking initiatives. That’s according to Accenture, where its senior MD and head of its banking practice said: ‘“Unlike banks in Europe where it is mandated by regulation, those in North America and Asia Pacific have the luxury of deciding if, how and when they will implement Open Banking, and we expect many will do so as a way to more easily offer integrated financial services to customers.”
Banks need greater insight from data in order to offer greater personalisation of services.
Customers expect intuitive experiences, typically offered by agile and early-moving startups.
It’s this convergence which leads IDC to expect the ‘majority of the top 250 Asia/Pacific banks to deploy open APIs in the next two years as they take advantage of the capabilities of third-party partners in improving their organisation’s insight into customers, and dealing with them to the point of serving a customer segment of one.’ Plus there’s the cost-savings associated with this form of Banking-As-A-Service.
When data is opened up in this way, customers can see all their accounts in one place. Investments, savings, mortgages, pensions, available online or within an app. It’s a customer-centric model ideal today’s Industry 4.0 era.
And it’s particularly relevant for financial services, an industry already buffeted by increased regulations, worldwide economic uncertainty, the rise in blockchain and cryptocurrencies, and a Millennial generation used to online banking.
The role of APIs
Digital transformation may be sweeping through APAC and the rest of the world, but banking has distinct requirements Highly regulated, with complex networks of partner systems, plus plenty of legacy infrastructure. Each one presents challenges to Industry 4.0’s model of agility, scalability and MVP culture.
That’s why many are turning to fintech partnerships. Initiatives like the Open Bank Project enables banks to trial new services by opening their API, in a sandbox. Fintech startups can then tap into the interface and trial innovative services to the bank’s customers. As an added bonus, this collaborative approach helps bank attract graduates who may have otherwise been attracted to the tech sector.
DBS Bank, Southeast Asia’s largest bank (by market cap), reportedly offers the world’s biggest banking API. Developers can plug into 155 APIs to create a complete portfolio of finance services. Everything from mortgage applications to funding transfers. Companies already signed up include McDonald’s and AIG.
Data as the bridge
Of course, these are still early days. By 2018, only 25% of APAC banks are expected to have an API strategy in place. One thing is for certain: the rise of open banking and APIs symbolise a transformation in how data is managed, shared and controlled. Data centres will need to adjust to provide and enable this new form of financial services.