As financial services become unbundled, digital entrants are finding ways to better serve and delight their customers, breathing new life into a market that has been untouched for decades. Fintechs are now moving from single-service offerings to multiple lines of business and, in doing so, transforming financial services. Far from being a threat, these fintech services can now be consumed by banks through platform models and open application programming interfaces (APIs). This allows institutions to use them to elevate the customer experience.
Banks are waking up to the fact that they need to collaborate to innovate – and it’s a positive realisation. We recently surveyed more than 600 banking professionals across the US, Europe and Asia and discovered that only around 6 per cent thought that open banking was a threat to customer retention. In contrast, 86 per cent of the respondents viewed open banking as a positive movement, identifying it as ‘the future of banking’ and an opportunity to grow their services and improve the customer experience.
Collaboration isn’t happening overnight; the early partnerships between banks and fintechs were slow and cautious. Moving from a culture of proprietary innovation to an open mindset in a legacy bank is not a simple process, but it’s happening at an accelerating rate. One of our respondents said: “Collaboration is a cultural and mindset shift that is gaining speed – managers are increasingly realising that not all problems are best solved in house.”
Banks are smart enough to see into the future. The majority of our respondents recognised that some of the best innovation happens externally, and that their customers wanted to use fintech applications developed outside of the bank.
The industry is moving towards a cloud-based platform model because platforms ignite innovation. They give banks the opportunity to boost their legacy or core functions through in-house development or by plugging in new, API-based services. They connect banks to a wide external ecosystem to consume services, or collaborate on new offerings, which reduces development time and costs. Plus, they allow for safe, staged transformations and eliminate risky implementations or rip-and-replace models.
The new world of finance is open: an open ecosystem, open technology and collaboration using open APIs. By embracing this open movement, banks can transform at their own pace, and put the power to innovate firmly back in their hands.
Eric Duffaut is president and global head of sales and marketing at Finastra
This article was originally published in the Spring 2020 issue of The Record. Subscribe for FREE here to get the next issues delivered directly to your inbox.
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