Banking & Finance

Open banking: From pilot to practice

open banking from pilot to practice

So, you’ve committed to open banking. You’ve got your IT systems in place. The APIs that will connect you to the world are ready to go. You’ve even gone so far as to assemble a crack team of IT specialists and enlist a handful of partners in a pilot program to test the functionality and potential of your new open banking capability. Congrats, you hit all the right metrics. High fives all around.

Now what? How do you go from a pilot project to a full-scale commercial deployment?

Operationalizing your open banking strategy isn’t as easy as flipping a switch. It’s a step-by-step process. To illustrate, let’s visit one of Axway’s recent open banking use cases, Commerzbank – a German international bank with private and small business customers as well as large corporate clients.

First, focus less on API production and more on API consumption

Open banking is about more than just building payment APIs as an end product. Commerzbank understood that tapping into the broader benefits of open banking meant expanding their focus beyond a product-centric approach to APIs, and embracing a platform approach – one that shifts the paradigm from API production to API consumption.

This can be a daunting change for banks who are used to nurturing traditional linear value chains that have existed for centuries and have earned them lots of money. But with a simple paradigm shift, Commerzbank was able increase their offerings and pursue a lateral strategy that draws value from multiple revenue streams.

Expanding physical branches to serve a growing base of depositors causes unnecessary friction in an industry that requires banks to be increasingly frictionless to compete. By concentrating on API consumption, Commerzbank leveraged APIs to help them branch out into new markets.

Second, make corporate clients part of the equation

Yes, customer-centricity is important. But there’s a tendency among banks to make the customer the ultimate beneficiary of everything they do. With open banking, corporate clients need to be part of the equation from the start.

Commerzbank collaborated on a project with the University of St. Gallen in Switzerland, in which they were able to use the university’s digital ecosystem as an extended canvas for expanding their services.

This is indicative of the growing opportunities of open banking. To be relevant in the future, banks need to explore the idea of joining forces with corporate clients as a symbiotic method of broadening the prospects for both.

Banks should evaluate companies they want to work with based on the makeup of their digital ecosystem of users, providers, orchestrators, and others. What are the needs, the activities, and the resources of these companies? What’s their specific value propositions and offerings? More importantly, what value propositions do they share with the bank?

Fostering a collaborative relationship through open banking that leverages combined digital ecosystems is the definition of making corporate clients part of the equation. But understand, this type of approach necessarily places the customer at the center of everything they do – the goal all along.

Third, draw value by transcending organizational borders

Success in the previous steps requires work, and time – often months. Then, it all comes down to streamlining operations.

Banks, like any other business, have internal departmental borders. They’re not really silos, but certainly, defined edges of purpose. Yet, with open banking, there’s no central “open banking unit.” Instead, firms need to invest heavily in strengthening all its core teams – IT teams, business units, the whole bank – to be agile and scalable through decentralized enablement.

When approached a step at a time – focusing more on API consumption, making corporate clients part of the equation, and enabling teams to create new, multilateral value chains by working together across organizational borders – banks can move confidently from those initial high fives, to the future of banking.

Open banking.

This blog draws from comments by Daniel Le in his capacity as Principal Presales Architect at Axway, during a round-table discussion at Sopra Banking Summit 2021 entitled Into the Wide Open (Banking) World.

Discover keys to successful adoption of APIs in financial services.