Opportunities abound in Open Banking


The one sure thing in the world of finance is change. Digitization, growing customer expectation, and global financial regulations all continue to evolve and the financial institutions quick to embrace these shifts will be significantly more successful than those who don’t.

Open Banking, or the accessibility of customer data by third-party providers (TPPs), is becoming a reality, particularly for those in EMEA and in the UK. What’s driving this industry change and how is it impacting banks, both now and in the future? There is more than one lever to this change.

Industry change drivers

The Fintech catalyst effect: Smartphones have changed the interactions end customers have with enterprises in general. In the last few years, more than 60% of B2C interactions have started on a mobile and this is increasing year over year.

While Fintechs have addressed the specific, painful situations customers now face in their banking relationships, the banks continue to lag.

This evolution started with payments where non-financial players improved the customer experience in the check-out process. Then, they expanded to include a comprehensive perspective over personal bank accounts and opened the door to simple wealth management and other services. They put the customer in the drivers’ seat.

Regulatory landscape

The Fintech successes have opened the door for banks to consider the risks that might otherwise be shouldered by citizens and make competitive and market authorities consider the need to open access to individual banking information as a way to foster innovation and improve their competitive position.

Leading the way for a regulatory change in Europe is the revised Payments Services Directive (PSD2) as well as CMA UK order which requires banks to provide access to customer accounts to regulated TPPs that provide payment initiation and/or account information services.

This includes both the retail payment environment and corporates for both cash management and payments. With full implementation set for January 2018, PSD2 is also defining the timeline for open access.

PSD2 compliance may not be achieved in a vacuum, however. Open account access must be granted in full compliance with the General Data Protection Regulation (GDPR) which outlines data protection standards for all individuals in the European Union when handled by organizations in the EU, as well as when data is exported by organizations outside of the EU.

Tech-savvy consumers

Truth be told, few financial institutions are eager to meet the requirements to provide back end processing. Instead, banks are much more motivated to satisfy today’s digital consumer. Strong customer relationships equate to loyalty, which translates to business growth, and that is something every bank will support.

But today’s digital consumer has very high expectations. They expect extreme engagement and responsiveness and hyper-personalized information across all physical and virtual interactions from a wide variety of devices.

To not only meet but exceed those expectations, banks must offer a variety of innovative new products and services which can come through partnering with the very organizations PSD2 is mandating open access.

Consider the possibilities

At the intersection of increasingly stringent financial regulations and growing customer expectation, is a great opportunity. On one side, we have customers demanding relevant, timely and personalized engagement and on the other are bank partners –other banks and payment service providers — that play an important role in fulfilling open banking and delivering those valuable customer experiences.

We also have the technology that fuels all of this — APIs. More and more, banks are leveraging APIs for developing a strong ecosystem capable of delivering secure, open access to account information. With that same ecosystem comes the creation of engaging services and seamless customer experiences.

As experiences build into relationships and relationships grow into loyalty, the banks’ bottom lines will of course benefit. But that isn’t the only path to growing revenue — many also consider monetizing those valuable services directly.

While the regulatory landscape and customer expectations continue to evolve, each bank must decide how far they will take Open Banking. Is basic compliance the goal or will you go beyond?

Axway recently completed an interesting report on this topic with Finextra, PSD2 and Open Banking: Defining Your Role in the Digital Ecosystem. It provides insight into where the industry stands with PSD2 as well as looks at the use of APIs in Open Banking.

Additionally, you can find more information on how to make open banking work for you and your financial institution at our Imagine Summit.