Open banking is poised to launch a new era of innovation in India
Open banking is one of the most widely discussed topics in the banking industry today, and there are enough reasons for that, as it offers large parts of the competitive scenario and value chain for both retail and corporate banking.
While open banking originated in Europe via the Union’s revised Payment Services Directive (PSD2), regulators in many major markets have it delivered or are in their way to getting it delivered within their own guidelines.
However, while the outcome of these processes is making the banks expose customer account data and other open banking software services that are used by the third parties, provided the customer gives their consent. There are differences which can be can be traced back to the points that lead to the regulatory intervention. How is open banking being accepted by one and all, take a look at several pointers,
· Many banks are looking to the forefront to embracing the open banking opportunity
There has also been a flurry of activity in the UK and the US as well in embracing open banking platform. Developments are more market-led, with there being a direct link between the bank and the treasury systems in large corporations. Banks like Citibanks are leading the way.
· Open banking is leading to a form of ‘API economy’
Financial institutions are showing a great shift towards open banking. The study released by Ovum’s ICT Enterprise for 2017/18 found that 51% of banks were considering encouraging third-party developers to consume open API-delivered services in the year ahead. Most banks in the industry are wondering how to make the most of the open bank opportunities and how it will impact the product landscape since the list of potential use-cases is an exhaustive one. They are divided into three main categories,
1.The first is bringing changes and improvements to existing processes and workflows.
2. The second is in surfacing account data or banking services such as payments in the platforms or workflows in which customers may want to consume them. A good example here would be direct connections between an SME’s accounting software or ERP platform and the banking as a service.
Where the industry conversation is concentrating on is focusing on the creation of APIs that go beyond the basic regulatory requirements.
· It is mandatory for Banks must regard APIs as a new form of distribution channel
Ultimately, most banks can view APIs not as a not-so-important initiative to the wider organization, but as a novel as a new form of distribution channel. As a result, third party developers are treated as a new customer base, focusing on specific needs and expectations.
Open banking is set to transform the competitive landscape of the future. Those banks that invest in their capabilities will position themselves to remain as strong consumer-facing brands.
