How Open Banking initiatives are creating new opportunities for developers
The UK’s Open Banking initiative, introduced in January, heralds a new landscape for increased competition in financial services. The legislation empowers customers to share their banking data with any trusted third-party service provider they choose – making it imperative for incumbent banks to innovate and evolve their services to compete more effectively with newcomers. This in turn has the potential to create a wave of opportunity for the developer community.
It’s not just developers within the banks and traditional tech vendors that stand to benefit – a new appetite for increased collaboration is extending opportunities more widely to fintechs, independent developers and students too.
So what’s driving this change and where are we starting from?
The stark reality is that today, most financial institutions are still using the same legacy core banking systems they used in the 1980s. Clearly these systems present a significant challenge for banks who want to create value for customers through the provision of new services.
Altering existing IT environments is risky business – particularly for large banks that can have thousands of applications built into their core systems. If one of these applications should fail, the fallout could result in the loss of millions or even billions of dollars a day. This consideration has led to traditionally slower development cycles, making it extremely difficult for banks to roll out new services.
In a digital world, legacy challenges are irrelevant to customers. They want mobile apps and self-service tools that deliver anytime, anywhere access to the data, insights and services they need. Financial organizations must find a way to meet their customers’ expectations while also maintaining their legacy investments. Ripping and replacing just isn’t an option.
The use of APIs and cloud platforms is giving banks the opportunity to change their approach to developing applications. And banks are increasingly recognising they must collaborate to innovate.
But it’s not just a case of them throwing open their APIs to just any third party. To truly reap the benefits of collaboration, banks must adopt an outside-in approach. By involving customers, developers and fintechs from the outset, they can create a new, streamlined model for innovation that delivers in-demand services at pace, with minimum cost.
So what type of framework provides the most effective means of collaboration?
A platform-based approach
Adopted long ago by the likes of Amazon and Apple, a platform model connects consumers and producers in a way that is beneficial for both parties, allowing for the rapid delivery of goods and services with minimal friction.
The commercial benefits of such a business model are immediately evident when one considers the fact that iOS developers using the Apple App Store earned a total of $26.5 billion in 2017 alone, while Amazon CIO Jeff Bezos is now the richest person in the world, with an estimated fortune of $154.4 billion.
Finastra has developed a platform-as-a-service offering designed to help banks adopt this new operating model where they can open themselves up to the outside world and the developers of the future. The platform allows developers and fintechs to create new applications that integrate directly with banks’ existing software, and to make these available through an app store model. This allows the banks to tap into new streams of innovation, to test new apps in a safe environment and quickly roll out new functionality to customers, adding value to existing services.
In the past it’s been difficult for fintech start-ups and independent developers to work with the banks because the integration processes have been complex and progress extremely slow. Such practices have made working with financial services viable only for those with the deepest pockets and financial backing needed to withstand the long lead times involved.
All this is changing. Open Banking is breaking down the barriers to innovation and creating a new era of collaboration and openness.
This brings huge potential for developers – particularly those with ideas about improvements that could be made to the customer experience in banking. Whether that be the development of a new interactive interface providing a window on your financial data, a voice-activated payment capability, or the integration of artificial intelligence technology into financial advisory services – the opportunities are endless.
If you have an idea about how a new application could deliver added value to customers in financial services – what are you waiting for? Now’s the time to get involved.
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