A lack of clarity over the potential products and services spawning from the open banking revolution will make it difficult for the industry to prepare for how the market will change.
“I don’t think there’s anyone that can tell you what kind of services will be delivered off the back of these APIs,” says Nick White, vice president, product and marketing, digital banking group, Fiserv. “What the banks have got to be fit for is that type of operating model that allows them to deal with the unknowns.”
White says that banks will need to reappraise internal processes, and widespread internal reforms are likely as companies attempt to change their approach to how they view their APIs.
“I think we are going to see changes internally, within banks, in terms of their target operating model, for the first time, he says. “Banks are getting their heads around managing their APIs as part of their business. It’s not been part of their DNA to manage the distribution of their APIs to third parties.
“There’s an operating model that sits behind that. That has got to become the norm for banks,” he adds.
As open banking has developed at the European level, and came into effect in the UK at the beginning of this year, many in the industry have suggested that it serves as a threat to the long term stability of the traditional banking sector. But White suggests it doesn’t need to be that way, and that opportunities are everywhere.
“Banks must be ready to consider the API as the product,” he says. “They need to have product managers for the APIs, because it’s actually in the interest for the banks to have someone working internally, making sure that their APIs are the most accessible and the most useful to developers. Also worth bearing in mind they come with related applications that haven’t all been tied in with the standards but have been voluntarily added to the mix.
“You can’t afford to not be in that game: we will see product managers of APIs,” says White.
However, with open banking very much still in it’s infancy, banks and other institutions need to communicate with their clients on what the new rules mean. From the consumers’ perspective there’s a lot more to be done to make the market aware of how the things are likely to be reshape in the months and years to come, and while there’s been a lot of information communicated to consumers, there’s still a lot to be done, says White.
“[Banks] need to make sure that their products and services are distributed into their consumers’ lives as much as possible, in all the right places and spaces,” he says. “This shouldn’t be seen as a threat so long as their customers can see that they have all the bank’s services all in one place. That’s what will drive customer satisfaction.”
One sector that has of course benefited from the open banking revolution is the fintech industry. White says banks need to start thinking like fintechs in order to make the most of the changing landscape.
“I would encourage every bank to start looking at the APIs that are being made available by their competitors. Banks should look at themselves not just as a distributor of an API, but as a consumer of an API,” he says.
That, he says, could be crucial for the banks, as fintech organisations become more a part of the mainstream financial services agenda.
“We’ve seen some really good, healthy interest from fintechs though as we know they are perhaps the ones who have most to gain in terms of open APIs. They have the blessing of the Financial Conduct Authority, and they’re now trying to start using these APIs. It’s good to see that kind of innovation coming through.
“Let’s see now what will happen when they actually go live and start launching services,” says White.