Open Banking: A Strategic Approach to Win Digital Consumer

Benjamin Henshall
Benjamin Henshall, Country Manager India and Director Sales, Financial Services, APAC at Red Hat

Rapid innovation across industries has given rise to changing consumer behaviour, especially in the banking and financial services sector. This has also enabled non-traditional players like PayTM and PhonePe to offer financial services in India.

In fact, according to recent reports shared by McKinsey, it is estimated that digital banking penetration has grown 1.5 to 3 times in emerging Asia since 2014. This trend indicates the growing need to establish efficient digital channels for day-to-day operations.

The need for banks to deliver exceptional customer experiences is now more important than ever, as customers are becoming more open to switching financial services providers (even if the provider is not a bank) if they find one that offers them a better experience. By making the right technological investments and adopting more flexible business models, banks have the opportunity to enhance operational efficiency and accelerate innovation in order to improve customer satisfaction and increase revenue.

Digital Banking in Asia-Pacific (APAC)

 Banks in the Asia Pacific are recognising the advantages of going digital. Reports shared by market intelligence and advisory services firm IDC (International Data Corporation) indicate that about 80 percent of the region will operate on a hybrid cloud architecture by the end of 2018. By doing so, they may be able to lower the total cost of ownership and increase agility. Since cloud provides the ability to quickly provision resources, it allows banks to quickly develop and deploy new apps and services that address changing market and customer demands.

Taking it a step further, those banks could also deploy automation tools to both improve operational efficiency and free up staff for revenue-generating tasks such as cross-selling and building relationships with customers.

Open Banking is the way forward

Although banks have already started digitally transforming to better compete in the digital age, they should bear in mind that digital transformation is a journey, not a destination. As the business environment becomes increasingly volatile and uncertain, banks need to remain nimble and continuously innovate to quickly address the everchanging consumer and market demands.

Banks have a duty to constantly refine their applications to keep up with times. This is where open banking can help. Open banking is a model in which banking data is shared between two or more unaffiliated parties through Application Programming Interfaces (APIs).

It provides opportunities for banks to gain a 360-degree view of customers that can be used to help enhance their services and create new revenue streams. For instance, banks could use data from insurance companies to provide real time comparisons of insurance plans and automatically suggest the best deal based on the customer’s financial capacity/needs. Recognising the benefits of open banking, some Asian banks are opening access to their APIs to co-create new and more customer-focused financial products and services. Such a move will enable banks to leverage each other’s strength and accelerate the speed of innovation.

To further benefit from open banking, banks should take a microservice-based approach to building apps, in which large apps are broken into smaller, independently scalable components (also known as microservices) according to their functionalities.

This enables app developers to make changes to specific microservices instead of a big piece of code, reducing the complexity and time it takes to release app updates. Moreover, microservices can help banks accelerate software development as they can be reused as the foundation of new apps. With such a capability, banks will be able to constantly keep up with changing customer demands, which is crucial in ensuring good customer experience and retaining customer loyalty.

Macquarie’s Banking and Financial Services Group is one such bank that has benefited from adopting microservices. By using microservices and containers, it now takes the Australian financial group minutes instead of hours to release software updates and features. It is able to update existing applications quickly without any downtime on the customer end, as well as meet customer demands for new services.

Given the rapid pace of change, banks need to be agile to effectively deal with unknown disruptions that will come their way. Open banking is the key to achieving this. Elements of open banking such as APIs and microservices can not only help solve the challenges they face today, but also help banks build the right foundation to address future customer and business needs.

 (Views expressed in this article are a personal opinion of Benjamin Henshall, Country Manager India and Director Sales, Financial Services, APAC at Red Hat.)

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