Banking as we know it will cease to exist in 2017, and regulators and governments have recognized the need for open banking initiatives in the current environment. The Indian Government recently launched the United Payments Interface (UPI), and the European Union passed the PSD 2 regulation to promote open banking. With open banking initiatives and regulations coming into play in the global arena, it is a clear sign for banks to change their traditional mindset and collaborate to innovate.
In the new age of financial services, banks will be the ones to enable customers to share their data securely with third party service providers; this will not only give the customers full control over their own data to get the most out of the service providers, but also allow customers to manage their financial information on one single interface. Customers will be able to find relevant offerings/products easily in an environment where they can share their data freely and will be empowered to make better financial decisions. Banks will also be able to reap the rewards of freely available customer behavior data when it comes to implementing fraud management processes or creating terms for banking services.
Financial institutions will be able to compete with each other through enhanced applications created through collaboration with third party service providers. With an engaged developer ecosystem at their disposal, banks will be able to innovate in the domain of financial services/products. This experience in banking will be the new norm, and will be enabled by the developer ecosystem with a foundation that will be built on multiple bank APIs. Progressive banks are already making strides in collaborating with third party developers and more often than not, it is not surprising to see banks having a proprietary application market place where APIs are provided freely to the developer ecosystem.
Banks will no longer wait for regulators to enforce open banking, but will take their own steps to collaborate in this environment of innovation and open banking. The open banking ecosystem will be driven by open APIs, applications, app stores, and the extended developer ecosystem that will be built by a partnership between banks and third party service providers. Both banks and service providers will benefit equally by this partnership as data will flow freely between the partners to help them to fine tune their customers’ experiences. The biggest beneficiaries will be the customers, who will have the power to pick and choose offerings/products that are relevant to them.