Open Banking, whether guided by specific regulations, as it is in Europe, Australia and elsewhere, or driven by changing technology and customer needs, will revolutionize the way in which banks will need to operate and communicate their digital services. It is no exaggeration to say that banks will have to radically change their business and operating models to continue to operate and compete successfully.
Open Banking will impact the way banks will offer and communicate products and services, including standard price and other information. It will place even greater demands on the digital product and servicing models that banks will need to retain and attract customers and to grow wallet share.
So if banks want to remain competitive in an Open Banking environment, they’ll need to be prepared. Here’s what you need to know:
What is Open Banking?
We’ve actually defined Open Banking once before, in a post exploring hot buzzwords in FinTech. It reads:
“In a nutshell, Open Banking refers to the more fluid transfer and sharing of customers’ financial data to make it easier for them to work with multiple financial institutions. In fact, sometimes Open Banking is simply called “open bank data.”
That is an abbreviated way to describe the new systems brought about by regulatory powers or driven by consumer demand who recognize the value of a fluid, or “open” banking system. It’s better for customers, it breeds innovation and it’s next to inevitable at this point. Which means banks no longer have the luxury of keeping data siloed as a means of keeping customers’ loyalty.
What are the primary objectives of Open Banking?
In essence, the aims of Open Banking are to encourage greater competition and product and service innovation by financial services institutions for the benefit of customers, initially by making:
- Standard product and pricing information transparent and more easily available
- Comparison of products and services easier
- Access to products and services, including value-add services (Apps) provided by 3rd party providers, easier for customers
- Providing greater visibility on service quality and ease of access to services
Leveraging available technology to accomplish these aims is essential for the success of banks that wish to achieve “customer-centricity.”
What capabilities will be required to successfully deliver the product management objectives for Open Banking?
- Transparent standard product and pricing information
- Product management capabilities comprising standardized, rationalized product templates based on core banking and other product systems
- Ability to create more tailored product propositions, including bundles or packages, more closely aligned with customer needs
- Ability to support bank and 3rd party products to enrich customer propositions
- Easier comparison of products and services
- Adoption of banking standards for products and services, i.e. AFP service codes to facilitate efficient and accurate provision of price comparisons for products and services
- Ability to offer tailored, competitive, propositions, including bundles, as well as standard propositions in order to retain / attract key customers
- Better access to alternative products and services (both in-house and via 3rd party providers) and enhanced on-boarding or switching capabilities
- Improved product (account) on-boarding or switching (product orchestration)
- Capability to evaluate and offer optimal products based on actual customer utilization (using transaction and other information)
Open Banking will, arguably, expose banks to greater visibility for customers and other parties, which will place ever more emphasis on banks’ underlying product design, product pricing and product offer solutions. The more fragmented and unstructured the existing capabilities are, the greater the challenge will be for banks to provide successfully the product and pricing innovation and information required to compete in a way that minimizes reputational risk, e.g. incorrect product or service information being provided, and maximizes opportunity to retain and acquire customers and grow wallet share.
Zafin’s Enterprise Solution suite incorporates a range of in-built features, including a standardized API framework to support the capabilities outlined above, that will help banks accelerate their transition towards full Open Banking models, but in a way and at a pace that suits.
Want to learn more about Open Banking and how Zafin enables banks to succeed with it? Join us on November 6th in Toronto for a panel discussion about how it will impact the future of banking. Click here to register now!