If you’ve listened to Open Banking debates over the last eighteen months, you’ll be used to hearing how banks will lose out to newer, nimbler, more technologically adept fintech competitors. Business models will be undermined, services disaggregated, customers poached.
There’s no denying that banks will be challenged by Open Banking. But what’s often overlooked, are the many advantages banks enjoy which will give them a competitive advantage.
Banks have an existing financial relationship with millions of consumers. They are repositories of trust and no matter what the Open Banking landscape looks like, banks are likely to remain at the heart of it.
Here are 5 ways in which banks will benefit from the move to Open Banking:
- The disaggregation of services will allow forward-thinking banks — ones that are planning new customer acquisition and go-to-market models now — to win new clients with a range of innovative new products. In Australia, Macquarie Bank is already using its open-banking API as part of a drive to attract new customers who want a more modular banking experience.
- Partnering with fintechs, rather than competing with them, can help banks take advantage of their scale and their established consumer relationships while also making them as nimble as their digital-only competitors. In Singapore, the OCBC Bank partnered with fintech WeInvest to create its first AI-driven investment platform.
- Enabled by common standards, banks will be able to monetize the non-sensitive parts of their APIs. Rather than independently develop the same technology that others have created before them, many banks and fintechs will simply buy APIs from the market leaders.
- Regulated and familiar, banks are repositories of trust. Consumers trust banks with their data and businesses trust banks to validate (through Know Your Customer and Anti-Money Laundering processes, etc.) consumers and to properly authenticate their customers before handing them over to other parties in the digital-finance ecosystem. This puts banks at the centre of that eco-system: a lucrative place to be.
- Through services such as digital account opening, banks will be better able to reach younger gen-z consumers. And once they have this app-happy audience, banks will be better able to market additional services to them through a digital-marketing model with which the demographic is familiar. A model not available to banks to the same extent before Open Banking.
To make the most of open banking, banks need a low-overhead, fast-moving, low-code development environment. This allows them to react faster, getting new products, services and technologies to market in time to make the biggest impact and capture the greatest market share.
OPEN BANKING WHITE PAPERS
Download our white paper, Open Banking: The New Customer Frontier to learn more about how Open Banking will revolutionize the banking and financial services industry.
We also examine what banks and other financial services companies can do to meet the initial challenge of transformation and then to go beyond that first step by developing new business models that will anticipate changing consumer demands and build the winning companies of tomorrow. Download here
Download our new white paper, Open Banking Beyond Compliance
to learn about why monetizing Open Banking APIs is vital for long-term success.
In this white paper, Virtusa surveys the current Open Banking landscape and puts forward recommendations for effective API monetization, including API pricing models, risk and quality control mechanisms, potential new business models, and strategies for open banking. Download here