This is the latest in a recent series of blogs on open banking, which is likely to become the biggest driver of change in the banking industry since double-entry bookkeeping swept the industry in Genoa during the 1300s. I recently talked with Virtusa's xLabs, a digital innovation hub within Virtusa, about their approach to open banking and what their roadmap is for the future.
Open Innovation Platform
Virtusa xLabs believes a successful open banking environment will require rapid, successful, iterative innovation by banks and FinTechs. However, the inhibitors to innovation include:
Virtusa xLabs has built its Open Innovation Platform (OIP) composed of three elements to reduce the impact of the last three inhibitors (funding, partnerships, and value) and allow individual innovators to focus on addressing the first of them (feasibility). OIP is composed of vendors providing:
The OIP provides access to these resources to allow banks to convert an idea into an MVP in a few weeks rather than months. The effectiveness of the OIP relies in part on scale. Currently, the OIP's scale of offerings include:
Virtusa xLabs supports clients using its OIP with four services:
FinTech has been slow to achieve its promise due to several factors. Experimentation to date has been active but ineffective, and most POCs do not meet their business case. More effective synthesis of domain expertise with technology should improve project conversion to useful operational change. And improving a bank's ability to evaluate and select technology vendors will improve the rate of successful project generation and reduce the cost of achieving success. In addition, sharing best practices for non-differentiating processes will release industry funds to pursue disruptive opportunities, which require long development cycles and large resource commitments.
Virtusa's OIP is creating a scale community where participants can not only find each other, but the OIP helps participants effectively search for the 'best fit' partner. Over time, Virtusa xLabs will need to move the focus of the OIP from accessing a wide range of technology vendors to fewer vendors with a greater domain focus on a few key geographies and business cases.
As FinTech offerings become more mature, technology vision will become less important than business execution. Currently, Virtusa seems to be developing a focus on reg tech, payments, and deposits, which are the core of retail banking. These processes require heavy customization by country and must be executed at high volume and low cost, just the type of processes that need disruption if banks want to remain effective in a digital world.
The article was originally published on NelsonHall Blog and is re-posted here by permission.
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