Open Banking, coupled with the rise of cloud-based platforms and open APIs, is helping to drive innovation in financial services. Open Banking is an area where we’re seeing real momentum. In November 2023 Open Banking Limited reported the number of individuals using Open Banking hit 8 million in the UK, and there were 1.2 billion successful payments and VRP initiations using Open Banking APIs.
To truly deliver on the Open Banking vision, banks and financial institutions must be bold and imaginative – and ready to work with not only new, but also different types of partners. Collaboration supports the creation of new services through shared data and technology and can bring fresh perspectives and new opportunities to drive customer engagement and improve the overall customer experience.
Delivering growth and value
Global financial institutions recognise the value of collaboration:
- Almost nine in 10 (89%) respondents to the survey identified collaboration as a driver for success in their business
- Collaboration is being driven by a desire to provide better customer service and experience (52%), improved service delivery (48%) and better sharing of ideas with third parties (46%);
- Some 84% of banks believe collaboration has already made their business more efficient;
- Tangible business benefits outweigh the cost of collaboration – according to four out of five (80%) financial professionals; The biggest business driver for adopting new technology for banks and financial institutions globally is to stay ahead of the competition.
The results of Finastra’s survey demonstrate that fintech collaboration forms a key element of financial institutions’ strategy for success. Businesses are looking for partners to collaborate with, which is creating new and innovative ideas, and will in turn produce solutions to drive growth and improve the customer experience.
There are of course hurdles still to overcome, with complex regulation seen as an ongoing issue, but it’s not the only bottleneck. Some barriers are internal, including legacy technology and cultural change. Adopting the right approach to these will drive positive change. Technology can foster collaboration, unlocking the power of data and providing fintechs with improved access to financial institutions.
What does the future hold?
We know that collaboration between partners in financial services is essential in helping to address industry challenges. Partnerships are a crucial part of digital transformation journeys and collaboration can deliver a wide range of benefits to customers. For example, partners can help optimize technology and services for end-customers, providing managed services solutions through the cloud, thereby allowing customers to reduce capital expenditure, free up resources and move to a more modern, flexible and scalable pay-as-you-go model.
I envisage a future where fintechs, systems integrators, software vendors, big techs and academic institutions will work with banks to create new applications across all areas of financial services. As a result, financial services providers will be able to better harness the latest technologies such as machine learning and AI to deliver enhanced services to customers.
An ecosystem for success in the Open Banking era
Collaboration works best when banks are open to working with each other, with new partners and with technology providers to spark innovation, win new business and improve the customer experience. It is reassuring to see that financial institutions are overcoming concerns around losing their competitive edge and sharing critical data and are embracing partnerships to develop innovative financial services.
In the consumer space, for example, challenger bank Starling has partnered with Habito, Monzo has partnered with OakNorth and Revolut has partnered with Intuit QuickBooks. Meanwhile, incumbent bank Barclays has partnered with both PayPal and SAP, and Skipton Building Society has partnered with Experian. In the business-to-business (B2B) segment, Mastercard is collaborating with Cardlay to use corporate card transaction data to offer value-added services such as automated expense management and VAT claims. These are just some of the many examples of the ecosystem collaboration.
Collaboration can bring easy wins in the form of cost efficiencies. But financial institutions are also looking beyond savings and toward opportunities to add value through innovation. For example, making it easier for consumers and businesses to compare prices or switch their provider for insurance lending, savings and mortgages.
Open Banking technology and business model innovation are evolving all the time towards open finance. Cloud-based technology, combined with a cultural shift towards an openness to partnerships and new business models, is key. A new ecosystem is taking shape. Fintech collaboration, in all its emerging shapes and forms, will be at the heart of future success in financial services.
