The rapid transformation of customer behavior and digital technologies has driven change across every value chain and in every industry. Amazon, for example, began with a merchant-based approach, buying books from publishers to sell to consumers. A few years later, in response to consumers’ increasing desire for a modern, convenient shopping experience, the e-commerce giant introduced Amazon Marketplace. The new model allowed third-party retailers to sell merchandise using Amazon as a platform, giving customers significantly more choice and boosting Amazon’s value – which stands at a $1.6 trillion in 2023.
This shift is happening in banking too. Consumers and corporates are looking for more flexibility and personalization from their banking experience, and banks can meet those needs by adopting a platform-based approach. But how much will it take to completely revamp the banking business model? The good news is that you don’t have to – and shouldn’t – do it alone. It’s time to collaborate.
The new power of collaboration
Today’s interconnected digital landscape is the reason for banking’s significant shift. Banks realise that the tightly controlled, proprietary operations they once ran don’t work anymore, and to get ahead in this new open marketplace, collaboration is crucial.
Why is the market so perfectly primed for collaboration right now? With the rise of open APIs, it has become increasingly easy to partner with agile third-party groups like Fintechs and technology companies. Banks can now take advantage of cutting-edge technology and methodologies without needing to develop them in-house, a process which would be both cost prohibitive and restrictively slow.
Banks that want to embrace a platform-based banking model need to break the barriers of traditional thinking and adopt a new mindset to survive in a collaborative economy. Instead of fearing Fintechs once deemed competitive, it is time to start thinking about co-creation and how innovation can be sparked together.
A connected revolution is here
The “open” and collaborative nature of innovation needs to go a step further into the future. Placing the focus on customer expectations and behavior completely changes the rules of the game ─ something that new technology implementation is not achieving for everyone.
There is a need for banks to move from simple customer touch points to journeys, and to provide a connected, consistent customer experience. Designing a customer experience requires reshaping interactions through the customer’s eyes.
Re-inventing customer journeys using digital technologies and innovation strongly correlates with business outcomes and, with superior customer experience, banks can sell an ever-wider range of products to their loyal customers.
An Open Banking race to meet customer needs
Asia Pacific is getting ready to win the race in Open Banking. The latest Finastra Open Banking Readiness Index for the region provides a framework against which banks can measure their progress toward Open Banking readiness and success in staying ahead of the transformation curve.
Finastra’s Open Banking Readiness Index was created using data from interviews with 146 banks across 14 Asia-Pacific markets. Its five dimensions are as follows:
- Adoption of external/partner APIs
- Collaboration with Fintech ecosystem and third-party providers
- State of data-based transformation in banks
- Data monetization
- State of innovation and innovation structure
Asia Pacific has come a long way; moving from a fragmented banking landscape and towards Open Banking, with plans of connecting to the broader financial ecosystem. Instead of asking how banks can get ahead of the competition, they are now asking themselves, “can we win together?”
In fact, the Index shows that 8 out of 10 banks consider collaboration with external partners as a critical factor for success in Open Banking, which may explain the growth in partnerships between banks and Fintechs that 2018 has seen. In addition to collaboration, platformification was another business model commonly viewed as crucial for Open Banking success. 85% of Asia-Pacific banks agree that a platform will be critical to binding customer, business, and technology capabilities together.
The majority of banks in Asia Pacific are expected to ramp up their capabilities between 2018 and 2020. The Index also highlights:
Although 7 out of 10 banks have started on their Open Banking journey, only two banks have invested in full-fledged Open Banking-ready API management platforms.
6 out of 10 banks have concerns about the lack of readiness in their technological infrastructure to support Open Banking.
Although 8 out of 10 banks consider data monetization as one of the most critical factors for success in Open Banking, only six banks have noted the ability to monetize data.
Thriving in the innovation landscape
To accelerate the adoption of Open Banking, collaboration is the answer. There is an opportunity to transform the value chain by launching more collaborative, more innovative, and more responsive banking services. Asia-Pacific banks, in particular, are on the fast track to building collaborative banking models: 78% forecast revenue growth from partnerships and data monetization in the next three years.
Currently, Singapore ranks highest among Asia-Pacific banks in regards to Open Banking readiness. They are the leaders in industry collaboration and leveraging APIs for data monetization.
Australia and Hong Kong have made a strong regulatory push towards Open Banking and are being particularly intentional about customer data ownership and control. Cloud services and API adoption among Australian and Hong Kong banks are growing.
Malaysia and Thailand are fast followers.
Let’s explore a few use cases from these Open Banking early adopters:
Singapore: The country’s largest bank, DBS Group Holdings Ltd., has launched a platform allowing third-party developers to access its application programming interfaces for functions like real-time payments. This allows banking customers to instantly access funds, providing a seamless experience.
Australia: Macquarie Bank has partnered with Pocketbook, a personal budgeting app. This partnership gives Macquarie customers the power to manage external banking connections securely, without needing to provide personal information to third-parties.
Hong Kong: Citibank has announced six new open API partnership categories to enhance the customer experience. Through these open APIs, partners can develop branded credit cards, get approved access to customer profile data, facilitate easy money movement and customer onboarding, and enable Citi customers to Pay with Points.
In today’s data-driven world, banks must adopt a digital transformation strategy to remain relevant. With technological advancements like open APIs, banks can take advantage of the power of collaboration to aid in the move towards Open Banking.
Download Finastra’s Open Banking Index Report now to determine what to do next as you prepare for open banking.
