The arrival of open banking at the beginning of next year will be one of the biggest shifts in the finance industry since online banking.
Banks will be obligated to grant third-party providers access to customers’ accounts through open APIs. However, we’ve already started to see a number of banks take the initiative over the past 12 months and begin to drive innovation by opening themselves up through APIs, to enable idea sharing from beyond the four walls of the bank.
Yet if the banks are to get their open banking journey off to a successful start in 2018, the APIs they create need to go beyond compliance alone. ‘Box-ticking’ to satisfy the regulators won’t offer any competitive advantage as open banking becomes widespread.
Financial services will soon become commoditised and consumers will decide which bank to use in the same way they choose one fizzy drink over another, based on their personal brand preference.
To avoid this, in 2018 banks will increasingly look at how they can offer innovative solutions beyond payments, such as personalised services tailored to the customer’s needs. Those that succeed in next year’s open banking environment will be those that partner with third-party service providers to launch applications and services incorporating open banking data. With standardised and open APIs, third-party service providers will be able to create interactive and highly personalised services that securely access a customer’s banking history. For example, we’ll start to see retailers draw on open APIs to allow customers to check their bank balances prior to purchase, without needing to leave the retailer’s website.
Key to getting this innovation off the ground and creating new banking services that stand out from the crowd will be ensuring that the APIs they create are discoverable and re-usable. In the same way that Apple’s App Store taught consumers ‘there’s an app for that’ wherever they have a need, 2018 will be the year that people working in and around banks learn ‘there’s an API for that’ when they have a similar need to create a new service. Banks like Barclays are already doing exactly this, experimenting with the capabilities that can be unleashed through its APIs during hackathon.
Written by Danny Healy