Franziska Zangl about Open Banking and the challenges

Open Banking Opportunities

Currently, everyone is talking about Open Banking. One important thing is the right definition or interpretation of this term. There are some banks that understand Open Banking as purely publishing OpenAPIs so TPPs can access their data. But Open Banking is so much more than this: We see Open Banking as a platform based business approach in which data and services are exchanged and shared between banks and FinTechs in a bilateral way. This means Open Banking should be understood as the establishment of an ecosystem where FinTechs are able to access a broad range of bank data and banks can in return profit from their services by offering them to their end users:

1. Building Ecosystems
   We refer to this approach as ecosystem building e.g. integrating customer tailored applications directly to the e-banking system. PFM services or wealth management tools can be integrated via white label or in the form of an app store. Enhanced with services like Single Sign-on, banks can provide their customers a far better user experience without giving up control over the customer interface.
2. Integration of APIs
   Another way of profiting from existing FinTech products is the integration of APIs. Banks can create digital processes very easily by connecting existing APIs. A great sample is a fully digital loan process backed by several APIs:
   • XS2A API grants access
   • Categorization and Enrichment Engine provide a financial profile
   • Credit check by another integrated API
   • Finally an API for the e-signature

   All those APIs are already available! Thus, banks do not have to reinvent the wheel and create the whole process again. They just need to onboard on the right platform which enables simple integration of APIs.

   Many banks are already following this approach but lack the right infrastructure and do not have enough resources to change their legacy systems. This is where lean platforms like the one from ndgit come into play, which can be used as a middle-layer on top of existing backend systems, enabling banks to implement digital services in a quick and cost-savvy way.

Challenges providing API enabled services

For banks, the main challenge when implementing open banking services are their own obsolete legacy systems and the lack of resources to establish a better IT infrastructure. Another obstacle are their slow decision-making processes. Many banks we are talking to already have the right mindset and good ideas to implement great services. What most of them are lacking is flexibility meaning a flexible platform – or let’s call it the technological backbone. They suffer under slow and complex bureaucratic processes. It will be crucial for them to speed up in terms of time-to-market e.g. by embracing the agile approach and allowing an MVP culture like ING recently spoke about at the BankIT in Zürich.

Meaning of API economy for consumers

Consumers generally have a relationship of trust with their bank. Depending on the service, they are likely to prefer an offering from their bank. We also see quite often that consumers worship a good user experience more than a solid trust basis. So banks should be aware that consumers will shift to FinTech services if they find a better user experience somewhere else. Banks should understand this as an opportunity. It’s not a question of having integrated products or not. It’s just a matter of time until banks will experience losses if their integrated offering is not available.

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