New products and services delivered with ease
In an era of rapid development where proposition and customer experience is paramount, it’s never been more important to secure the effective delivery of new products and services in a safe and secure manner – Open Banking has been a game changer in achieving this.
Whilst product innovation and an enhanced customer experience remains top of the wish list for every financial institution, Open Banking has already helped achieve this for many, revolutionising the financial services industry and what it has to offer.
Like any successful, fast moving initiative, financial institutions launching and developing new Open Banking services, and who consider concept and the ability to deliver equally, are those who are making an impact and gaining market share. Open Banking has been a next level initiative, but what’s needed to secure future successes and develop the concept further?
Open Finance – the next big thing
Open Banking has been a catalyst for positive change, enabling users, both individuals and businesses, the chance to plug into a wider, more personalised set of banking options benefitting both the customer and the financial institution.
With banks modernising like never before following tech investments during the pandemic, financial commitment in open technology has been a priority for innovative institutions allowing new customer propositions to develop at speed. As such the benefits of Open Banking are also starting to be transferred to broader areas and in all that the financial services sector provides.
Open Finance is the new Opening Banking and is set to take the industry to yet new heights. It’s been heralded as the next big thing and is on the cusp of becoming an everyday reality creating better access to savings, pensions, mortgages, insurance and consumer credit options in addition to everyday banking.
The transition has already begun. Progressive financial institutions are collaborating with a wide variety of product suppliers to deliver this extended range of products based on data and financial messages. The pandemic has accelerated banking tech development at speed, as it had to, and there’s no turning back now customers have seen what’s possible. The resulting progression from Open Banking to Open Finance is one advancement that will become a significant benefit for all involved as long as it’s managed well.
The building blocks of Open Finance
For years, the payment industry has been fixated by the definition of ‘standards’ which means the data flowing between organisations must be packaged in a similar format. The principle is to ensure the message can be understood and acted upon effectively as it moves between organisations. Essentially, Open Banking and the migration to Open Finance is all built upon API standards.
Across the world, different regions have adopted different API standards. In the US it’s the Financial Data Exchange, in Australia the Consumer Data Standards. Open Banking EU and Open Banking UK define the standards across Europe. These important standards will define the format of the financial messages circulating around the global economy as they instruct institutions to perform different tasks. They will be the building blocks of new propositions and the DNA of Open Finance.
Fintechs and financial institutions around the world are exploring options to build their proposition through Open Finance to gain a competitive advantage. With the right planning, co-operation and support Open Finance initiatives can be implemented extensively and to the benefit of many. A variety of players in the financial ecosystem can work together to create new services for customers, who will gain greater control of their finances, access new products and services and operate more quickly and with greater security.
Product specialists have reacted quickly getting new options to market quickly through Open Finance but within the same financial institutions, their tech support is coming under increased pressure to link together what is increasingly becoming a complex matrix of products and delivery channels. It’s a challenging job, but once the standards are understood in detail then it’s possible to innovate easily.
Making a smooth transition to open financing
As tech develops so too must the way institutions test and launch this new capability. With the Open Finance revolution already underway it will be the institutions that remove friction and promote ease of adoption who will benefit most. The creation of virtualised test environments and automating test processes will be key to success. Virtualised environments allow technical teams to be more agile in the way they launch or implement changes, with multiple launches per day as propositions are tweaked, refined and created.
Every new launch will be easier as the financial message will already have been tested against multiple API standards and specifications. Confidence in the launching of new products and services, lower innovation costs and a clear competitive advantage will be created.
Forward looking financial institutions around the globe are already in a position to showcase new, more accessible products through Open Finance. These innovators are taking concepts to market far more quickly than their competitors who are dragging their heals when developing similar propositions. Can they afford to? If organisations can create, test and launch with confidence then they will have far greater opportunity to take advantage of Open Finance and all it has to offer!