Experts say partnering with the right people can help banks succeed on their Open Banking journey.
In an effort to offer additional services to their customers, banks may choose to develop their own Open Banking capabilities themselves or form partnerships with fintechs and other third parties outside the financial services industry.
This decision will depend on the scale and size of your organization, your business strategy and the type of Open Banking service you are looking to establish – whether it is a standard offering or something more specialized. .
However, many opt for the latter, partnering with other industry players to add value to their customers.
While the conversation around Open Banking has often pitted more traditional banks against cutting-edge fintechs, according to Jacquelyn Painter, Senior Manager, Product Marketing Solutions for Financial Services at Okta, in many cases both actually collaborate to develop new products and services:
“The conversation at the beginning was ‘fintechs: are they friends or foes?’ but some of these traditional banks are now choosing to partner with fintechs so that they can have a common solution and offer products and services to their customers, while complying with Open Banking and PSD2. to partner with a fintech provider because they simply don’t have the resources or the bandwidth to implement such a venture.
“Big banks do a lot of this in-house, but there are some aspects of Open Banking and Open Finance where it makes sense to partner with fintech vendors depending on the use case or of the service they seek to provide.”
Hans Tesselaar, Executive Director of the Banking Industry Architecture Network, explained that it is not always necessary for financial services organizations to create all products themselves:
“When you look at car manufacturers, they don’t develop everything themselves. It would be useless to develop your own GPS if you have Google. So if there are good things in place, then you should put all these different pieces As a bank, you can choose from all the offers and create a top-notch set.
“There are more resources outside of the bank than inside, so if you can pick and choose what you want and connect them to a cutting-edge solution, then you’re the winner at a cost. less than developing it yourself.”
Banks can bring their reputation and customer base to the table, while third parties can bring technical know-how and may be better placed to quickly create new products.
“What we find is that there is still a level of guidance that is needed,” says Painter. “It’s very complex stuff. It’s not easy and it’s very vague, especially if you look at PSD2 and RTS, they’re vague and you have to read between the lines. It’s not like it gives you a checklist of what needs to And as banks, especially these big banks, look to move beyond Open Banking and into Open Finance and Integrated Finance, as well as to this Open Economy concept, they need advice.
“We’ve had clients before that say, ‘We started building this on our own, but now we need help because we’re not in the identity business, we’re not in the identity business. the security sector, we are in the banking sector. “This makes it very difficult for them to keep up with changing mandates, regulations and necessary security improvements.”
However, it is important for banks to approach partnerships carefully, as systems inherited from traditional banks, differences in organizational culture, and fears of banks becoming “dumb pipes” on which startups can build their services can create problems later. As such, selecting the right partner is essential.
Painter also emphasizes the importance of having the flexibility to partner with multiple third parties to create an interoperability-centric ecosystem:
“It’s really important to use a vendor-neutral partner. You want someone you don’t have to completely rely on for everything, especially if your strategy changes. Being able to make sure you have that top-notch environment, where you pick and choose, and having a solution that can integrate with all of these different applications is crucial.”
To learn more about the opportunities, challenges and future of Open Banking, read Computing’s full report on the subject.
This content is sponsored by Okta