23 Apr With Open API’s banks need to remember it’s not a project it’s a philosophy
When asked about digital transformation banks are quick to point to an app and initiatives in open banking. A digital channel is important but the subject at hand is far broader. The “digital” in digital transformation is a set of technologies implemented sequentially. But the “transformation” part is probably more critical to address for success. This has to do with culture. All the banks we have worked with which are undergoing digital initiatives have cited their own culture as the biggest hurdle in implementing digital. This is why innovation and digital in banking need to incorporate the broader ecosystem. It’s not just about smart partnering; it’s about using those outside your culture to deliver digital where your own culture will not allow you. Digital in banks has to be collaborative. This is especially important as the regulator, trade finance line of revenue, Fintech startups and technology vendors all are important considerations.
What API’s allow you to do is bring this ecosystem together and offer you a way to negate those cultural aspects that are hampering your digital initiatives. API or application programming interface, is a technology protocol that allows all sorts of software components to communicate. Banks can use them to create an open master layer that can be quickly plugged into by third parties and innovative Fintech startups. These Open API’s allow for secure data sharing. This means a third party ecosystem rapidly creates and launches exciting new digital products and services enabling a cost effective agile banking value chain. Previously banks had to painstakingly craft interfaces between bank and client systems in a laborious time consuming manner. Every time the bank needed to add a feature the go to market was long. With Open API’s it is now seamless.
Because Open API’s are agile and enable collaboration they allow a bank to respond to the customer faster. And this is something you cannot lose sight of. Open banking, Open API’s, digital transformation should all be powered by a single obsession…. to become customer centric. Too many technology teams being forced to respond in the digital age gleefully take on the Open API project as a technology stack project to show they can also do digital. This misses the point. Open API’s are means to an end. Putting up an Open API layer is not digital transformation. It’s an enabler. Digital will mean researching the customer and your competition to identify top use cases for digital and then prioritizing them based on your conditions of victory. Transformation is organizing your bank around the customer in terms of processes, organizational structure and supporting enterprise technology decisions to become customer centric and using the Open API layer to recruit Fintech partners who can provide the innovation your own culture is resisting.
Banks who keep the customer as the center of their digital strategy and not the creation of an Open Banking layer using Open API’s, will reap the rewards of enhanced banking products and services that generate revenue and delighted customers who primarily bank with them.