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How Open Banking is transforming banking and payments?



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Open Banking will fundamentally re-architect the banking sector over the next few years, by revolutionizing speed, security, and transparency of how we consume banking services.

Open banking is a legislated system that provides third parties (for example fintech companies) access to data from several financial institutions via application programming interfaces (APIs).

Ernst and Young’s Fintech Adoption Survey of 22,000 digitally active consumers in 2017, highlights the tipping point reached by the FinTech revolution, due to the impressive and rapid growth in adoption among 20 different mature and developing markets. The report outlined that “The financial institutions that people consider to be their primary financial service provider are changing” also advising that this variable is likely to erode over the years as non-traditional banks continue to grow thereby reducing the importance of legacy and changing values of reputation in banking.

The survey revealed four critical areas for banks to keep the central place in the lives of consumers: building trust, enhancing understanding, rethinking engagement and, finally, innovating.

Competition & Markets Authority

Meanwhile in 2018 banks entered a new era of transparency, as financial institutions and fintechs alike attempted to deliver APIs (application programming interfaces) that would comply with the mandate of the Competition & Markets Authority (CMA) on one hand, but were also able to ensure that data structures and security architectures were secure enough for customers to confidently share their information.

Transparency & Open Banking

13th January 2019 marked one year since the start of the UK’s Open Banking initiative, which was designed to bring more competition and innovation to financial services. Over the course of 12 months the innovations in the fintech world as well as open banking resulted in traditional incumbent banks losing their tight grip on payments services, fintechs gaining access to a larger potential customer base, and a springboard created for a – possible – revolution in retail finance. And this revolution is driven by the customers, for the customers.

In a new era of transparency, Open Banking allows customers to see all your transactions in one place by choosing to give a regulated app or website secure access to your current account information and putting the customer back in control.

Banking Transformation – Benefits to banks by embracing open banking

Partners and 3rd parties not only add value for the bank’s customers, they also help banks to provide new and enhanced services to their customers.

Customers today want innovative banking products delivered as quickly as possible and open banking platforms make it possible for banks, to meet the growing customer expectations.

Open banking enables the banks to create an omni-channel customer experience, by enriching service offerings through open API’s.

Open APIs help to bring down the cost of financial transactions, as banks identify cost-effective service providers.

Open banking built on good architecture design principles, enables the banks to deliver superior customer services, increase customer engagement while reducing infrastructure scale up costs.

Customer trust and Customer Service

Banks used to compete largely on legacy, reputation, location, as well as price, product and the scale of the branch network. However today, we see customer experience is the main competitive front and traditional banks are slowly adapting and seeing how they can offer their customers more than basic banking.

Not only do we notice a new emphasis on simplicity and convenience of interactions between customer and bank across a variety of channels, banks are dedicated to improving their responsiveness to consumer requests and are offering a proactive approach to continual engagement with customers – all aimed at helping consumers increase their financial well-being, for example by educating them on spending habits. And by doing so, the challenger banks have found a way to build a relationship of trust with their customers.

Challenges faced by the banks and way forward.

Since open banking involves connecting with multiple third parties and sharing of customer data resident across  proprietary systems, banks now need to a secure interoperable platform to ensure that the data from the underlying systems is shared in a efficient, safe and robust manner. FSS Open Banking Hub an open platform, secure and reliable messaging middleware hub that is both ‘message format’ and ‘platform’ agnostic can help banks meet these objectives. FSS Open Banking Hub can connect to multiple third-party providers and banking systems to seamlessly deliver messages between different applications supporting API aggregation, message filtering, transformation, synchronous and asynchronous message processing, business rules for message delivery, re-delivery inclusive of store and forwarding messages and message security.  Banks can adopt this as a single platform to open their internal systems as API’s in a regulated manner to the outside world without having to expose every system and monetize every API’s which is being consumed by the TPP’s thereby saving time and cost.

FSS Open Banking Hub can also help banks to connect with multiple overlay services of the the payments eco system like utility payments, loyalty, mandates investment entities, insurance to power payments payment transactions and the authorisation can happen completed through faster payments or payment systems running on the HP NonStop

The Future

Open banking framework will be a game changer for financial services and banking customers, allowing for greater transparency and increased trust which requires a secure framework and FSS can help banks to successfully embark and benefit in the open banking journey