• By Richard Price, Head of FSI, UK&I at TIBCO Software


• 21.04.2022 11:30 am
#banking #API

Consumer attitudes to financial services have changed radically. A waning enthusiasm for traditional banking services in favour of digital alternatives, especially among the young, was already apparent pre-COVID. Now it is becoming clear just how much the pandemic has hastened new behaviours and expectations. Consulting firm EY carried out a survey last year which found that 43% of consumers have permanently changed the way they bank since Covid hit.

What today’s customers want is straightforward enough: flexible financial services that give them the ability to conduct transactions anywhere and at any time. They expect tools that make accessing money and services as frictionless and secure as possible, and they want to be able to take interactivity between different channels, and between different parties in a chain, for granted.

To help meet these expectations, traditional banks are looking for technology-driven approaches, in particular ones based around APIs and open banking.

APIs offer a great way to facilitate communication between different applications and services, and give banks a chance to extend their offer into new markets, such as mobile banking, without having to reinvent themselves from the ground up. APIs give institutions the ability to connect to consumers flexibly and intimately without those consumers even being aware of what an API is. No wonder research firm McKinsey recently found that over 90% of banks plan to leverage APIs to achieve better revenues from existing customers, while 75% see them as a means to drive new business.

Open banking is a great way for older institutions to create mutually profitable ties with a range of disruptive market entrants, like mobile share-dealing applications or digital payment platforms, all via APIs. Initially seen by some banks as a threat, open banking is now widely perceived as an essential way to stay relevant and work collaboratively with nimbler challenger brands.

However, there’s a potential catch in the pursuit of all this transformational bounty. The dividends of open banking rely on a high quality of data and the ability to leverage that data in something like real time. 

Many banks are sitting on several decades’ worth of poorly organised and unstable data, perhaps the result of multiple mergers and acquisitions, or a model whereby different lines of business still operate independently of each other. Old and new data from multiple sources is either jumbled together or walled off in unconnected siloes. Organisational barriers stand in the way of an agile and unified approach to data, and cultural attitudes prevent these barriers from being torn down. Poor data will equate to minimal or negative results from any transformational effort, and is certainly not any kind of fast track to the required agility and responsiveness.

The irony is that customer data could and should represent a crucial competitive edge for established institutions over digital challengers. They have tons of the stuff. So how can the data quality challenge be overcome and the desired results delivered? How can a data swamp be turned into a clean data lake, brimming with trusted information to act as the foundation for an open banking strategy? 

It all starts by deploying the right technology platform to allow for a more event-driven approach. Every element within a digital banking ecosystem, whether that’s a digital transaction, the input of market information or some data swapped via API, amounts to an ‘event’ that must be managed and analysed, ideally in real-time. Software that delivers this kind of immediacy is a major foundation stone within the open banking world. You can’t manage what you can’t see, necessitating data-driven insights so that every stakeholder enjoys full transparency and awareness of all events that impact services. These insights must span everything from risk to profitability.

Older data management methods that seek to consolidate information centrally can leave you with an even bigger and more intractable data swamp, whereas an effective form of data virtualisation means that data stays where it is, but open to intelligent interrogation. The right software generates APIs that provide secure, high-speed access to customer account information in whatever form it takes, rendering it in an actionable form where and when required.

Banking data can live in any number of disparate systems, varying by geographic region, data type, and classification of customer. With a data virtualisation platform, the complexity of all back-end architecture is abstracted away, turning a melting pot of different data sources into one virtual data repository. The whole package is supported by data management tools to allow the right visibility and access to the right people, as well as facilitate regulatory oversight and compliance.

Let’s consider an example from the real world. KBTG Bank in Thailand, which provides services to 16 million retail banking customers, saw how data virtualisation brought business and IT together to deliver services to customers in a timelier manner. Its ‘My Portfolio’ mobile app shows users every banking product and account they have. The data that powers these services is stored in multiple systems – deposit account, credit card, mutual fund. Each API call can require data stored in 12 to 15 databases and so the power of the API is to create a united view over multiple databases.

There’s no doubting the potential of open banking for traditional banks competing against agile online start-ups. It gives them the digital-first and data-centric approach they need to remain relevant. But the right way of handling data will always need to underpin any success in this area.