• Alexi Karalis, Chief Technology Officer at Iliad Solutions


• 03.03.2022 10:00 am
#openbanking #banking

Financial institutions are adopting Open Banking and its capabilities at pace, but what will the future hold as wider financial services providers adopt similar technologies? 

Delivering new products and services

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. 

Like any successful, fast moving initiative, financial institutions launching and developing new Open Banking services who consider concept and the ability to deliver in equal measure, are those who are succeeding. 

So what’s next for Open Banking, and what’s needed to secure success in future phases of its development?

Open Finance – the awakening of new possibilities

Open banking has been revolutionary, enabling users, both individuals and businesses, the opportunity to tap into a broader, more personalised set of banking options benefitting both the customer and the financial institution.

With the potential to modernise banking like never before, investment in open technology has been a priority for innovative institutions allowing new customer propositions to develop at speed. Unsurprisingly, what’s worked in Open Banking is starting to be transferred to much wider disciplines within the financial services sector. Fast forward and Open Finance is hailed as the future and set to become an everyday reality creating better access to savings, pensions, mortgages, insurance and consumer credit options in addition to everyday banking. 

Financial institutions are already beginning to collaborate with a wide variety of providers to deliver this broader range of products based on data and financial messages. The pandemic has been a life event that’s sped up the development of customer service technology like no other in living memory. The resulting progression from Open Banking to Open Finance is one advancement that will become a significant benefit for all involved if handled 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. 

Financial messaging

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 should be applauded for the wider offering they are providing through Open Finance but within the same financial institutions, technology teams are coming under increased pressure to knit together this complex web of products and their delivery behind the scenes. While this is indeed a difficult job, once the standards are understood in detail then it’s possible to innovate with ease.

What success looks like 

As technology changes so too must the way institutions test and launch new technology. Those benefitting most from the impending Open Finance revolution will be the institutions that remove friction and promote ease of adoption. The creation of virtualised test environments and automating test processes will be key to success. Virtualised environments allow tech 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. 

There will be less fear with each new launch, as the financial message will already have been tested against multiple API standards and specifications. The result will be more confidence, cheaper innovation costs and a clear competitive advantage. 

The proof is already out there as illustrated by a number of progressive financial institutions around the globe, trailblazing new product development. These innovators are taking concepts to market far quickly than their competitors, who are taking much longer to develop similar propositions. If organisations can create, test and launch with confidence then they will have far greater opportunity to take advantage of Open Finance – it’s the future!