How banks and financial services players will monetise open banking
Joined by executives from the financial services ecosystem, Celent’s head of corporate banking Patricia Hines took to the Sibos virtual stage to lead a discussion on the potential for building on ROI with APIs.
Hines states that over the past few years, APIs have of course been “synonymous” with open banking and have been “at the heart of data access,” allowing third parties to leverage this information and initiate payments.
Further, more recently, an evolutionary shift has occurred where banks and their clients have also favoured real-time transaction models and value-added solutions, creating an opportunity for open banking in the corporate arena.
A Sibos poll run on LinkedIn also revealed that 48% of respondents saw new value-added services as the true benefit of open banking, with 29% choosing open banking compliance, 19% fintech collaboration and 5%, client connectivity.
Today, APIs can support banks in achieving their business goals, help monetise open banking and financial players need to see a real return on investment. Daniel Globerson, head of open banking at NatWest, highlights that while APIs have supported connectivity for decades, the UK bank is looking at “our ability to bring new digital propositions to our customers, whether those be retail customers, small business customers, wealth customers, commercial and corporate.”
Globerson goes on to say that rapid innovation with APIs will allow NatWest to deliver products and services to customers in channels “which are not necessarily our own.” Speaking to the convenience of the open banking model, he adds that opportunities include providing lending for cash flow analysis for businesses, allowing customers to apply for products through social media or e-commerce channels, and partnerships with other financial companies.
“No one financial institution or technology company can be everything to everyone,” Globerson states.
Sindhu Vadakath, head of global digital channels and payments product management at BNY Mellon, agrees and says that APIs are a critical enabler, especially when BNY Mellon clients are looking to reduce risk and create operational efficiencies.
“To provide real-time data sharing solutions through the pre- and post-transaction processing lifecycles allows automation and streamlining of operational processes as they [clients] do not have to rely on batch reports anymore, which are now perhaps legacy,” Vadakath says.
Alongside this and fundamental to the success of the partnership between bank and corporate client, she explores how the purpose of APIs have been reinvented and today, they can be utilised as a client access channel and improves said access to various payment rails and a suite of treasury data solutions.
In the custody space, as Wayne Hughes, head of data and digital for FI&C at BNP Paribas explores, there is no regulatory requirement for APIs, but the bank’s business goals are aligned with those at NatWest and BNY Mellon.
Hughes explains that in addition to enhancing client experience with self-service, BNP Paribas are using APIs to optimise internal processes and build services that their customers will require in the future.
“In providing our clients a new flexible means of interacting with their data, this will allow them to both directly extract their data into their platforms as they require and when they require, but also to allow us to implement new solutions and new packages,” such as a client facing chatbot that leverages natural language processing.
He also agrees that having a real-time flow of information is of paramount importance due to the time critical nature of business. “Partnerships allow us to create seamless consolidated services, combining some of our traditional core services together with the services provided by new actors like fintechs and regtechs,” he adds.
Vincent Pugliese, SVP & GM, platform at Finastra provides an alternative perspective, positing that “on one side banks are struggling to innovate, it is difficult to connect to their core systems and contract with fintechs and on the other side, fintechs are struggling to deliver their innovation to banks and credit unions.”
Pugliese explores how Finastra are attempting to bridge this gap and again, says that APIs are a fundamental enabler, a key component to their platform strategy and in turn, a bank’s business plan. “We started treating APIs as a product, instead of thinking that the product has an API,” he says that this has helped offer a better solution to the market as it “more generally meets the needs of the industry.”
Patrick Nealon, VP of strategy at Fidel, continues this discussion around connecting businesses in the ecosystem and states that viewing the API as a product can result in the most value for banks and other financial players. “No two APIs are the same and there is a lot of value in focusing on connectivity as a product in itself,” Nealon says.
Returning to the fact that 48% of poll respondents believe new value-added services to be an advantage, Hines turns to Pugliese who highlights that while it is not an emerging concept, banking-as-a-service is picking up steam and is mitigating legacy issues within banking. “I believe it is an opportunity for financial institutions to start finding better ways of turning cost centres into profit centres.”
For banks to provide banking-as-a-service, Pugliese explains that there are two key layers to the model. At the base, there is the core banking functionality that the financial institution wants to offer e.g. account origination, loan origination or transfer of funds.
However, at the centre of this model is a set of open APIs that expose capability for financial institutions and allow them to offer up services for consumption by financial or non-financial brands.
Globerson picks up on this and says that beyond this value-add for banks and real-time payment channel and treasury functions, there is also potential for improving KYC and identity verification in the corporate banking space.