As someone who reads this blog and follows the industry, you’ve likely heard a lot of talk about open banking recently. Headlines with references to “Open APIs” and “Shared Data” continue to appear in inboxes and popular topics with industry reports.
We know that in today’s market, consumers don’t compare financial institutions (FIs) so much as they compare experiences. As we speak, tech behemoths like Google and Amazon continue to take an innovative approach to customer engagement and expansion. A Celent report even notes that Amazon has been recently negotiating with big banks to launch a checking account, and the company has also formed a mortgage lending unit.*
Consumers clearly want freedom, flexibility, and choice. And it naturally follows that the FIs that will thrive in the future will be those that demand an open platform that is focused on optimizing the end-user experience for today’s consumers.
Fundamentally, open banking is the sharing of financial information electronically in a secure environment with a consumer’s permission. Europe implemented open banking regulations a little more than a year ago with PSD2, requiring big banks to allow their customers to share their own transaction data with third parties. This is, of course, possible through application programming interfaces (APIs) which allow software at one company to have access to data from another in a compliant fashion. While we do not yet have the same regulations here in the U.S., market trends indicate that FIs place high importance on the need for openness.
But on a broader scale, openness is more than connecting industry innovations via open APIs to a technology platform. A true open approach will require a change in the way vendors, FIs, consumers, and businesses interact and transact with each other, and what they expect from each other.
Open platform banking and open APIs are expected to alter the banking ecosystem. While traditional banking isn’t expected to go away anytime soon, consumers will have more flexibility to change providers and will have much more choice when it comes to banking products and delivery channels. To embrace an open platform strategy, you’ll need to develop business models and sales strategies that optimize your openness – or you’ll miss opportunities to gain new customers or members and deepen existing relationships.
To meet the needs of diverse FIs, effective technology providers should be catalysts for your agility, magnets for partners, and support products that are highly customizable and scalable on your own terms, in a secure manner. Forbes recently touted top solutions and applications that deliver on this new kind of expertise, also noting the importance of technology that is built on top of “trusted APIs.” Core technology providers should also have strict standards for vendors who seek integration with their platforms and be able to provide expert advice on any integration decisions you’re considering.
As technology continues to play a larger role in consumers’ lives, it should empower you to respond with solutions that connect with them on a human, personal level and ultimately put the consumer in control of their financial lives. This includes people from the baby boomer dad who still enjoys visiting his local branch and transacting face-to-face to his millennial granddaughter who prefers to do everything on her phone – and everyone in between.
Does your provider’s open philosophy also apply to how they approach advocacy in our industry? Do they seek and maintain endorsements from industry associations like the Independent Community Bankers Association (ICBA) or actively participate in the Association for Financial Technology (AFT) and the Digital Banking Group steering committee? The answers to those questions will go a long way to indicate the degree of openness you can expect to receive when you choose to utilize their technology.
As we start to think about 2020 and beyond, consider: How well-positioned are you to address your institution’s evolving needs through open banking? The openness you and your customers or members demand and deserve?
Experts agree that FIs should either respond or be left behind.
Through open banking, you can easily leverage new technologies – data analytics, open APIs, and cognitive banking – which will continue to impact the business of banking long into the future.
Now is the time to position your FI for the future – to attract, engage, and retain accountholders of all generations and demographic segments – no matter what big tech has in mind or what future industry plot twists emerge. Open banking represents the opportunity and the path forward, empowering you to customize and refine your technology lineup as consumer demands evolve in the community markets you proudly serve.
I loved a comment from Mark Forbis, our EVP, and CTO, who said it perfectly when he said, “We were open when open wasn’t cool!” at a recent conference. While I think Mark said that “off the cuff,” he is so right! We created jXchange™ years ago as a good medium for real-time integration for third parties – and we use it too. Prior to that, we readily worked with third parties to interface with our product suite when our customers felt the need. And we continually work to expand our integration capabilities to make it easy to integrate into Jack Henry products and to give our customers a choice. We get it, always have gotten it, and you can count on us to be your partner as your institution grows and innovates in the future.
* “Platform Banking in the US: Positioning to Be at the Center in Retail Banking,” Celent, Nov. 2018.
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