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Open banking has changed the perspective of financial institutions from viewing it as a threat to recognizing its potential in achieving digital transformation. It originates from the concept of open innovation, which centers on the idea of the wide distribution of knowledge that encourages organizations to rely on external resources as well as share internal inventions outside the company. In banking, it enables third-party vendors to use open APIs that help them build services around a financial institution.
In today’s world, consumer’ are eager to find financial service providers that provide better digital experience, and banks are determined to remain profitable during low ROE, slow growth, and less cost control. Hence, banks are scuttling to find fast, flexible and cost-effective ways that enable digital transformation, meet evolving customer demands and participate in the API economy. Still, the future of banking is not just about modernizing their services through a useful mobile banking app; it is about moving towards new banking models that center around intelligent and platform-based solutions.
Even though, banks are sitting on top of data sources that translate into new revenue opportunities; they have legacy systems bound within firewalls and jammed with siloed and incompatible business data that hinder their path towards digital transformation. Open banking will help expose these systems internally as microservices using modern architectural tools, which will ultimately help create new channels, collaborations, and customer experiences.
Additionally, IBM is building a suite of software products that provide various benefits such as direct integration to internal hosts, and support for multiple interfaces, which establishes new digital channels and revenue streams, while driving engagement and collaboration with partners.