Other parts of this series:
Special guest Chris Skinner from The Finanser.com and author of “Digital Human: The fourth revolution of humanity includes everyone” joins Graham Rothwell, our Managing Director for Asia Pacific Payments, Fergus Gordon, our Managing Director for Africa and Asia Pacific Banking, and Kieran White, our Senior Manager for Customer Experience and Channel Strategy, to discuss what Open Banking means for the future of the financial sector. Listen to the podcast.
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Open Banking, which requires banks to share customer data with authorised third parties, is rapidly becoming a worldwide phenomenon. The UK, the EU and Australia are all already implementing regulatory frameworks for the sharing of financial data, and major Asia Pacific economies such as Singapore, Malaysia and Hong Kong are following suit with their own initiatives. The implications for the banking industry are profound.
Under Open Banking, third parties will be free to use bank data to develop new financial solutions or enhance existing ones. This means that banks, which have for centuries controlled the entire supply chain of financial services end-to-end, must now open up to others leveraging their customer information to target segments of their business. We are already seeing fintech companies take on functions traditionally associated with banks, such as payments and international transfers, and this trend will accelerate as Open Banking gains traction.
If incumbent banks are to stay competitive in the Open Banking era, they must rethink their business models. One thing they will need to look at in particular is their distribution networks. Today, large banks have extensive branch networks that are extremely costly to maintain. These networks are increasingly unable to cater to the evolving needs of consumers—many of whom require on-the-go services—and are preventing banks from developing the flexibility needed to compete with smaller, more nimble players.
Banks must also improve their data management capabilities. In the early stages of Open Banking, incumbents will likely continue to control customer data. Consumers must grant permission for their financial information to be shared and studies suggest that the majority are not yet comfortable with the idea of this data falling into the hands of non-bank organisations. Banks can capitalise on this first-mover advantage by acting quickly to use their internal data, as well as data from outside sources, to build up a holistic view of each customer’s specific needs, and tailor their offerings accordingly.
Lastly, banks will need to consider whether they have talent on their leadership teams that understands the technological developments that are shaping the next generation of financial services. In the years to come, the banks that thrive will increasingly be those that have senior executives who know how to code—or at least understand the importance of coding.
In short, Open Banking presents a host of new challenges to the banking model. But forward-thinking banks will recognise that the shift can also be a catalyst for the industry to move well and truly into the digital age, and to innovate in a way that better serves customer needs.
Accenture at Sibos
We’ll be discussing Open Banking and other topics at Sibos. Come see us at our booth and join us in the conversation around enabling the digital economy. Keep up to date on all the latest from us around Sibos right here on the blog.
