The Banking Executive Magazine - Issue 150, June 2021

Open Banking interest in how organisations are dealing with their data. • Fintechs and banks will work to- gether to make the open banking infrastructure more accessible while attempting to alleviate the security threats. • Once banks and fintechs begin working together more smoothly, there will be room for innovation. RECOMMENDATIONS TO ADDRESS CHALLENGES AND RIP BENEFITS Open banking entails great opportu- nities, but is surrounded by serious challenges that may hinder all bene- fits if open banking is not properly adopted. We hereby gives some rec- ommendations to address the chal- lenges and rip the benefits of open banking. These recommendations are endorsed by leaders in the field such as EU Open Banking Consul- tancy, EU Banking Hub, Fintech News, and others. Recommendation #1 Raising Financial Literacy for All: Only by fully understanding the new open banking dynamics, and then taking the right steps to develop an operating model, banks will be able to effectively integrate open banking in their daily operations. Recommendation #2 Using technologies to leverage the value of banks financial data: With the help from specialised fin- techs in data processing and analysis areas latest technologies such as big data, artificial intelligence, 3D track- ing, and many other technologies can be embedded in open banking APIs. Recommendation #3 Expanding the open banking ecosystem: An ecosystem connecting banks, merchants and consumers can help in expanding bank service offerings in partnership with third-party providers. This raises potential for new revenue streams. Recommendation #4 Building a compelling digital banking experience: Most banks are moving forward with an API development strategy to intro- duce innovative personalised digital banking solutions. API platforms can add granular and enriched access to data, ranging from standing orders to demographic data and market data analytics. Recommendation #5 Offering real-time market intelligence from aggregated consumer data analytics to SME customers: Analytics that can be offered to SMEs include real-time market share track- ing against competitors, retail shop- ping data, cross-competitor spend profile analysis and demographic segmentation. Recommendation #6 Fully embracing open banking: Most retail banks assert that they are open to adopt open banking. How- ever others are forced towards open- ness. Fintech innovation is driving the trend. Some banks are still stuck in compliance with regulations and in entering in partnerships with third parties. Banks should recognize that creating an open-banking ecosystem creates tremendous opportunities for improving the overall customer ex- perience and that third-party partner- ships will be a source of competitive advantage. Recommendation #7 Getting the open banking model right: APIs are at the heart of open banking. They can help in increasing innova- tion, fostering collaboration, extend- ing customer reach and lowering costs compared to existing legacy systems. To succeed with an open banking strategy banks should de- velop the right open banking model. Recommendation #8 Developing an API strategy: For banks considering opening their infrastructure, an API strategy should be considered a business strategy, not an IT strategy. Free API access may be stepping-stone for both direct and indirect business models. Recommendation #9 Establishing added value partnerships with Fintechs: Fintechs are seeking bank partners to provide core financial infrastructure for new products and services. This could benefit banks in generating new revenue streams. Recommendation # 10 Adopting Banking as a Service: For many banks, the idea of becom- ing a wholesale provider of com- modity utilities is considered a worst-case scenario. To provide Banking as a Service, banks and fin- techs have to collaborate to deliver products and services that often re- quire a banking license. Recommendation # 11 Adopting openness at the core: Legacy core banking systems are often the key obstacles. These sys- tems are closed and monolithic by nature, while open banking requires openness and real-time processing. Banks are building their core bank- ing solutions on a blockchain-style technology that can be used for in- terfacing with open banks. REFERENCES World Economic Forum; INNOPAY; Next Generation Banking; FIS; EU Banking Hub; EU Consultancy on Open Banking; Fintech Open Series; Meniga; Investopedia; Al Riyadh Daily; PwC network; Pay Direct; Fin- Tech Futures; Wikipedia; Open Banking Article by Alejandro González, Bela Virag, Juan González, Gerald Hessenberger, Rocío Castedo, Mateo Jiménez; Open Banking Article by Thorsten Brackert, Stefan Dab, Steven Alexan- der Kok, and Maarten Peeters ISSUE 150 JUNE 2021 the BANKING EXECUTIVE 17