Open banking is spreading around the world. Banks need to do more than just tick compliance boxes if they are going to stay relevant, writes Brian Caplen.
In the latest World Payments Report from Capgemini, 90% of banks surveyed said that being involved in an ecosystem-based business model is the key to long-term success in the challenging new payments market. But the report also found that only 48% of banks globally are considering launching APIs beyond what is required for compliance with open banking regulations.
This begs the question as to whether banks will be leaders or followers in the transition to the ecosystem and rekindles concerns that they could lose out to the 'big tech' players. If banks do not become facilitators of platforms and aggregators, they risk ending up as service providers to third parties which control the interface with the customer. This is the infamous back-end role that banks have always feared might be theirs in the digital payments revolution.
If they are to avoid this fate, banks will need to be a lot more proactive. They need to be the orchestrators of greenfield ecosystems as well as participating in systems run by other players. In doing this they face another tough question as to how much the ecosystems they orchestrate should be open to competitors. Only if they are sure of their competitive advantage in all products can they feel secure about this approach.
These are scary times for banks but the problems will not disappear by only doing the minimum required for compliance reasons. Every bank needs a bold digital strategy that takes its products and services to the competition and not the other way round.
Brian Caplen will be chairing a session on the World Payments Report 2019 at Sibos on September 24.
Brian Caplen is the editor of The Banker. Follow him on Twitter @BrianCaplen
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