In this eight-part article series, we explore Canada’s journey to implement an ‘open banking’ system, the first phase of which is set for launch in fall 2023. This is the sixth article in the series.
APIs. Micro services. Open architecture. The techno babble around open banking can be head-spinning. Certainly, if you’re going to participate in open banking as a bank, credit union or other service provider, your company must have the right technology and a whole bunch of digital infrastructure in place.
However, in preparing to march into the open banking terrain, try not to get so mired in the technical plumbing that you can’t see the proverbial forest for the trees. Put simply, your company’s journey to open banking shouldn’t just be an IT exercise. You should think as much about the strategy and services needed to win – or keep – customers, versus focusing too narrowly on the basic infrastructure required for handing out customer data in open banking interfaces.
Leveraging your IT
Don’t get me wrong. The technology underpinning open banking is foundational. APIs are one example. They are the mandatory vehicle for digitally sharing information among a wider set of organizations.
But everyone is talking so much about APIs, and IT folks are busy creating lots of APIs, you’d think they were the only important aspect of open banking. APIs are the starting point, the gateway. And the key for making the APIs work is having a standard. Standards are important because you’ll have multiple different companies coming in to get that information. They need to know how to talk to you. So the format of the information and the way you connect with the organizations needs to be standardized.
We haven’t landed on a universal standard yet in Canada (even though it certainly looks like the FDX forum is the de facto standard). Standards are still emerging, so the really important point is to create ways of sharing information. If the standard changes, you can perform mapping to get to where that standard is.
This underscores my argument that APIs should be treated like a product, not just a technology. If you’re not managing them effectively, how are you going to monetize them? The interfaces you build – those are actual assets you’re creating. Sure, the technology connects a whole bunch of systems together, but APIs are really a business asset that says “I now have the ability to take this information and share it with the right people who meet all the right criteria”. How you do all this is part of your roadmap, your offering.
Authentication and consent management are also key pieces of the technology infrastructure to make sure your platforms are API ready, from a technical point of view. Consent, which is very important in an open banking environment, is really authorization, and is dependent on the context. Consent needs to be tracked, managed and auditable.
Shaping your business strategy
In addition to these and other technology-related considerations I’ve posed, you should also evaluate several strategy questions:
- What offerings will actually help people and create value for customers?
- What is your growth plan in the coming open banking world? Are you going to start providing new services or do you prefer to accommodate others who create the innovations?
- Are you engaging in open banking because it’s a compliance item or do you view it as an exciting opportunity to enhance your brand?
- By sharing data with others, how will you create better experiences for your own customers and win new customers?
The answers to these questions will ultimately shape strategy and customer value, and they should not be afterthoughts. I’ve heard too many discussions to date in Canada that have revolved solely around APIs and other technical aspects of open banking. What hasn’t been talked about publicly, at least in the traditional financial services sector, are all these other things that are really the end game that will result from opening up the financial system to more participants.
But how can you bridge the technological aspects of open banking with business strategy for long-term success?
Within your organization, be sure that IT teams and business development teams are sitting together to figure this out, especially in larger companies where technology issues are often determined several layers down the hierarchy. These two sides should be closely collaborating to achieve integrated decision-making among technical and business leadership, through conversations focused on what open banking actually means from a business point of view.
Remember, customers won’t really care about the plumbing. Improving digital customer experiences, and making people’s financial lives better, are where you will truly hit the value marker. And bridging the two solitudes of IT and business strategy will empower you to do so.
How CGI can help
CGI is ready to help you. We work with banks across the globe to build digital business models, develop pragmatic roadmaps that support the execution of strategy, and deliver technology capabilities that drive innovation and growth. If you’d like more information on our work in this area or to discuss how we can support your open banking journey, feel free to contact David Hooper, Vice-President, Open Banking and Payments Consulting.