Design and deliver- creating an agile and secure ecosystem for data to drive open banking services

Data, cloud, security and networks are going to underpin the success of banking’s strategy in open banking, was the strong message at a recent roundtable event hosted by Finextra, in association with Equinix, in central London.

Where is everyone?

Banks need to understand what the ecosystem is made up of- where each player sits, how each service or third party is connected and delivered and, hence, how the data needs to be managed. At delivery level, it is all about computers. Where is each player in the system? What kind of service is delivered through which kind of channel? These are important questions, the answers to which frame the ecosystem and inform the infrastructure and design. But these answers are not conveyed to all the bank stakeholders and there isn’t enough marrying up, communication or understanding between IT and business within financial institutions. There is a fundamental disconnect between those at a business level in a bank trying to plan and create new services, and plan partnerships through which to do so, and the IT or tech people, who have the wherewithal and knowhow with which to execute such plans.

Building an open banking ecosystem infrastructure

Various multi-cloud fintech players can create extra complexity and pressure for larger financial organisations. Somehow the old world and the new world have to meet in the middle. The potential for different services based on newly-gleaned data is huge and most bank platforms would collapse under that amount of data without taking to the cloud, it was discussed.

IoT – the further it develops, the more enormous the strain will become around the sheer amount of data being generated and processed. Today’s commerce and payment platforms would buckle under the weight of data to capture, process and store, and existing economic models will fail when applied to micro-payments. Many parts of the UK do not have broadband still, further limiting advancement. How do you connect all the data points? Who is going to pay for the infrastructural costs is another debate altogether, the government, the GAFAs?

There was pretty much unanimity during the debate regarding speed-to-market, especially with partnering or from proof-of-concept to go-live being six months, bringing this down to six weeks would be more in line with expectation and anticipated speed of development of services when open banking builds momentum. Open banking or not, the speed and uptake of technological advancement is setting the pace of change.

Open banking services

Putting aside the capturing, processing and analysing of data, and turning attention to new open banking services, attendees discussed what could be created with the combination of new data and in-house data in terms of predictive analytics. What areas are ripe for disruption? Credit scoring, came one answer; dynamic currency conversion, another.

In terms of oft-mentioned aggregation services, one delegate quipped that for consumers, a 5p or 10p saving is not a game-changer, and with regards to changing to a new challenger for mortgage provision- this seems an unlikely sell also, going by the trust stats and to-date abysmal switching stats we all know about. However, in the world of merchant services, major disruption is afoot. SMEs are “crying out for services to encompass merchant service agreement, tax, VAT, and that’s where the banks need to be concerned, more than the consumer on the high street”.

Dynamic currency conversion is an anachronism, according to one attendee, bearing in mind the increased international purchases that are taking place, particularly those of high value. At the same time, the days of going for a quick buck are gone, it was discussed, the industry requiring stability and sustainability, which should be caked into any strategy.

Geo-location in transaction view- another interesting value-add banks can add to their security suite, appeasing their customer-base.

The SME market is also ripe for disruption- and yet it is “incredibly conservative” but does need help with efficiency. The average age of a business is three years.

Corporate treasurers today are often advisors to the board- what can be innovated and improved upon through data for the corporate treasurer? They need more visibility, for one. There is a struggle to capture and centralise the data in a customer friendly way, it was posited. Cash forecasting could be bettered; data analytics on the suppliers could yield a whole host of business benefits and cost efficiencies.

At the same time, businesses large and small don’t necessarily know which improvements could bring what benefits, so to whom does the responsibility fall to inform and educate them on this?

Request to Pay (RTP) can bring visibility and efficiencies, greater empowerment to businesses but it was suggested that this would only be the case for 5-10% of the customer base. Another opinion, given the stated fact that utility companies are collectively owed something in the region of £2bn, was that RTP would merely exacerbate this. On the other hand, RTP could enable contracts and, hence, payment plans to be put in place.

Any new service needs to be deployed on a well-thought out and secure platform and infrastructure- one that is agile and robust enough to roll with the innovation punches and placate the regulators. Being fintech-friendly is a must also. Friendly interfaces, as one delegate put it, are essential now- it simply is no longer viable to take six months from proof-of-concept to a live service. Build out platforms and test in a responsible way. A culture change is necessary also, open banking being a much more open and collaborative business arena than that of traditional banking.