Open Banking is less about technology, more about people
You may have seen that I am currently right in the middle of a series of interviews on Open Banking. I talked to a lot of bankers, both on an informal and on a formal way, and I will talk to a lot more.
It has been a very interesting journey thus far. Most of the blogs we find online are about APIs and Open Banking and PSD2 and technology and regulation and bla bla bla.
Like in this image:
Of course it is key to rethink your infrastructure for a more open way of banking, of course you need to reflect on how to unbundle services. I know: that is mainly a technology question, and quite a big one.
After all: what Open Banking is all about? APIs help to speed up developments within an organisation. The internet opened a lot of opportunities, but we can expect a lot more possibilities in the future, thanks to new technologies, like these APIs and microservices of all kind.
However, if you dig deeper in the topic with those bankers, there is one point they all have in common: they struggled to change the mindset of colleagues in the beginning. This is normal of course, since you start with banking in a completely new way.
What happens if you cannot change the mindset of people? You will not have the right basics for an optimal technology implementation.
And what happens if you cannot explain the advantages of new implementation to your users? Right? They don’t take full benefit of the advantages that are offered.
So here we go: my blog on Open Banking and People.
Employer branding challenge
Banks evolved from branch to internet to mobile to everywhere. “Mobile is where the APIs come in, “Everywhere” is where the APIs get visible.
Often the management of APIs become a new business unit. This new pool of talent takes care of sandboxes, API developments, documentation, security…. API manager, Product Owner APIs, Product Manager APIs… : these people understand APIs and have an affinity integrating it in financial services.
This brings us to the first ‘people challenge’ for banks: finding the right talent. APIs are being used in every industry. Why should an expert go work at a bank if he can go into automotive, Big Tech, Fintech, retail or any other industry?
To answer that question, banks need to invest in employer branding. This is a long-term exercise, and banks are still suffering from the crisis more than 10 years ago.
An alternative is to outsource all these activities. That will help a bank to stay compliant, to benefit of economies of scale. But how will can they differentiate if they don’t own the process?
Workforce buy-in challenge
Having the experts in is one thing, having the rest of the bank to understand the value of working with these experts is another. Only when everyone understands the value of working with APIs, creativity can grow.
Product managers of payments, but also deposits, lending, investment and all kind over other product managers can reach out and co-create new ideas based on APIs. That is a magic of APIs!
All kind of services can be digitized to be present everywhere, 24/7. You don’t have to be an API specialist to come up with new ideas, but you do need at least some affinity with the way it works.
It is pretty similar to the evolution from internet to mobile: you don’t just copy internet banks into an app. Well… quite a few did and they soon realised a new app is required to stimulate usage.
You need to understand how consumers of these channels consume the respective channels. Internet banking is different from mobile banking, like mobile banking is different from “everywhere” banking through APIs.
Like Joris Hensen, Founder and Co-Lead of Deutsche Banks’ API Program explained in his interview: “The life of a bank customer does not evolve around traditional banking products only, but it is about the daily decisions as well as the decisive moments in their life. Open Banking is a way to serve the customer in those moments together with third party providers.”
Once all employees understand this, they can start contributing to the future of the bank through APIs. Lots of iterations will help in building an excellent product. Buy-in is key to find enough energy through the whole organisation to achieve this.
Banks who did their proof-of-concepts and modification well before September 14, can demonstrate a better, more user friendly way to providing APIs. That will accelerate usage on the short term and it puts them in the driver’s seat for the first wave of Open Banking and PSD2. On the mid-long term they will also be able to find new opportunities at a much faster pace.
What I heard thus far very often is the “Open Banking is about putting the power back to the consumer from a data and consent perspective”. This is a very noble idea, and it makes perfect sense.
Banks are still very trusted by consumers, so they can increase their relevance by playing the right cards in this context.
Daniel Van Delft, Country Manager Netherlands at Visa, shares this opinion: “On the other hand, it will also push for the need for more control. We want to be an enabler there as well. Our transaction control API is a good example: it helps consumers to be and to stay in control of their daily finances.”
Question is how will you get the consumer on board. This is likely a long-term plan as well. First of all most customers don’t like change, and they definitely don’t want to know about regulation (that may explain why in Belgium only 2,6% were aware what PSD2 is, see The Banking Scene’s Conference Report).
Today things get more complicated: who is your customer? There is no direct communication between bank and consumer: there are developers and third party providers in between. This means you need to think of user experience for the user of APIs, the user of the service and often even an intermediary in between.
These blurry lines leave a lot of opportunities for financial institutions to focus, and to rethink their identity to become a true ‘everywhere-banking’ provider. Because technology is getting cheaper everyday, there are opportunities to smaller, more agile players.
Key element is to be able to translate the opportunities of new technology to all stakeholders in the ecosystem. No, a bank will not become an ecosystem… it is an integral part of it.
This means that collaboration is an essential part of the success, not imposing partnerships. This balanced partnership will (1) allow more creative thinking and (2) facilitate change management, as people are more open to change when dialogue is not top-down.
To come back to the idea of the customer challenge: with partnerships I do not only mean technology partners, but also for example merchants and other parties that can help in convincing the end-customer to adapt to the new world of digital banking.
Financial education is a key aspect of getting the market ready for Open Banking. You don’t need to explain what Open Banking is, but it may be useful to show the advantages of the new way of banking. Banks no longer have a monopoly on this financial education. To take the example of the wearables: it is good to have banks promoting it, but if the merchant does not promote it, the bank will get nowhere in volumes: it is a two-way street.
These are the easy examples where a watch is integrated with a card. The future of banking will be way beyond banking of.
More on that later 😉.