The financial services industry witnessed the start of a transformation that will fundamentally change the relationship between consumers and retail banks when the European Union Revised Payment Services Directive (PSD2) came into effect in January 2018. The expansive PSD2 regulation includes numerous updates, however the requirement for financial institutions to participate in an open banking system is by far the most challenging. Open banking is the upandcoming trend in financial technology, emerging out of a situation of shifting customer behaviour, regulatory changes, the threat from digital ecosystems and the quest for new business models. It is based on financial institutions signing over the access rights for their digital assets and services to third-party developers, who can use application programming interfaces (APIs) to build applications and services around the financial organisations. The open banking approach facilitates greater financial transparency and helps financial institutions to innovate and create new revenue models. If executed correctly, open banking technology will increase innovation, substitute collaboration, extend customer reach, and lower costs.
When banks are opening up their infrastructure, an API strategy should be considered a business, rather than an IT, strategy. Giving API access away for free may drive brand loyalty and allow the API provider to enter new channels, but it may also prove unsustainable over time. However, with careful execution, offering third-party developers free API access may act as a stepping stone for building both direct and indirect business models.
One of the biggest hindrances for banks when it comes to adopting an open banking approach is core banking systems. Owing to the complex nature of these legacy systems, dealing with core banking processes is time-consuming and expensive. It is possible for banks to redesign this core infrastructure, but this is an equally costly and long-drawn-out process.
The Banking Industry Architecture Network (BIAN) is working to address the design issues of core banking systems, seeking to establish a reference framework that identifies and defines IT services in the banking industry. BIAN's framework represents an opportunity for banks to facilitate legacy system replacement and consequently, to improve business agility and reduce integration costs.
VeriPark is a member of BIAN and, now that the majority of banks have also joined the community, it has seized the opportunity to use its industry expertise and architectural agility to help define a revolutionary banking technology framework that standardises and simplifies core banking architecture. In addition, VeriPark is committed to using the open banking and payment standards that have been set by BIAN.
VeriChannel from VeriPark offers a secure, unified platform that empowers organisations to manage seamless, consistent and engaging customer journeys across multiple customer touchpoints. Banks can use VeriChannel to standardise their web, mobile, kiosks and ATMs services according to BIAN's open banking standards. Meanwhile, companies using the VeriChannel Omni-Channel Banking solution will be able to use VeriPark's standardised connectors to provide feature-free APIs to third-party developers so they can build applications and services. Mixing up APIs, financial data and other technologies will create endless possibilities for the banking industry. Open banking will also benefit both businesses and consumers by giving them new insights that will help them to better manage their money and by allowing them to access products that may not have been available before. By providing easier access to financial services, cheaper overdraft services, more innovative ways to perform financial operations, and improved comparison services for loans, mortgages and insurance, banks will be able to deliver more personalised or tailored financial services that better meet customers' individual behaviours and lifestyles.