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Open Banking: Unbundling Services and Extending into Other Ecosystems

By Gavin Michael, Global Consumer Technology Head, Citi [NYSE:C]

Gavin Michael, Global Consumer Technology Head, Citi [NYSE:C]

Across today’s financial services industry, technology is driving change at an astonishing pace. Many players in the business are passionate about developing new customer experiences that are simple, personal, and human. Customers are trying to balance their financial relationships between the banks they know and trust, and new entrants that are attempting to stretch the boundaries of traditional banking by making themselves relevant in feature verticals such as credit acquisitions, payments, and marketing. To address this situation, traditional banks have gone on the offensive to find ways to leverage the internal set of services they already own and execute against.  

In recent years, several banks have embarked on strategies to partner with their internal businesses and create roadmaps which decompose their monolithic, heritage systems. By driving this approach, they are creating microservices which are aligned closely with the business product model offered to the customer. This enables both IT and the business to narrow their focus to a slice of the legacy monolith application, carve it out, and then recreate it as a new set of stand-alone offerings. These offerings are then enabled through an internal developer portal to allow other internal business and IT teams to take advantage of that function. As these groups scale this approach, the catalog of services grows quickly and is available for both discovery and execution. 

“Innovation and creativity will continue to change the landscape in which customers interact with banks”

To further leverage this approach, the growing service catalog is then examined by all parts of the business to create/offer new and innovative ways of assembling banking services into customer interaction channels. For example, consider if a business wants to offer the ability for customers to pre-authenticate an ATM transaction using biometrics. Using their catalog of services, the business can add their biometrics, account balances, ATM transaction, and Near Field Communications (NFC) services to their “shopping cart” to orchestrate an end-to-end customer experience. No longer is the traditional ATM experience tied to a stiff and immovable interaction. Businesses can combine information from multiple services combining them to offer the personalized experiences. This allows everything from small scale conveniences (e.g. bots on social media) to larger payments and loan integrations with major players. Each interaction with these new services is founded on the premise that a standard application programming interface (API) is used. This is a similar concept to the electrical outlet—if you want to use it, you need to plug into it in a standard format.

A broader and more exciting possibility soon emerges as well. Consider that today’s service ecosystems (banking, entertainment, etc.) no longer sit in isolated silos. In stark contrast, companies are providing an open and transparent communication platform (a.k.a. external developer portal) so those around them can utilize their capabilities. This has the ability to exponentially impact business value. Utilizing best in class capabilities from both internal and external providers, businesses can plug in what they need and where they need it.

Innovation and creativity will continue to change the landscape in which customers interact with banks. By unbundling large applications and assembling an open set of banking services built upon core competencies, banks allow themselves to be present everywhere their customers work, live, and play digitally. From moving money through social networks such as WeChat in China, providing value added services such as paying with reward points, or enabling third-party developed white-label capabilities like the recently launched Qantas Platinum credit card, customer touch points are no longer bound to a bank’s branch, website, or mobile app.  

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