It has been an interesting past couple of years for banking world over. Some of the biggest regulations and overhauls have taken place in this period that include Open Banking, GDPR and Basel III. Open Banking, however, was a revolutionary step ahead for the banking industry, beckoning the dawn of digitisation and the need for banks to step up their infrastructure.
Open banking has been hailed by many as a positive step towards the next phase of banking. What makes this concept so interesting is the sharing of banking data through application programming interface (APIs) that deliver enhanced capabilities to the marketplace. McKinsey states that the benefits of open banking are multiple including improved customer experience, new revenue streams and a sustainable service model to serve traditionally un-served/under-served markets.
One of the biggest challenges to achieving success in Open Banking is the applicability. To generate bylaws and industry standards that are to be adhered by all can be a daunting task. But one particular organisation that is striving to standardise the open banking experience for all is the Banking Industry Architecture Network (BIAN). Established in 2008, BIAN is a not-for-profit association tasked with developing a common architectural framework for banking inter-operability issues. Earlier this year, BIAN published an updated version of its standardised global IT architecture model called Service Landscape 6.0 (SL6.0). This model contains 26 new types of semantic APIs providing banks and software developers consistent guidelines for creating and implementing APIs in the larger banking ecosystem.
BIAN has prominent members from the industry that include ABN AMRO, Banco Galicia, Bangkok Bank, Credit Suisse, ING, JP Morgan Chase, DBS, Nomura, Citi, CIBC, KfW Bankengruppe, Societe Generale and Wells Fargo among many others.
The organisation also has onboard a network of prolific IT vendors such as Temenos, Capgemini, IBM, SAP, Infosys, FIS, Fiserv and Finastra among others, which work with banks to deliver technological support.
For Hans Tesselaar, banking veteran and executive director of BIAN, the past year has been insightful and exciting. “When we started in 2008, we had no standard on banking. Following the 2008 economic crisis, the world began to see the need to spend money wisely. Banks have business needs, and we identify the critical information that’s necessary to flow between banks.”
Open Banking has split wide open the very principle of conventional banking—in that the flow of information between banks has to be open. And Tesselaar believes this is an immense opportunity for banks to understand their own processes better. “Banks can now really understand the backbone of processes within, and optimise them accordingly.” BIAN works with banks to establish standard operating procedures, on the back of nearly 51,5000 use cases. The organisation is actively working on educating banks and enabling more APIs. This is one of the fastest moving endeavours for the company, and Tesselaar is excited at the prospect of making technology highly digestible for its banking partners.
Having supremely enhanced technological offerings at banks is no longer a luxury, but a necessity. Tesselaar puts it aptly: “Banks are becoming more like IT companies, not the other way round.” Despite initial reluctance over embracing transparency in banking and open exchange of information, it has fast become obvious that banks need tech to survive. Mainly because of the advent of fintechs. Several fintech companies are headed by banking executives, who were bogged down by banking conventions that hampered their scope for innovation, while fintech is all the rage in developed countries and even emerging markets. Tesselaar thinks Open Banking is among the best opportunities for fintechs to really deploy innovation and not buck the trend of payment models alone. “Fintech can help banks in so many ways, but the focus now is only on making banking functions technologically sound. This is a great chance for aspiring technology savants to get into the dynamics of a bank, and make these very processes faster, more efficient and safer.”
Great ideas have to be led by great leaders, so therein lies the problem to Tesselaar’s hope for the industry. One of the most critical roles that can achieve the fine balance between banking and technology is that of a Chief Information Officer. Someone with sound technology proficiency and a deep understanding of banking functions can be the answer to bridging this divide, he believes. “A good CIO can drive change at a pace that’s in line with the industry expectations, and not change things every few years. Overhauls of any kind, especially in this industry, take time and money.”
Almost a year since Open Banking and one thing is evident that it’s here to stay. Tesselaar and his organisation are at the forefront of this inevitable change.
To know more about BIAN or to sign up as a member/vendor, log on to www.bian.org