BANKING TECHNOLOGY
Powering new banking business models with open banking platforms Open Banking and the continuing development of APIs are reshaping the financial services landscape. Sanat Rao, Chief Business Officer and Global Head, Infosys Finacle presents a clear account of the background, the features and the new opportunities that open banking has and will continue to bring.
W
hile the concept of Open Banking has been around fo r s o m e ye a rs , t h e industry mostly espoused it for the sake of regulatory compliance. However, in the wake of the pandemic, there has been a definitive and rapid uptake of open banking approaches and adoption globally. For instance, in Covid’s devastating aftermath, many beleaguered borrowers – especially small businesses and individuals – have found the Open Banking ecosystem to be an easier source of credit. By authorizing their banks and various other institutions to share their data with third-party providers in real-time, the borrowers are able to tap a wider supply of credit on more favorable terms. And this is just one of the many forces driving an accelerated adoption of Open Banking that has made it a key transformational lever of our world today. Along with this growing appetite for Open Banking, the scope of Open Banking has also enlarged in recent times. The early days of Open Banking
40
saw limited information sharing and little else; today, as participants gain in compliance and confidence, they are offering a wide portfolio of offerings, including credit, payment and accounting solutions, with plans to introduce savings and investment products as well. Two factors are supporting this growth – first, a regulatory push in many countries and second, the proliferation of open APIs. The numbers speak for themselves – in the first two quarters of 2020, Open Banking API platforms globally grew 49 percent QoQ1. In the latest EFMA Infosys Finacle Innovation in Retail Banking Study, financial institutions said Open Banking APIs will have moderate to very high impact on banking business in 2021. APIs are a huge enabler of Open Banking ecosystems, facilitating both efficient exchange of data between participants and a variety of offerings on third-party/ non-banking channels.
The Growing Impact of Open Banking Open Banking is changing the very nature
Banking and Finance news in the MEA market
Sanat Rao, Chief Business Officer and Global Head – Infosys Finacle
of banking and banking institutions. At the highest level, it is dismantling the “pipeline” universal banking model and enabling a ‘platform’ model in its place. Consequently, banks, which traditionally manufactured their products and distributed them through their own channels to their own customers, are now offering a variety of financial and non-financial products sourced from other providers or distributing their own products and services on third-party channels. They are doing this by working with their external ecosystem in a variety of ways: • Creating joint products with partners: Examples include Paytm which has introduced a co-branded credit card with CitiBank (and VISA), and Marcus
