EXCLUSIVE—With mobile #banking services offered at the majority of financial institutions, innovating the #digital space is becoming more important in the #fintech ecosystem, especially for smaller players like regional #banks or credit unions. So, how can these smaller institutions move their digital platforms #beyond the simplest (and expected) mobile banking service? “First off, we need […]
Bank Innovation
While #banks focus on competing against each other with similar offerings, are they in danger of being overwhelmed by tech giants with superior analytics and familiar, easily understood interfaces?
Financial Technology
Legendary magician Harry Houdini used to perform spectacular escapes #from handcuffs, straitjackets, ropes and chains, and often combinations of them. One of his most famous and difficult escapes was the 1904 London Daily Mirror Handcuff Challenge, where Houdini managed to escape from a pair of handcuffs that had taken a Birmingham blacksmith five years to perfect.
Many bankers see the traditional application service provider (ASP) #model for managing their #core systems—renting the use of core #banking software centrally hosted and managed by a single vendor—as a set of handcuffs they cannot pick. The ASP model proved useful in the early 2000s in helping #banks lower costs. Yet over the years, the constant adding on of various components (think digital user interfaces or new payment types) atop 30-year-old #technology has created an increasingly complex maze of systems that is now hard to maintain, difficult to integrate, designed for “vanilla” service, slow to change and costly to service. Add to that the frustration of vendor-controlled product releases that can take the #future of banks’ IT innovation out of a CIO’s hands.
If banks are to have a chance of competing for customers’ attention and business against the likes of Amazon, Google, Alibaba, fintechs and others, they must devise a clever escape from the constraints of the ASP model. Digital rivals are built bottom up on IT systems that are open, scalable and flexible, enabling innovative services, high-speed responses and efficient operations. Banks need the same traits to be future #ready—to connect with broader digital ecosystems and deliver hyper-relevant services (financial and non-financial, human- and automation-supported) through multiple and rich channels in real time. Those banks unable to rise to the occasion risk becoming digitally irrelevant and targets for acquisition.
Luckily, the typical ASP model is not escape-proof. While Houdini was an illusionist who used tricks to perform his death-defying feats, banks can take a few well-staged steps to truly #free their core banking systems and become future ready.
It begins with designing the bank’s future-state IT architecture. For the future-ready bank, we envision the ASP model evolving to serve as the engine for Systems of Record, Messaging and Services activity. It will be open, modern, secure and agile enough to allow for seamless integration of applications, API management, Cloud hosting, and plug-and-play of best-of-breed technology. Rather than having the lion’s share of its IT served by a single ASP provider, the bank provider pool becomes more diverse, fluid and adaptable. Then, banks will need to rewire their IT delivery organisation to adopt a multi-speed approach, operating and simultaneously supporting multiple business objectives. They will also need to “hollow out the core” and diversify the providers of IT technology for greater flexibility and innovation. Houdini used keys and cutlery; banks can use processes and technology to free themselves from the handcuffs of the ASP model.
Read our recent report, Breaking Free of the ASP Model, for a closer look at how banks can break free of their ASP model—and how a few banks are already doing it.
The post Free core banking from the ASP model to be future ready appeared first on Accenture Banking Blog.
#Crypto #Finance, a virtual currency #investment #firm, today announced it closed a €13 million ($ 15.40 million) capital raise to fund an application for a #Swiss #banking #license. The company said it would use these funds to file for the license with Swiss Financial Market Supervisory Authority (FINMA), but did not specify a timeline. Based in […]
Bank Innovation
Major changes are underway in Europe’s payments landscape. In the UK, the Competition & Markets Authority (CMA) has triggered a fundamental reshaping of the UK’s digital financial #industry ecosystem through the #Open #Banking regulation. And in the EU, the #PSD2 (Revised Payment Services Directive) regulations—coming into force on 13 January 2018—require #banks to open their systems to third parties, and provide interfaces for them to initiate payments and retrieve account information.
However, PSD2 leaves open the details of the application programming interfaces (#APIs) that third parties will use to connect with banks. While the CMA has required British banks to set up an independent implementation entity called Open Banking Limited, the European Banking Authority’s (EBA’s) draft Regulatory Technical #Standards (RTS) for PSD2 specifies only technical framework conditions and no interface standard.
As a result, cross-bank or pan-European API standards have yet to be clarified. Creating these standards is #vital: PSD2 aims to develop a unified, innovative, pan-European digital ecosystem for financial products—and uniform interfaces and processes are essential for achieving this goal. So the lack of an implementation entity for the EU is a significant gap.
To help fill it, the Berlin Group—consisting of almost 40 banks, associations and Payment Service Providers (PSPs) from across the EU—has defined a common API standard called “NextGenPSD2” for the use cases specified in PSD2. Initiatives are also being launched in Poland, Slovenia and France. However, given that the standardisation initiatives of the Berlin Group and Open Banking are the most advanced, it makes sense to compare these two frameworks to identify their main differences. Here they are:
USE CASES COVERED: Open Banking supports the use cases &8220;Payment Initiation&8221; (PSD2 article 66) and &8220;Account Information&8221; (PSD2 article 67). The Berlin Group covers all PSD2 use cases by adding &8220;Fund Confirmation&8221; (PSD2 Article 65).
DATA FIELDS: Working with numerous EU banks, the Berlin Group analysed various online banking masks to create a minimum standard set of data fields which all banks must offer via their APIs. In contrast, the Open Banking standard was negotiated only among the CMA9 banks and a UK third-party advisory group, and provides more extensive information, including on balances and available balance types that are particularly relevant to fintechs.
CONSENT MODEL: Open Banking allows the customer to allow specific data clusters for use by third parties – for example, only account balances, deposits or direct debit transactions. This approach is close to the data minimisation requirements in the EU General Data Protection Regulation (GDPR). The Berlin Group provides for consent only for account balances and transaction histories for a certain period.
MESSAGE FORMATS: The Open Banking Standard uses only the JSON (JavaScript Object Notation) format with field names based on ISO 20022, while the Berlin Group offers alternative industry-standard formats. On top of JSON, Berlin Group supports JSON with encapsulated ISO 20022-based pain.00x for payments and camt.05x and MT94x for account information.
AUTHENTICATION: Open Banking supports strong customer authentication (SCA) through the &8220;redirect&8221; approach, while the Berlin Group offers two more approaches: “decoupled” (using a dedicated bank app), and “embedded” (the name of the customer is carried directly through the bank API).
USER EXPERIENCE: In addition to the API specifications, Open Banking standardises the user experience and text modules in the click route, unifying consent issuing, authentication (2FA) and account information/payment authorisation. The Berlin Group allows each bank to devise its own user experience.
TRANSACTION RISK ANALYSIS: The Transaction Risk Analysis defined in the RTS is supplied differently, with Open Banking offering more parameters via the API.
While these are the main differences at this time, the gap may narrow. For example, the Berlin Group is expected to incorporate #fintech requirements in the final version of its proposals, scheduled for publication by the end of 2017. It’s also important to remember that implementing a standard does not automatically make a bank PSD2-compliant, since it still needs to comply with other aspects of the RTS like authentication methods, exemptions from SCA and API testing systems.
The EBA’s RTS is expected to be ratified by the European Parliament at the end of February 2018, after which banks and other PSPs will have 18 months to implement it—including providing APIs. In choosing between the available standards, banks should make their evaluation as early as possible and take strategic and technical aspects into account so they can hit the ground running. Time is short—and having the optimal APIs in place will be critical to success in the PSD2 world.
For additional information, see our report, PSD2: Defining new customer journeys
My thanks to Hakan Eroglu for his research and analysis for this blog.
The post Why PSD2 and Open Banking make it vital to establish industry standards for APIs appeared first on Accenture Banking Blog.
Another #digital #banking #startup has raised funding this week, this time to expand a current account offering aimed at students and millennials. #Loot, a startup begun in 2014 by founder Ollie Purdue — who was finishing up school at the time of the company’s founding — has raised £2.2 million, or about $ 2.9 million, in […]
Bank Innovation
With the introduction of the revised payment services directive (PSD2) in January 2018 just around the corner, #banks face a new and potentially disruptive era. #Open APIs and PSD2 will, in time, disrupt traditional #banking. It’s no surprise, then, that the majority of global banks are planning to invest heavily in open banking initiatives by 2020, as revealed in a recent Accenture study.
But are consumers ready to embrace the era of open banking? Customers will, for example, be able to share access to their financial data with non-bank third parties, which could provide customers with new, innovative services using their customer data. However, consumers appear to have their doubts and concerns about financial services being provided by non-financial third parties. Another recent Accenture study shows that two-thirds of consumers in the UK said they won’t share their personal financial data with non-bank providers.
These results suggest that banks already have an extremely valuable competitive advantage they can use as they build their open banking initiatives: their customers’ #trust. But in order to capitalize on this in a rapidly changing market landscape, banks need to act now and create their strategy for winning in the era of open banking.
The banks need to move quickly because while they currently possess the advantage of customers’ trust, the study shows millennials are already significantly more open to using services from non-banks. Banks should use the time before PSD2 APIs become mandatory to strategically plan for open banking, create compelling digital launches, link into ecosystems and gather a developer community to be better positioned before non-banks make their moves.
In the Nordics, we see quite a mixed degree of preparedness between various banks to enter the new market. In contrast, for example, retail companies seem to be actively grasping the upcoming opportunities. Many Nordic banks face challenges from adapting their legacy systems and architecture to become Open API-enabled business models.
Reach out to us to learn more about how to address open banking in order not just to comply—but to compete.
The post Open Banking: Why trust matters appeared first on Accenture Banking Blog.
With the introduction of the revised payment services directive (PSD2) in January 2018 just around the corner, #banks face a new and potentially disruptive era. #Open APIs and PSD2 will, in time, disrupt traditional #banking. It’s no surprise, then, that the majority of global banks are planning to invest heavily in open banking initiatives by 2020, as revealed in a recent Accenture study.
But are consumers ready to embrace the era of open banking? Customers will, for example, be able to share access to their financial data with non-bank third parties, which could provide customers with new, innovative services using their customer data. However, consumers appear to have their doubts and concerns about financial services being provided by non-financial third parties. Another recent Accenture study shows that two-thirds of consumers in the UK said they won’t share their personal financial data with non-bank providers.
These results suggest that banks already have an extremely valuable competitive advantage they can use as they build their open banking initiatives: their customers’ #trust. But in order to capitalize on this in a rapidly changing market landscape, banks need to act now and create their strategy for winning in the era of open banking.
The banks need to move quickly because while they currently possess the advantage of customers’ trust, the study shows millennials are already significantly more open to using services from non-banks. Banks should use the time before PSD2 APIs become mandatory to strategically plan for open banking, create compelling digital launches, link into ecosystems and gather a developer community to be better positioned before non-banks make their moves.
In the Nordics, we see quite a mixed degree of preparedness between various banks to enter the new market. In contrast, for example, retail companies seem to be actively grasping the upcoming opportunities. Many Nordic banks face challenges from adapting their legacy systems and architecture to become Open API-enabled business models.
Reach out to us to learn more about how to address open banking in order not just to comply—but to compete.
The post Open Banking: Why trust matters appeared first on Accenture Banking Blog.
#Open #banking APIs need an orchestration layer to interact with a bank’s existing systems.
Financial Technology
Digital transformation and #open source amount to more than #technology — they require and inspire cultural change sin #banks.
Financial Technology
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