The challenge of evolving to compete in a new scenario: the main opportunities offered by the future of financial services are linked to the concept of coopetition (collaborative competition), the construction of ecosystems and the ability to share information.
The consulting firm Gartner defines this phenomenon as “a strategy based on platforms that enable new business models and relationship ecosystems with the potential to transform the financial industry.”
This is an unprecedented opportunity with the ability to create value exponentially, both for entities in the sector and for customers. The former gain in flexibility, capillarity, efficiency, and adaptability, while the latter obtain more transparency, better services and a top-quality experience.
In order to capitalize on all this, it is necessary in principle to consolidate the change in mindset: contact, integration and exchange with other players in the financial system, as well as with non-financial companies that provide related services, may be the way to maximize the proposal that is closer to the consumer and to leverage a true financial inclusion approach, since Open Banking also brings financial products closer to more people through spaces of daily use for historically unbanked people, such as e-commerce marketplaces or even utility bills, such as gas or electricity.
The cornerstones of the new banking era
At the heart of Open Banking there are three concepts that behave like pillars.
The first one is that of regulatory requirements, which motivate financial institutions to adapt their processes to comply with them (although in some geographies they are just recommendations and not obligations), and which focus on aspects of how to share bank customer information, putting Emphasis that the data belongs precisely to the client and not to the institution or operational aspects of transactions that go through more than one entity.
The second aspect is that of the business models that arise from these regulations, and which can be grouped into three broad categories: financial information aggregation (two or more entities share data and enable a 360º view of the client), the initiation of payment operations (financial institutions provide the infrastructure and websites provide the interface, for example) and the combined ones (based on the available information, for example, presenting personalized proposals for a client considering their income, surpluses, and investor profile).
The third aspect is the collaboration ecosystems that are being generated: BaaP (banking as a platform), operation optimization, extended ecosystem and BaaS (banking as a service). If we look at it from the collaboration flow perspective, the first two are internal and the last two are external. If the approach has to do with the scope of impact, both BaaP and the ecosystem have an impact on business, while the other two have an impact on the operational aspect.
New models, new opportunities
What do these models consist of? In the case of BaaP, they consist of marketing third-party products, monetizing the bank's distribution channel, and complementing the offer with added value for the client. If an entity is good at providing credit-related services but its investment area is not very well developed, it can “hand over” its capillarity and its channels so that other companies can provide this service and improve the consumer experience.
When we speak of an extended ecosystem, we refer to distributing the bank’s financial products through diversified marketing platforms, that is, offering products to third parties through their channels. Optimization focuses on outsourcing the operations that the entity does not perform optimally. Lastly, BaaS refers to the ability to monetize the bank’s operational capabilities. For example, a telco can deliver loans to its customers using the bank’s engine.
Faced with this paradigm, financial entities are deploying different strategic positions. There are those who reactively comply with the regulations or those who defensively seek to prevent another from disrupting their market and causing them to lose value. But there are also those who embed these new features in their tools to start taking advantage of the opportunities and, even better, those who appeal to this new model as a booster for transformational change to become leaders or benchmarks.
The technologies are available. The consumer is changing. The regulations are already being defined or they will not be long to come. Banking is changing towards an open and collaborative scheme full of opportunities. It is time to embrace the future: welcome to the era of Open Banking.