Ready or Not, Open Banking Is Here

Banking And Financial Messaging

Ed Adshead Grant

Ed Adshead-Grant

Mar 16, 2020

Since the launch of open banking in January 2018, it continues to fundamentally change the financial industry as we know it. But this change is happening at different speeds around the world. Some regions, like Europe and the U.K., are leading the way thanks to regulatory standards like PSD2. On the other side of the coin, the U.S. lacks the regulatory mandates needed for a comprehensive open banking plan, therefore leaving open banking initiatives up to individual banks and free-market forces. This isn’t the only point of diversion. Even in markets where open banking is required, there are often two schools of thought.

In one camp, there are organizations that feel like open banking is being imposed on them and they are doing only the bare minimum to stay in compliance. In the other camp, we’re seeing more innovative organizations that view open banking as the opportunity to develop new offerings, introduce new technology, enter new markets, and gain a strategic advantage.

Those who feel open banking is an imposition are slowly but surely shifting their point of view toward acceptance. They’re resistant to get on with it. They consider their data as their own asset that they’ve built up over the years, but with open banking the data is now owned by the customer. Banks are beginning to realize they need to compete for the user experience; otherwise, new players are going to come in and put all that data to use while banks become relegated to the backend with no customer touch.

2020 is the year all banks will need to develop their open banking strategy, regardless of whether open banking is required in their market or whether they wish to meet only the minimum standards to maintain compliance. While technology will play a role, open banking strategies will be determined as much by a bank’s DNA as by market opportunity. Open banking grinds against the embedded culture of bankers used to working in proprietary closed systems. The technology is here now—it’s a massive cultural shift.

For banks willing to embrace the opportunity of open banking, there is a world of new possibilities. This includes the acceleration of new partnerships between banks and fintechs to open up the innovation cycles. With all that data, banks can package personalized offerings to their customers, whether corporate or consumer. Historically, banks have pushed out bland products where one size fits all. The dynamic nature of open banking means that banks can use many data sources internally and externally to personalize and customize products and services, staying relevant and intimate with their customers.

Sooner or later, open banking will force every bank to make a choice. It’s not a matter of if—it’s a matter of when and how banks respond. In areas like the U.K., Europe, and Australia, banks must offer open banking to be compliant, but I’ve really encouraged people to look at this regulation as less of a burden and more of an opportunity. If banks don’t look at this as a commercial advantage, they will be at a competitive disadvantage when offering dumb products in a digital world of smart products.

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Ed Adshead Grant

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Ed Adshead-Grant

Ed Adshead-Grant is an experienced Fintech expert in the Global Payments and Cash Management industry, driving secure business payment solutions in ACH, Card, SWIFT, Faster Payments, Blockchain, Cyber Fraud & Risk Management and more.
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