This week’s curator, Livio Hughes, shares some early thoughts on the challenges faced by banks in complying with the upcoming open data regulations and picks 5 links for further reading on the topic.
Open data innovation: can banks do it?
Since writing my last post, on PSD2 acting as a potential catalyst for digital transformation in banking, I have been thinking about the extent to which banks will actually be able to comply – let alone digitally transform their operations.
At the heart of the compliance and transformation challenges lies the current state of data readiness of the banking industry. To what extent is the customer and transactional data held by the large banking incumbents complete, well-maintained, and fit for purpose? There is really no point publishing an API enabling interactions to happen between a bank and applications that use its assets, if the data repositories to which the APIs refer are full of gaps. To be clear, this is not just about syntax and formats.
Speaking with a few colleagues in the industry, there is a shared unofficial consensus that key banking systems are decades-old, highly customised, hard to maintain. This, coupled with the speed at which new consumer products have emerged, has led to a proliferation of manual processes and off-line data repositories taking the place of automation in processing routine customer requests, ranging from customer profile data (change of address, anyone?) to more complex transaction requests, and much more.
What kind of holes will the implementation of PSD2 (and, worryingly, GDPR) uncover and how will banks get to grips with this challenge? Will we see the emergence of third-party API providers or a ‘data.gov’ open source approach? Perhaps the idea of rebuilding banking systems from the ground up, using modern standards-compliant technology, then migrating your customers is a better long-term bet, as some visionary CIOs have already decided.
Following on from these technical challenges, to what extent are the large incumbents’ much-publicised forays into the startup space actually going to deliver change? For as long as banks – with notable exceptions – are unable to produce and expose data that an innovation ecosystem around them can consume to serve customers better, then all the investment going into trendy digital labs, hackathons, incubators and accelerators look a lot like PR-friendly window dressing.
I will try to return to these topics in a full blog post at some point, but in the meantime, here are some links to provide further food for thought:
- A good introduction to mBank from respected FinTech evangelist Chris Skinner. This Polish bank basically reinvented itself as a digital business and has since become a FinTech beacon. mBank: the world’s first mobile social bank within a bank – Chris Skinner’s blog | THEFINANSER.COM
- The Open Bank Project is an open source API and App store for banks that empowers financial institutions to securely and rapidly enhance their digital offerings using an ecosystem of 3rd party applications and services. Open Bank Project | Home | OPENBANKPROJECT.COM
- The Open Banking Working Group (OBWG) was set up in September 2015 at the request of HM Treasury to explore how data could be used to help people transact, save, borrow, lend and invest their money. The Open Banking Standard | Open Data Institute | THEODI.ORG
- A fascinating list of APIs from ProgrammableWeb’s API directory relating to several aspects of banking. Well worth a scan and even a play if you are thinking about prototyping a banking app. 120 Banking APIs | ProgrammableWeb | WWW.PROGRAMMABLEWEB.COM
- The global payments industry is in the midst of rapid change as financial technology’s (‘fintech’) potential to alter how, when and where payments are made gains momentum. This paper examines fintech’s growing capabilities and explains why bank-fintech partnerships hold the key to unlocking the true potential of digital payments. Innovation in Payments: The Future is Fintech | BNY Mellon | WWW.BNYMELLON.COM
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On 18 October at RPC’s London offices, Post*Shift will host an exclusive breakfast event, “Reimagining the Firm: From Platforms To Pyramids.”
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