With the advent of technologies such as blockchain, bank regulations such as Europe’s second Payment Services Directive (PSD2) and the FinTech revolution, it is imperative to have an open mind and collaborate with the ecosystem players including competitors, third parties, FinTech players, and developers with the end objective of offering value to customers in the form of financial and non-financial offerings. As the definition of banking expands to include non-financial services, it may not be possible for banks to develop all products and services in-house and also deliver the products which the customer needs through the channel they prefer. So to remain in business, it is critical to leave behind the traditional mindset and follow new approaches to solve customer problems by enabling interactions between consumers and third party product or service providers. Unified Payments Interface (UPI) by NPCI in India is a clear example of banks participating in an ecosystem effectively. UPI-enabled banks can provide other qualified payment service providers (PSPs) connectivity to access customer account data to initiate payments. They can also allow instant transfer of funds between two bank accounts.
Similar to a cloud service provider’s offering of PaaS (Platform as a Service) banks can offer a platform that provides an infrastructure for interactions between its existing customer base and other players to offer a full suite of products and services which the customer wants thereby enabling value creation for all participants. Infosys Finacle’s 2019 Banking Trends report states that banks will arrive at different approach based on their unique vision and circumstances.
Different participants in the ecosystem will be able to access banks’ capabilities using APIs, an easy means of exchange of information in a scalable manner, enabling integration of its internal consumer data with external products and services. The platform will set control mechanisms and usage guidelines for the participants to engage and arrive at new digital offerings. As per the report, a lot more banks are expected to launch their API stores in the coming year to expose APIs to the ecosystem players including partners and developers to build real-world applications with production data.
Banks need to identify different areas of the customer journey which they want to address, and arrive at a comprehensive list of APIs. For example, in secured and unsecured lending, we can plan and arrive at a comprehensive list of APIs for different scenarios and products and not create APIs in an ad hoc manner.
Customers will also benefit in this collaborative environment. They can expect relevant financial and non-financial products and services in a single interface. They will have control over their data by providing consent and securely sharing it with the participants in the ecosystem.
Banks must think about their revenue sharing models as they embark on this customer-led business opportunity so that the ecosystem is a profitable one. Innovation with ecosystem players will be a key differentiating factor that will set one ecosystem apart from the other.
