As we move past the mid-year point and head towards the January 2018 deadline, Open Banking is starting to feel very real. We are moving beyond concepts and standards into a phase of delivery, and Ping Identity continues to work very closely with a number of key customers to help ensure continued progress.
Open Banking Ltd has just released the payments initiation API and continues to build the directory and additional components that will sit at the heart of the ecosystem. At the same time, a number of banks are now deep in the process of building out the environments to support their open banking requirements, and it is interesting to see the different challenges that our larger financial customers are facing relative to some of the digital-only and challenger banks that we are working with.
In speaking with these customers over the past few months, and attending a number of conferences recently, there are several interesting themes that are evolving and, I have to admit, changing my own understanding of what Open Banking really means--and what the future might hold as this all comes together to deliver the infrastructure for a new era in banking services.
Open Banking is Ubiquitous
I attended the EBAday conference in Dublin recently where "Open Banking" was clearly the turn of phrase to describe the changes that are happening in the finance sector across Europe. For most of the past year I have been using Open Banking mainly to describe our engagement in the UK market and have been conscious to use PSD2 or XS2A for any discussions that I have had outside the UK specifically. However, it is clear, and absolutely logical, that Open Banking is being used as the most accurate description of the shift that we are seeing, which has clearly accelerated over the past few months.
Open Banking Involves Open Collaboration
A clear message from EBAday was that collaboration with fintech companies has become a key part of the digital strategy within all banking organisations. Until recently, large banks seemed to always want to build or buy off-the-shelf technology and deliver under their own brand logo. It was interesting that all of the large banks at EBAday affirmed a cultural shift to open collaboration (with the right partners) as a key part of their digital strategy, and for Open Banking specifically. Banks now see partnering as a better, more agile and cost-effective means of delivering innovative digital services for their customers.
API Economy is at the Forefront
It is very clear that the API economy is a critical part of building the next-generation banking ecosystem, and whilst it has been a fundamental part of the discussion that we have been having with technical teams at our financial customers, it was interesting to see how this term specifically had taken centre stage at EBAday.
Banks are clearly focused on building open architectures that will allow them to deliver innovative services that will improve stickiness with their customer base, whilst looking to gain competitive advantage and open up additional revenue streams. And there is a broad understanding now that APIs are integral to this.
With banks embracing the opportunities that exist, with new collaboration models and Open Banking architectures, it is exciting to consider the options available for all parties. It is evident that we will be looking at entirely different payment models in the very near future. The rate of change could be greater than we expect and this has already been illustrated in other geographies like Asia, where Alipay has grown to over 500 million customers over the past decade. It is striking that the target is for this number to grow to 2 billion by 2020.
Innovation accelerates in any field and banking is no different. Consider the evolution of consumer payments and the time that it has taken to transition from cash to cheque to credit cards, to chip/PIN, to contactless, to mobile, to Apple Watch...
As we enter the millennial generation of banking customers, we know that continued change will be embraced. Already, 65% of millennials don't carry credit cards. This generation tends not to carry cash, they aren't tied to a certain bank, they more readily accept terms and conditions when signing up for apps and, above all, they expect a high level of digital experience. It is no stretch to consider how the timeline for evolution will continue to reduce as this generation makes up a higher percentage of customers and staff within our financial organisations.
Gaining Competitive Advantage
While the initial drive for Open Banking and PSD2 was clearly driven by a desire to be compliant, it seems very clear that banks are now fully engaged in embracing the revolution and ensuring that they are best positioned to gain competitive advantage. The key will be delivering the best, most open, most easily useable API option for fintech organisations to integrate. APIs enabling key services and allowing third parties to write apps that can integrate will be crucial. The banks that can best harness this opportunity might be positioned to go and become the Amazon or Apple of the banking world, whereby everyone goes to that place where they know they can get the best apps, and thereby the best customer experience.
It's Not Just the Banks that are Maneuvering
While we are talking about how banks are now actively working to realise the benefits that the new ecosystem will bring, it is clear that the time is now for fintech and merchant organisations to make similar moves to be Open Banking ready, and reap the potential reward that first-mover advantage may bring.
A number of interesting fintechs attended both EBAday and Money20/20 in Copenhagen with propositions and services ranging from account aggregation, payments, new mobile apps, and it feels like we are only starting to scratch the surface of potential. At the same time, merchants are now in a position to change the way that they handle e-commerce transactions, reducing cost and improving customer experience at the same time.
Security Will Always be Top-of-Mind
Delivering this open architecture whilst keeping security top-of-mind is a distinct challenge and a key area where Ping Identity has been focusing on helping provide the best technology to meet customer requirements. Secure and seamless access across web, mobile and APIs has been our tagline for a number of years.
Ping has been at the forefront of working with customers and regulatory bodies like Open Banking Ltd to ensure that not only do our products support the standards mandated, but that our industry experts are monitoring and helping emerging standards evolve to ensure that security is married with innovation for our clients.
We have been able to fast-track a number of product enhancements into current releases to help meet key Open Banking use cases and will continue to work with customers and partners to deliver the best user experience with the highest levels of security.