There are several authoritative articles presenting the innovations introduced by Open Banking and PSD2 and describing the push to openness brought about by these initiatives.
In this post, stimulated by the profound reflections on the words of the great writer William Shakespeare, we want to bring out the leading role of Application Program Interfaces (API) and related technological innovations as catalysts for a digital transformation and the benefits for Wealth Management.
To be or not to be, that is the question
The forced opening by the new compliance rules has caused some dormant but always latent dilemmas to re-emerge in the business and technology debate in different forms.
Walled Garden or Open Garden? Competition or coopetition? Is it better to close by consolidating business exclusively on internal assets or to open up through collaborations with external assets and systems that can extend the offering?
In this context, is technology a weapon to defend one’s value or a tool to expand the value outwards? Is Open Banking compliance an obligation or an opportunity?
Certainly technology should not act as the discriminating or limiting element in business positioning with respect to these dilemmas but must be able to enable the various choices, that are all valid depending on the specific business context.
It should support a position of incumbent with the need to protect its value in the face of the openness required by the regulatory and the opportunity to use the open model as a tool to optimise costs by focusing on its core business. It also should support a position of newcomers looking for a quick time to market and extension of its offering through the coopetition.
O Romeo, Romeo, wherefore art thou Romeo? Deny thy father and refuse thy name
In the eternal battle in opposition between Capulets and Montagues, the greatest value of love is forgotten and dramatically becomes the victim of a dispute over the principle and prestige of the brand. Similarly, the open model gives space to the growth of the greatest value of the business through coopetition which becomes greatly facilitated thanks to new architectural paradigms such as the display of services, Bigdata technologies, algorithms and prediction tools, etc.
Only the ability to abandon the traditional comfort zones with “closed” technologies moving towards an architecture that enables open collaboration will allow the safeguarding of the primary value of business growth.
Much Ado about Nothing!
The need to comply with the regulatory requirement of “to be open“, could drive activity (from a technological point of view) to the well-known issue of the exposure of interfaces, through functionally enriched by essential access to data, for example for account aggregation.
This interface exposure activity is already known and by many already started or carried using different mechanisms; by some with innovative blueprints that make use of, for example, API GW, Service Registry, Service Manager, Ecosystem definition and by others more traditionally leveraging on the exposure of legacy systems through Webservices or even simply asynchronous data exchange.
They are therefore all evolutions, already underway to improve the quality and time to market of the new features, which are strengthened and enhanced by regulatory requirements; can we then say “Much ado about nothing”?
In reality there is much more to this technological evolution starting from the transition to the API as true service exposure and not just interfaces, to the service mesh to ensure protection and consistency, to the possibility of aggregating different microservices including third parties, to cooperation through developer portal and, through this, enabling the possibility of creating value-added marketplaces.
Such an evolution in term of model and technology enables multiple benefits such as aggregation for customers with multiple relationships, simplifies customer loyalty by becoming one stop shops, allows small and medium financial institutions to offer their customers access to a wider range of products and enables major players to generate revenues by selling access to their core systems.
On the other hand, the significant efficiency provided by this open approach allows a higher level of democratisation both in addressing small areas of wealth without services so far due to sustainability, and in easly integrating new products from incubators.
The creation of these new holistic scenarios leads to the need and opportunity to exploit technologies capable of managing large volumes of data, to analyse and predict data through Deep Learning tools and to federate them through a ledger.
We are such stuff as dreams are made on
It may look like moving to a new “open” world could be only a dream, too distant to make it a reality due to the big changes required and too complex to allow to deliver the benefits of such opportunities.
Luckily there is always the opportunity to leverage on suitable partners with concrete experiences in such a journey and with solid technical assets to leverage on. Leveraging on such a partner satisfies compliance requirements, starts the new revenue streams of the “open” approach and gives the opportunity to “stay hungry and stay foolish”!