It is common to see the term “Open Banking” in the industry trade press but is this an area where financial institutions should either be looking at or starting to make investments in?  In this post, I will explain what Open Banking is, why becoming an open bank is important and how banks should be starting the process of becoming an open bank.

Open Banking is defined “the ability to allow access to customer accounts through 3rd party applications with the consent of the customer”.  An example would be allowing a 3rd party mobile wallet application to access and transact with that data residing at the bank.  Why would a bank want to do this and potentially run the risk of becoming the backend plumbing for a Fintech dominated environment?  Is giving a 3rd party application access to “your” customer data a good business idea?  There are a number of reasons why banks need to be closely looking at this. 

First, if you are or do business in the European Union it is now a directive.  PSD2 (the second Payment Services Directive) and more specifically the Open Banking effort in the UK requires the nine largest banks in the U.K. to release their data in a secure standardized form only if the account holder provides explicit approval.  This is intended to enhance competition in the financial services industry, a trend we will continue to see grow worldwide.   

Second, this will likely become a required part of doing business in the financial services industry.  With changing demographics, banking customers are becoming more comfortable using 3rd party Fintech providers or even social media apps to perform financial services transactions.  Much of this is already taking place with applications such as Venmo, Facebook Messenger, etc.  Currently, in order to use these existing tools, customers register their debit account information and these tools leverage the existing payment rails including the ACH network which settles over a period of days.  Direct payments by elimination of the merchant acquirer and Visa/Mastercard will also drive down the cost of payments.  The industry needs to move to instant payments and move off legacy payment rails.  There will be a significant revenue risk for banks if they do not embrace these new payment models. 

Third, banks understand the payments business and have the back-end systems in place to facilitate payments in a secure regulated environment.  Investments made in Anti Money Laundering (AML) systems and fraud capabilities can be leveraged at greater economies of scale to support this ever-growing market.  Banks can also leverage the data used to provide actionable insights or monetize the raw data.  The insights from this data allows banks to provide more personalized services to their account holders.     

Banks can also leverage their use of customer data to provide new and enhanced customer experiences.  Examples include digital payment providers or even partnering with retail providers.  Banks can also choose to become a supplier and provide white label offerings to Fintech providers and digital only banks providing a new source of revenue.     

Where to start:

Banks choosing to open their customer data will need to create a new or leverage an existing secure integration tier to mediate the incoming requests from the customer data in the back- office transaction processing systems.  This mediation tier will need to be able to transform, route, orchestrate and provide potentially metering and billing capability doing all this securely and at scale.  Ideally these requests will leverage industry standard formats and protocols.  Although the financial services industry has traditionally been a laggard with providing a consistent set of messaging standards, some standards do exist and industry consortium groups are driving standards.  Regardless of the messaging format, the mediation tier will transform the message formats facilitating the required integration.  HCL Integration Platform (HIP) can provide that integration tier allowing a bank to begin the journey to becoming an open bank with the Financial Payments Pack which provides out of the box integration with the most common financial services message formats.

HCL Technologies and HCL Software have both the skills and tools to help you begin the journey to move to open banking.   

Comment wrap
article-img
Uncategorized  /  March 24, 2020
How pandemics may change the way we bank and run our banking technology
By: Tom Parette, Global Director, Solution Architecture
Banking, Financial Services & Insurance
As of this writing on 3/20/2020, we are in the early stages on determining the impact the COVID-19 virus will have on both the economy and our lives.  While we still face many unknowns we are beginning to learn lessons which give us the opportunity to change the way we will bank in the future not only for events such as the current pandemic, but how to better support banking customers in general.  Hosting in the cloud:  A big part of the role of a Chief Technology Officer is business continuity planning to make sure that the underlying systems that support the banking business can operate under any conditions.  We frequently perform disaster recovery testing to ensure our critical applications continue to operate in the event of a regional disaster.  Although pandemic planning is part of our business continuity plans, the scope of COVID-19 may stress those plans to operate our technology infrastructure by limiting our operations and support organizations.  Cloud hosting can potentially be a tool that can be leveraged to extend our required resources to 3rd party providers in the event staffing operations and support teams become problematic.     Contactless payments:  With the introduction of “social distancing” the last thing we want to do is come in contact with payment devices including payment card terminals, ATM machines or handing cash to cashiers.  Fortunately, some merchants such as Starbucks and Dunkin Donuts allow you to have the QR code scanned using their mobile apps not requiring any physical contact.  This is more the exception than the norm.  This is an opportunity to accelerate the move to contactless payments.  Near Field Communication (NFC) payments is a well established technology and should be accelerated to more merchants and channels.  Contactless cards should also become the standard in the card industry. ...
article-img
Uncategorized  /  July 25, 2018
Always-On Marketing
By: Nick Combridge, Senior Director, WW Software Sales, and Services at HCL
  When was the last time you decided that you needed a product or service but really had no idea from where to get it? Even if this required that you carry out some research the internet stops this being an onerous task. What you almost certainly did not do was wait for a vendor or supplier to interrupt you to plant that seed of need in your head. That certainly was the approach with traditional outbound marketing. Marketers would look for patterns and similarities in data, devise segments that, hopefully, contained like-minded individuals and would then send them offers that appeared to work for others whose data defined the group. The next, logical progression was to push these segmented offers to inbound channels where they could be delivered if and when the customer appeared.In fact, the days of the outbound, interrupt, marketing message should be predominantly behind us now as the digital age enables us to easily move to an “always-on” paradigm where we, as marketers, are constantly picking up signals, markers, context and events that our customers and prospects leave behind them in the channels and ecosystem and, thereby, enable us to be able to react to their current needs and desires and present them with communications and help that they perceive to be of real value; truly marketing as a service.Let’s look at some examples. The outbound call center agent waits for the dialer to connect him with the customer which the marketing team has determined would have a high propensity for a Platinum credit card. They start to present the offer to the customer but it becomes apparent that the customer has recently written off their car and now needs a car loan as the insurance did not cover the full costs of replacement. Always-on marketing...
article-img
Uncategorized  /  July 3, 2018
Stay Tuned – V11 Highlights
By: Claire Timlin, Unica Product Manager at HCL Software
  Before the 'WHAT’S NEW IN MARKETING SOFTWARE V11'  webinar, I wanted to give you heads up for what’s coming in this release. V11 has been a very exciting release for IBM Marketing Software (IMS). This is the first release delivered by HCL Products and Platforms. This will be officially announced on 31st of May, however, GDPR toolkits are already available for existing customers.  We are adding more support to the platforms with GSKIT, Sun JDK 1.8, Oracle 12.2 database client, Adobe Acrobat DC in Marketing Operations and Cognos v11. ​      Suitewide  Use the new Tool/ sample scripts which allow users to delete customers’ personal data from the application system tables so they comply with the new GDPR EU regulations that come into force on 25th May 2018 Reduce the service disruption when upgrading your marketing software suite using the new Fast Upgrade approach, a new installation and migration process will allow you to move from any supported version to version 11 in one step      Campaign Understand your Campaign performance with Watson Assistant, use natural language to interact with Watson to discover how your Campaigns are performing. Access Cloudera data sources using the Impala ODBC Driver version 2.5.40 to improve the performance of working with big data. Using the latest version of the UBX Toolkit allow users to publish and subscribe to audiences from Campaign making integration with 3rd parties seamless. Integrate your offers easily with 3rd parties using the new REST APIs, link your offers to the content and send your offers to your email provider. Customers using WCA for SMS can now use the SMS response a customer sends back to build follow up activity. When using User Variables in the Extract process they are now copied to the template to reuse them across...
a/icon/common/search Created with Sketch.