Open banking system to help banks transform into digital powerhouse; win-win for customers, banks

open banking system, UPIBanks are harnessing open source solutions to support customer engagement applications and deliver a delightful customer experience

By Arvind Swami

The advent of Unified Payments Interface, popularly known as UPI, three monsoons ago altered the banking business process system – delinking debit instructions from banking accounts. This simple alteration in the process made banking easy and real-time for consumers, taking it one level above the previously accepted norms of online banking. The success of this platform and other such revolutionary banking innovations is also attributable to the adoption of the Open Banking system. Real-time payments, when combined with open banking, are also being used to drive financial inclusion, which is an important step towards inclusive growth.

Embarking on the modernization journey to simplify IT

The changes that are reshaping the financial services industry offer established banks in Asia-Pacific opportunities to adopt technology that can increase their competitiveness and agility. The future of banking is not just about IT modernization or creating a slick mobile banking app, it’s about rethinking banking towards new models that are open, intelligent and platform-based to drive digital transformation. As a result, banks are harnessing open source solutions to support customer engagement applications and deliver delightful customer experiences. According to the recent State of Enterprise Open Source Report, 93% of financial services organizations believe that open source technologies are strategically important for current and future plans. And when asked about the attributes they associate with enterprise open source, the top two responses were- a) Used by the most innovative companies and b) Instrumental in organization’s ability to take advantage of cloud architectures. A digital banking platform built on enterprise open source can help banks simplify IT and break down barriers between customer engagement and back-office teams.

Implementing the open-banking strategy will enable banks to:

Optimize operations by streamlining processes

Since a single customer record can have various finance-related transactions associated with it, banking systems based on application programming interfaces (APIs) can better service multiple activities associated with a single customer record. Banks can further improve operational efficiency by deploying an API integration tool, which connects externally facing APIs with the internal banking APIs and systems of record. It transforms and directs incoming requests to the appropriate endpoint within the IT environment, allowing changes to the back-office without impacting customer engagement services.

Standardizing the delivery mechanism

Since banks do not have the luxury of shutting down operations to rebuild, applying consistent standards across the board helps to more easily modify processing in a modular setup while still running and maintaining established levels of customer support. API implementation and reuse from shared catalogs can help to enforce adherence to standards and accelerate delivery.

Support business agility through continuous delivery

Open banking can help unlock legacy infrastructure of banks by using modern technologies like containerization and microservices. Modern, microservices-based architecture can help banks gain that agility by enabling them to adopt continuous integration and continuous delivery (CI/CD) so that they can build, deploy and manage applications quickly.

It’s a win-win

The retail branch model of banking is no longer sustainable. In the digital era, customers expect to be able to access their financial data anytime, anywhere. Open banking enables customers to choose from a range of applications developed by third parties for their own financial benefit. It allows financial institutions to customise these applications to specific individual preferences and requirements. It enables financial institutions to innovate and to develop at their own speed.

Aggressive adoption of the Open Banking system will help banks transform into truly digital powerhouses operating profitably.

(Arvind Swami is Director of FSI for Asia-Pacific, Red Hat. Views are the author’s own)

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