The true open banking opportunity

Across the globe, we are seeing a growing appetite for open banking models. Hot on the heels of Europe’s Second Payment Services Directive (PSD2), closer to home we have the Monetary Authority of Singapore’s (MAS) playbook for operating application programming interfaces (APIs) and the Hong Kong Monetary Authority’s (HKMA) Open API Framework.

It would be easy for financial services institutions (FSIs) in the region to merely comply. But open banking initiatives should not be seen as a mere tick-the-box exercise. Globally, the open banking market size is expected to reach $43.15 billion by 2026, up from $7.29 billion in 2018¹. The opportunity is big, and rather than sit back and view open banking and data sharing directives as mere regulatory requirements, players in Singapore and Hong Kong should grab the bull by its horns and take open banking as a chance to modernise – and offer transformative products and services to customers.

Compelling customer-centric products

Open banking will give FSIs an unprecedented view of customers’ financial standing, opening the door to highly personalised services that can enhance customers’ financial lives. In fact, the promise of compelling products and services are a prerequisite for open banking to work. In Hong Kong for example, 63% of respondents are willing to share financial data only if that brings tailored offers such as better mortgage rates or higher interest rates². The message is clear: FSIs must proactively generate value across multiple banks and the wider ecosystem of payments, ride-hailing, food ordering service partners and more to give customer better products, services and features.

Early opportunities in the B2B sector

Lessons from open banking initiatives in UK and Europe indicate that the business sector has more readiness for open banking, not surprising given their advanced understanding of data sharing and depth of unresolved challenges. In Singapore for example, only 22% of loans are extended to SMEs, representing a staggeringly underserved financing gap of $20 billion³. Incumbents would do well to step in to fill the gap – collaborating with fintechs to address emerging use cases, such as commercial dashboards, business lending and customer onboarding.

Ecosystems establishment

78% of business leaders surveyed agree that current business models will be unrecognisable in the next five years, and that ecosystems will be the main change agent⁴. We already see examples of FSIs extending beyond their traditional offerings, building ecosystems encompassing retail, transportation and other non-finance sectors to give customers value-added services. For ecosystem plays to be successful, FSIs first must think hard about their infrastructure and API strategy – ensuring that they can scale in step with the pace of innovation demanded by customers and partners.

Long-lasting customer and partner trust

Like their counterparts in Hong Kong, Singapore’s consumers are willing to share information for a better banking experience, with higher levels of customer trust towards banks than seen in some other markets⁴. But worries over security and data privacy remain – in Hong Kong, 71% of customers cite it as a top concern⁵. Instead of shying away from open banking and its security challenges, FSIs should take the chance to educate and reassure consumers at every step of the way with clear, transparent data guidelines and even real-time visibility into data use and access. Without question, banks must also harden their security postures – deploying strong authentication standards and database security to protect against potential cybercriminals.

A strong cloud foundation

Open banking mandates have brought renewed interest in the capabilities of APIs, especially combined with increasing cloud adoption. The two go hand-in-hand, where the cloud boosts the inherent agility of APIs. Since APIs are self-contained, they can be readily deployed and leveraged for innovation, but when powered by the cloud, FSIs can develop, test, launch and scale new services to customers with even greater speed and cost-effectiveness.

Crucially, artificial intelligence and machine learning also live naturally in the cloud. With its ability to handle massive volumes of data, FSIs can use the cloud to confidently leverage APIs to interconnect data sources and draw insights faster and cheaper than they would be able to on-premises. A trustworthy and reliable cloud services provider will be able to help FSIs to seamlessly and securely connect multiple private and public cloud environments and provide the right tools to bring open banking to life.

Deep and reliable security technologies

A single cyberbreach can expose thousands of confidential customer and partner information, as well as irreparably damage reputations – even denting customer and partners’ trust in the wider open banking concept. This nightmare scenario is one that organisations should spare no cost to avoid.

FSIs need to protect their corporate databases both from threats within and without. A database and big data scanner, for example, can identify identification and access control problems, missing patches and other issues that can create escalation-of-privilege or denial of service attacks. At the advanced stage, behavioural detection inserted into machine learning models combined with threat intelligence feeds can suss out unusual behaviour from common user patterns, enforcing security without disrupting customer experience.

FSIs that are willing to embark on an open banking strategy stand to boost revenues by upwards of 10%⁶. By treating it as a strategic growth priority rather than a mere compliance mandate, FSIs will set themselves on a path towards meaningful transformation – making the right partnerships to build the modern, agile and secure infrastructure required to deliver innovative products and seamless, engaging experience to customers.

Find out more about open banking and the opportunities it unlocks.

¹ Globe Newswire, Open banking market size to reach $43.15 billion by 2026, April 13 2020.  

² Accenture, The time is now, 2019.

³ Entrepreneurs’ Digest, The perfect storm for SME digital financing in Singapore, June 9 2020.

⁴ Accenture, Beyond compliance: Winning with open banking, 2019.

⁵ EY, How open banking in Singapore may pivot or remain organic, December 17 2018.

⁶ Accenture Insights, Open banking.