Every year there is a new buzzword that dominates the conversations in the financial services industry. A few years ago it was Big Data, then omnichannel. After that, it was Blockchain and now Open Banking. Interestingly enough, most of the attention is usually on the threats of new technologies, how they may disintermediate banks, how groundbreaking and innovative these solutions are and, of course, the resulting FOMO (Fear Of Missing Out) that contaminates the whole industry.
To bring these conversations to life people often use famous brands as an example of how innovative banking could be. I’m glad companies like Uber, Google and Netflix don’t charge royalties every time a banking consultant use them as an example! (I’m guilty as charged). It is hard to disagree, given these are truly innovative organisations and they do provide some form of inspiration to one of the most traditional and risk-averse industries on the planet. Actually, we need more examples like these.
"Google is living a few years in the future and sending the rest of us messages", Hadoop's co-creator Doug Cutting.
However, during these conversations, I think there is an excessive focus on the technology aspect, treating critical business factors as secondary. For instance, Blockbuster didn’t go under because of the advent of video streaming services like Netflix; the real reason they broke was the lack of convenience, limited choice and ludicrous fees for late returns (without mentioning the extra fee if you forgot to rewind the video tape.
Hey, if you didn’t understand this last sentence, consider yourself a millennial! Otherwise, you can amuse your kids telling them you had to go to a physical store to rent a physical media in order to watch the latest movies in low resolution (when available).
In the same way, Uber is not really disrupting the cab industry, despite all the recent protests across the globe. They are providing what customers always expected from cab services, period. In the recent past, could you book a cab using a mobile app? No. Could you see the driver location in real-time and agree on a specific meeting point? No. Could you provide a pricing model that’s predictable and easy to understand? No. Could you embed the payment as part of the journey to avoid the need to carry cash or cards? No. What’s the reason for these protests against Uber again?
Technology, by itself, is not the disruptor. Not being customer-centric is the biggest threat to any business. To truly understand where the market is going, anticipate customer needs and expectations is the real challenge. In any industry, disruption is not a fatality, it’s a choice.
In the financial services domain, conversations about Open Banking usually orbit around technology, data and APIs, which are certainly necessary but not sufficient. Open Banking is forcing a traditional industry to become innovative again. To have an API enabled business in the future, will be a hygiene factor, not a differentiator. Real disruption in financial services will be driven by customer intimacy, which is enabled by meaningful insights, which relies heavily on good quality data and great APIs.
Next time you think about Open Banking, before considering the technical aspects, prioritise the business capabilities your organisation has or needs to acquire, in order to better serve customers and create alliances. Your organisation may well have business capabilities that can become a service to other Open Banking participants, including your competitors. The inverse is also true.
Only after you identify and clearly articulate these business outcomes, can you think about the technology services that will make them real; and it’s very likely these technology services will be nothing more than APIs provided by third parties and innovative FinTech companies.
That’s the beauty of Open Banking, it allows you to focus primarily on the business outcomes your organisation is seeking, and not on building in-house technology capabilities that are expensive to implement and maintain.
Don’t fear missing out, it is a waste of time and energy, but be afraid of blind spots in your business and operating models that do not allow you to clearly see what your customer expects from your brand and, equally important, business opportunities to collaborate with other Open Banking participants. Be the disruption. It’s a choice. What will your choice be? I’d love to hear more about your thoughts.