In the Era of Open Banking, 'Positive Skeptics' Have a Crucial Role to Play
A skeptic is someone who habitually doubts commonly accepted beliefs. They are the naysayers, waiting in the wings to shoot down every great idea. But this does not mean that all skeptics are necessarily negative or cynical. In fact, positive skeptics play a vital role in our quest to modernize payments and banking, because they don’t automatically reject ideas. Instead of asking ‘why?’, they say ‘why not?’ They evaluate new ideas against the available evidence, instead of defaulting to ‘the way we have always done things’. They play devil’s advocate to innovate and create; a crucial role in an increasingly busy financial services marketplace.
Can Immediate Payments Prove Illuminating?
Over the last three years, ACI and Ovum have conducted a survey on how financial institutions see payments fitting into their broader strategic objectives. This often highlights the disconnect between the technology people and business people at a bank. Despite the many proven use cases for immediate payments, 6% of this year’s survey participants still see no benefit in real-time payments, mostly because they consider real-time to be a payments technology, not an essential part of a digital-first, customer-centric transformation strategy. Admittedly, the naysayers are trending downwards (it was 11% in the 2016 survey), but nonetheless it indicates how easily a market-leader can be left behind, or even be knocked out during a period of rapid industry change, simply by failing to see what is in front of them. As a result, digitization has led to the decline of some long standing ‘analogue’ market leaders across industries.
The Link Between Fast and Open Payments
As we move towards the era of open banking, organizations need team members who can draw parallels between the proven benefits of immediate payments, and wrap this into their evaluation of open banking strategies. We’ve already seen evidence that Open APIs help unlock that the true value of real-time payments.
A worrying number of payments decision makers say they see no benefit in open APIs (28%). They need the positive skeptics to push the agenda, or they will fall behind. Given the focus on proven use cases, it’s not surprising that 45% are waiting to see what others do before exploring the technology for their organization. This is a dangerous position to take – we know that being an agile business, first to market with innovations is the key to success in the New Payments Ecosystem. 65% of financial institutions report that Open APIs can help improve the customer experience, and 59% of banks do have a clear Open API strategy. It is far better to deploy at least a little curiosity and experimentation to avoid the risk of falling completely behind.
Open Banking Without Borders
The need for positive skeptics goes beyond the regulatory borders driving open banking within Europe. Open banking is a catalyst for global change. In Europe, PSD2 is a key driver, but open banking is also an opportunity to reengineer systems and offer innovative services to banks’ customers by taking advantage of new fintech propositions – as well as monetizing your own business in new ways. If you are going to innovate, you need to ask the right questions.
You have to ask: “what new services will help consumers manage their daily lives?” This is not about payments needs alone.
By operating within these open ecosystems, banks can credibly compete with global tech giants when it comes to personalized assistance propositions, and avoid being disintermediated from their core businesses of payments. The positive skeptics also need to ask: “how are we going to compete with the tech giants in payments?” – new entrants to the market will not all be startups.
The Tech Giant Invasion
A positive skeptic open banking mindset has already been adopted by a number of Asian tech giants that now offer all-in-one mobile apps that can also access and transfer funds – not just for traditional banked customers, but also for a new generation of consumers transacting electronically for the first time. Open APIs are paramount the key to enabling this explosion of digital payments via mobile phones and social media apps. The likes of WeChat Pay, Alipay and others have partnered with international retailers and tourism service providers to capture payments made by the growing number of outbound Chinese tourists in a simple, intuitive manner. They looked beyond their traditional marketplace, and considered the customer experience ecosystem beyond banking.
Harmonious Coexistence for Old and New
In the United States, banks are looking to leverage Open APIs as a way of modernizing not only their customer-facing retail payments business, but also to overcome the shortcomings of legacy systems that sit behind the payments engine, including core banking! The drive to realize digital transformation, while also saving costs, is forcing banks to take a fresh look at how to move away from cumbersome, obsolete, legacy technology.
When their positive skeptics ask, “how do we couple modern environments and consumer payment experiences with legacy systems?” the answer is flexible, agile technology that has a strong non-functional basis – and offers orchestration via Open APIs.
Go Forth and Question
The era of open banking is upon us, and there’s no question that banks must implement a strategy to meet these challenges, and maximize the opportunity. My advice to banks on the cusp of digital transformation would be to provide a platform for positive skeptics to ask, “can we do better?”, and to listen to their forward-thinking leaders.
Learn more about achieving open payments in this video: Build a platform for open banking
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