Accenture Banking Blog

Following our article on 5 actions to enable Open Banking for business finance, we now consider how commercial banks can innovate their entire business model by using Open Banking frameworks to build a powerful ecosystem.

Open Banking, accelerated by the Consumer Data Right (CDR) in Australia, aims to give customers control of their data and inspire a fairer and more competitive market.

However, the advantages of Open Banking aren’t just for retail customers. New capabilities enabled by Open Banking will allow financial institutions to offer innovative products and services across all customer segments. For a complex sector like commercial banking, reliant on greater data, deeper analysis and even relationship manager intuition, Open Banking stands to redefine how banks both reduce risk and grow revenue.

The power of data

Over the past few hundred years, the fundamentals of risk assessment have changed very little; bankers still rely on financial statements and projections. While these artefacts provide critical information, they also have limitations, because the data is typically static and narrowly defined.

In reality, the insight a bank has into its customers is actually much broader and deeper than that offered by financial statements and forecasts. Balance and transaction data overlayed with analytics can help model supply chain behaviours, predict future trends or assess liquidity. For instance, the need for a working capital line of credit could be identified through analysis of a customer’s sales, payables and inventory data.

The UK’s Atom Bank, for example, recently partnered with Plaid to offer their SME customers a streamlined loan origination process, with near real-time decisioning and a real-time view of their transactions. They achieved this with a data-driven approach which allowed them to run a lower cost model and take a pro-active approach to customer monitoring and anticipation of customer needs.

Even where Open Banking has emerged as a market-led initiative rather than a regulator-driven one, significant innovation is emerging. Despite Thailand’s lack of a regulator-driven Open Banking framework, Deutsche Bank recently partnered with Southeast Asian payment platform provider 2C2P to offer corporate customers new ways to collect and request funds through an extensive range of channels such as WeChat. They also provide various payment features such as instalment, recurring and multi-currency options.

In this way, Open Banking enables customers to share their data in a secure and controlled way; it is the customers prerogative to ‘consent’ to making their data available to selected financial institutions in order to access these competitive offerings.

Build, buy or partner?

As demonstrated in the examples above, there is a growing trend for banks to partner with or acquire third parties in order to roll out Open Banking-enabled offerings; this approach has both advantages and disadvantages over building solutions in-house.

Fintech partnerships provide commercial banks with faster speed to market, lower costs, new capabilities and talent. However, banks must also consider data security, partnership risk and potential loss of revenue that could otherwise have been made from data monetization, as the value of data as a core differentiator would be reduced.

When considering whether to build, buy, or partner organisations should also consider their products. For example, Stripe partnered with Goldman Sachs and Citi to offer treasury products and services to their business customers, including interest-bearing bank accounts, debit cards and other cash management services.

It is also important for an organisation to consider technology capability. Both buy and partner options are valuable if a third party builds a complex or highly specialised solution that leverages capability that the bank does not have. For example, ANZ, Canstar and Virgin Money have all recently partnered with Frollo, an Australian fintech and the second Accredited Data Recipient under the CDR regime, to use their mobile apps to take personal financial management solutions to market.

On the other hand, building an Open Banking-enabled solution in house allows the bank to retain full control of IP and data. While speed to market is likely slower and cost may be higher than when partnering, banks with a strong culture of innovation and in-house analytics capability can succeed with a ‘build’ approach. Building in-house can also result in something truly unique in the market—and since the bank retains its IP, customer uptake and profitability may be boosted.

We believe it’s also critical to scope and measure potential use cases for Open Banking data, connect with technology partners mindfully, and even co-create solutions with customers to ensure that they are incentivized to give their consent.

If you would like to discuss taking advantage of the wealth of opportunities enabled by Open Banking, contact the authors of this article. In our next post, we’ll be discussing the essential technology architecture (beyond great APIs) for building a secure, resilient and adaptable Open Banking platform.

To read more of Accenture’s latest thinking about Open Banking, visit the Accenture Banking website:

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