When transitioning to Open Banking, one of the key considerations for banks is their operating model and governance structure. If banks do not adapt to new ways of working, they may risk losing market share to savvy new digital entrants.

In our experience working with banks across the globe, we found that focusing on the definition of the end-state operating model as early as possible is crucial to the successful implementation of Open Banking.

A long-term strategy for the operating model

The majority of Open Banking implementations so far have been managed as part of the bank’s compliance program. But compliance programs are just the beginning of the Open Banking journey. As these programs begin to evolve into a long-term strategic roadmap, it’s important to define the operating models to support the future Open Banking propositions, including the supporting organization structure.

Based on our experience, the ideal end-state operating model is a layered ‘federated’ model where Open Banking is owned and coordinated centrally as a capability but delivered in partnership locally with individual lines of business (LoBs).

Whilst the desired state is the federated model, a phased transition approach is usually recommended for most organizations. This allows sufficient time to help identify the appropriate owners and set up new teams.

Aligning governance structure

As with the Open Banking operating model, we have observed a lack of a mature Open Banking governance structure in banks that have focused purely on achieving compliance. The ideal governance structure should be layered—with:

  • A central team to deliver strategy and provide direction on partner management and technology decisions
  • LoB teams with the flexibility to run their own Open Banking workstreams to accommodate their specific business priorities

Technology teams to do API design and development, data and security management, consent management, and platform and service management.

Creating new capabilities

Open Banking demands a new set up of capabilities, which need to be configured from scratch, for the new operating model to flourish. They should reach across the bank to include governance, third-party management, technology, data management, service management and monetization.

These new capabilities will need to be embedded within the operating model and will need to be ramped up to an ‘intermediate-advanced’ maturity level, based on the future business priorities.

The right expertise for project delivery

This brings us to project management. It’s important for banks to have Open Banking experts on the ground from day one. At the beginning of the journey, outsourcing or working with select partners may be the best solution, but banks need to make sure they build their own Open Banking capabilities to support future implementations.

Their Open Banking program plans should also include the transition to business as usual (BAU), ensuring that the transition covers the business, organizational and the technical components.

In this Open Banking journey, it is critical for banks to treat compliance changes as enablers for future opportunity and growth. As such, it takes the right operating model and governance to help align it to a long-term strategy.

In my next post, I will look into the last group of key considerations in the Open Banking journey—partnerships and the ecosystem.

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