Banks Connecting to the Matrix

With the advent of PSD2 in Europe, financial services companies have embarked on their Open Banking initiatives, which are set for full swing in 2018. Banks have been writing and exposing APIs for third parties to pull data and perform actions on the banks platforms through these APIs in order to provide more customer facing service innovation. For many banks this is the final step for complying with the PSD2 regulation, but the reality is that it’s only the very first step in the total transformation to an open financial services ecosystem. 


I had the pleasure of speaking at Google’s and Apigee’s CIO Summit on Ecosystem Strategies and showcasing our experience in financial services. Equally I was fortunate to listen to the presentations and the Google / Apigee teams fantastic work. It was extraordinary to hear first hand accounts of how large enterprises such as Pitney Bowes and Walgreens had adopted an ecosystem strategy and seen a vast return on their investment. This wave is now truly setting its sight on financial services. 

Connecting to the Ecosystem

Exposing APIs is a way to allow third party access to data and actions on the banks systems, connecting to a community of service providers and ecosystem partners. These connections can yield fantastic new innovative services, such as we’ve seen in the first fintech wave with e.g. payments innovation, yet through the lateral exposure of new banking API platforms, these innovations will not be limited to one vertical and indeed over time they will impact every single financial services vertical application.

This new position is, well new and with it these infrastructure provider and value add service provider relationships will be forged, yet no one knows what it will look like yet. What’s for certain is, that there will be a lot of new experimentation and the end users will get to play a part in shaping the future of financial services through their usage of newly created financial service offerings. 

Becoming a True Enabler

As with any ecosystem strategy, these technical APIs need to become more than technical functionality. Ultimately the mere connection does not make the initiative valuable, but the potential the APIs provide for the third party ecosystem to ultimately together better serve the end users. 
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The focus on value generation should be on the end user of financial services, the ordinary people and the quality of services they are offered directly and indirectly. Yet it’s important to recognize the vastness of financial services and that these applications range from life insurance products to car leasing and health care financing. But unless the end client consuming this service, for example the efficient financing of a vehicle purchase through increased competition, experiences that value in the most tangible way, such as better service, value for money etc, the revolution itself will be short lived. Or in fact, the model for the revolution would have been wrong. 

There’s a pervasive question at the heart of modernization in financial services, which goes something like this. There are two competing forces, 1) the modernization of financial services such as banks and 2) the re-writers of services, such as developers and larger software companies (Google, Oracle, Amazon…). 

In a give and take, who will take the most and who will give the most? Where does the balance sit in five years, how about in ten?

Not One Wave, but an Ocean

This vastness in financial services, including the fact that there is an inherent depth to each vertical of added dimensions (regulatory, domain expertise, scale needed etc) means the shift will not be one wave of change, but rather a series of waves that will gradually shift the entire services market. 

Adopting an ecosystem strategy will take time, but the time is now. Keeping a direct focus on the end user value, we look forward to welcoming adopters of ecosystems strategies to the open market as well as the innovators writing new code to serve clients in a new way. This second wave of fintech has got to include you all. 

The article first appeared at Difitek Blog.