Open platforms – The future of fintech

By: Bharat Rathod, Market Development Leader - Financial, Thomson Reuters, South Asia

Today, an idea can progress from paper to reality almost overnight to become the “new normal.” People used to Xerox a document, now they “Uber it” when taking a cab. It is hard to predict how the future of financial services will look like in ten years, however, some scenarios are starting to stand out as inevitable. One of those is the concept of an open platform.

Gartner predicted this outcome three years ago and stated that by 2016, 75% of the top 50 banks in the world will open their API and 25% of these will have their app stores for customers. Gartner may have been a bit eager in terms of the timelines, but it is almost a reality now and embracing an open platform strategy has become crucial in order to benefit from the fundamental shift in the financial industry landscape.

As the industry evolves, having an open platform and its tangible business benefits have been constantly in discussion. While most of us tend to define open platform in different ways, a common view is that an open platform is something that one can leverage further to build more. Beyond this definition, people diverge depending on their role and scope.

Platform is a plug-and-play business model that allows multiple participants (producers and consumers) to connect, interact and create and exchange value with each other. The key characteristic of a platform is that it can be programmed through the use of APIs & a well designed platform is consistent in common operations such as Authentication, Authorization, Data Models, Entitlement, etc.

A platform often acts as an ecosystem that allows users to build new apps leveraging on the core platform content & capability which enables

• Deploying innovative ways of servicing more customers
• Automating workflows
• Reducing operational risk
• Increasing productivity.

One example of an Open Platform is Salesforce. They have software, content, third party developers, and an entire ecosystem of app developers. They allow users to perform key functions and integrate their own sales data along with other potential 3rd party data. It’s powerful, scalable and hard to replace once you’ve embedded it into the organization. It is imperative for financial services to follow this suit & innovate by adopting open platforms.

But how will open platforms drive effective innovation in financial services?

1. Consumers demand innovation

Customer demands have led to disruption in the retail space leading to the creation of a host of digital & mobile apps that can intelligently tag people, places, events and cater to various banking operations, wealth management and other service spaces. The trend is to make content & analytics available across digital channels and internal portals to enable higher outputs. API based open platforms that link big data to produce hidden insights will provide clients with a much needed intelligence for critical decision making & a great experience.

2. Collaborative Ecosystem

Innovation in a real sense is possible with participation from a wide range of players within the ecosystem to create apps than just provide raw data. While data providers may continue to provide leading industry insight & content, having open platforms that allow clients, 3^rd parties, fintechs and the ecosystem to further leverage this in building new transformative apps will help in creating choice for clients and significantly enhance decision making.

3. Trust

As innovation thrives on open platforms, there is an underlying need to have trusted data, scalable infrastructure and a far reaching distribution / marketing channel. Apple’s App Store imposes strong restrictions on developers enabling complete trust. Similarly, the ability of the open platform to assure compliance & providing credible data is a critical aspect.

4. Flexibility

Users now expect everything to be available on the go - seamless updates, real-time information & ease of doing all operations – everything as secure as personal banking. The need to balance choice & control underlines the need for an open platform to handle activities such as administration, compliance, authentication and other key services.

5. Standards

We all understand ‘standards’ – both in business and technology parlance. Standards help create a level playing field and accelerate the pace of innovation. Open APIs, Web standards (HTML5), administrative procedures, controls are a few examples of standards that enable more efficient development. A growing trend as firms look to transform their businesses is to leverage industry standards thereby accelerating the pace of go to market while bringing  cost savings typically associated with custom technology builds.

6. Experience is Key

A key to ensuring high & habitual usage for any platform is to provide a seamless experience. Having common global data models, taxonomies, system procedures make all of this come to life. These tools empower consumers and partners to innovate at a much faster pace without relying on intermediaries or institutions. Consistent terms & standards provide a truly great experience

Merits of Open Platform:

• Fosters innovation and collaboration
• Enables leveraging on a growing pool of fintech talent for creating new propositions faster
• Provides new disruptive opportunities with cost efficiency
• Offers flexibility with new technology architectures
• Enhances customer experience & brand value

While we as consumers are blown away every day with the latest problem-solving app, considering the complexities and opportunities in financial services, it is now an inevitable that we will see the same levels of innovation across the industry. The question is, who will go first to create the platform that allows exponential innovation?

With a clear open platform strategy and focus on collaboration, financial institutions will be able to offer services to help them stay ahead of disruption, and perhaps become disrupters themselves.

A recent report by Accenture reflected how established financial industry participants deal with the disruption that new technology and Fintech companies introduce. The only way for the industry to re-invent itself and stay relevant is by collaborative innovation through open platforms. Anecdotally I have found out that the industry is much very keen on collaborating with the ecosystem to innovate.