With the rise of open-banking, the role of banks has evolved – from integrators to part of an ecosystem-driven business model.
The ramifications of this change are profound, and every bank (and service provider to banks) should be thinking about what this new reality will look like and how they plan to succeed in it.
Fintech.ca sat down with Anmol Grover (pictured), Global Practice Head for Open Banking at Wipro Limited, to learn more about the potential benefits of open banking for Canadians, and how banks need to proactively define their role in the financial ecosystem to create that new value for their customers.
Before we dive in, give us a brief description of your role at Wipro within the open banking sector?
AG: I’m an open banking and open finance SME with more than 20 years of experience working with global and regional banking and financial services clients. At Wipro, I’m responsible for delivering open banking compliance and monetization programs to clients, as well as developing Wipro’s open banking product suite.
I gave a keynote address at this year’s Open Banking Expo in Toronto on June 15th that spoke to the path to monetization, and the lessons that Canada can learn from the UK and Australia.
What do you think is the biggest barrier in Canada right now for a successful adoption of open banking?
AG: Open banking is continuing to gain traction worldwide, and Canada will be one of the following countries to adopt open banking, after its regulator and industry working groups converge on the exact open banking standards. The regulatory environment in Canada has been a key factor impacting the pace of open banking adoption.
Currently, Canada’s banking sector is dominated by a few large banks, while the process of implementing open banking involves active collaboration and engagement among various stakeholders, including banks, fintech firms, consumer advocacy groups, and regulators. Another factor with open banking includes striking a balance between data privacy and enabling data sharing, and the imperative need for customer adoption for it to be successful here in Canada.
To win in an open banking landscape, banks need to proactively define their role in the financial ecosystem to create new value for customers.
As you are based in the UK, can you explain to us why the UK has been the most successful in adopting open banking?
AG: Open banking is a true British success story. What really helped open banking succeed in the UK was conveying the value of it to customers. Transformation began with a top-down effort by policymakers to increase competition in a highly concentrated banking market. This competitive landscape, combined with regulatory support, incentivized banks to embrace open banking as a means to differentiate themselves and attract customers.
The UK’s early adoption of open banking allowed for valuable learnings and insights. Their example demonstrates to any market (like Canada) trying to enter the open banking field.
What challenges do banks face if they decide to operate independently in the open banking ecosystem, and why is the concept of “ecosystem banking” more beneficial for their positioning and success?
AG: Banks are not likely to reverse the open banking transformation. As with other platforms (credit card systems, telephone networks), value increases with breadth, depth, and interconnectedness – and success becomes increasingly challenging for those who decide to go at it alone.
From the perspective of banks, “ecosystem banking” is perhaps a more useful concept than “open banking,” if we refer to open banking as a regulation, they need to advantageously position themselves among a host of other players. In many cases, their collaborators will also be their potential competitors, and banks need to carve out the right footprint to grow and protect their share of this evolving market. Ecosystem banking brings both competition and opportunity.
While the banks that rest on their laurels are likely to get caught off-guard, the banks that take a proactive approach to orchestrating third-party services will find that ecosystem banking allows them to accomplish incredible things for their customers and not only preserve but increase their market share.
How can open banking compliance enable banks to expand internationally and drive monetization beyond their core banking services?
AG: Banks are often apprehensive about new open banking regulation, and for good reason. Succeeding in this new ecosystem requires significant shifts in mindset and even organizational structure as digital transformation impacts employee roles across the bank.
To remain competitive, banks will need to adopt the agile, “fail fast” DNA of technology startups. As they accelerate their technology adoption, banks will need to inject new homegrown capabilities (often rewiring current capabilities to meet future needs rather than starting from scratch) while also driving innovation with partners. Finally, they will need to make sure these strategies cohere into competitive business models.
What do you believe are the three fundamental competencies that will enable banks to succeed in the “ecosystem banking” world?
AG: There are 3 fundamental competencies that will let banks succeed in the “ecosystem banking” world:
1. Companies can design a compelling user experience. Customers are drawn to and trust brand products that rely on hyper-personalization to address an important need, whether that is at a fair price, at the right time, or that is reached through a great user interface, and backed by reliable customer support. Open banking enables UX improvements for enterprise customers as well as retail customers.
2. Companies can aggregate and enrich data to generate customer insights. Rich data sets will be the “coin of the realm” in ecosystem banking, because it is through data that companies will be able to individualize and optimize their products, manage fraud, reduce friction, and create a first-rate customer experience. For Canada, aggregating and enriching customer data—including data from other banks—will allow banks to build competitive, personalized product offerings and new value propositions.
3. Companies can create “must have” infrastructure. Consumer-facing brands get a lot of attention, but infrastructure plays can be massive winners. Even if banks are unable to make infrastructure plays on their own, they will be able to create valuable infrastructure and drive customer retention by transforming themselves via fintech and software partners that can help them re-envision how they use and monetize their data.