Create Data Trust as the Basis of Open Banking Innovation
Blog: The Tibco Blog
Reading Time: 2 minutes
This article first appeared on Finextra
More than ever before, banks need to stay relevant, as market-leading financial services companies are competing with far nimbler challenger brands that are changing traditional service models and product mixes. A majority of banks are in the midst of digital transformation, shifting from a face-to-face delivery model to one of self-service. COVID-19 has accelerated this transformation with branches closing and more services delivered online.
The changes in banking have given rise to an open banking model, one that requires stable and organized data, something older institutions lack. Data is federated, unorganized, and presented as an unstable data fabric, creating a data swamp. This is as a result of balkanized data sources, a mix of old and new, real-time and streaming data, and a maze of organizational barriers. What’s more, there is not a data-centric culture.
The changes in banking have given rise to an open banking model, one that requires stable and organized data, something older institutions lack.
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Data and, just as important, data trust, is a crucial element of an agile open banking culture – and one that can help traditional banks compete effectively with the new online-only banks. This is particularly important where banks’ competitive advantage is seen as being in their customer data, in light of today’s financial institutions wanting to create a fundamental data set to transition from selling products to ‘experiences’; and, these need to be based on the trust of data and the ‘identity’ it curates.
But, how do traditional institutions tame their data swamp, mine their applications and processes, and create a data-centric culture that builds a digital platform to allow trust in the data and true open banking?
Open Banking Must Be Event-Driven and API-Led
Open banking depends on a new way of thinking. That new way of thinking is an API-first mentality. APIs and API management create secure accessibility of all data belonging to a customer. As a result, organizations can also use master data management to ensure there is governed curation of all data and application, so the source for each type of data can be identified, ensuring consistency across applications.
Data and, just as important, data trust, is a crucial element of an agile open banking culture – and one that can help traditional banks compete effectively with the new online-only banks.
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API calls, transactions, market data, and all elements of a digital banking ecosystem generate events that must be responded to and analyzed, often in real-time. This API-led and event-driven way of looking at banking is vital and necessary in an open banking world. Open banking is dependent on integrated data in real-time, giving stakeholders real-time transparency and awareness of events that impact services, risk, and profitability.
To tame the data swamp, data virtualization can be implemented to quickly create APIs that provide secure, high-speed access to customer account information in whatever form is needed by the programming interface. With data virtualization, dozens of independent data sources turn into one virtual data warehouse that is reinforced with data management for access rights and regulatory oversight.
The potential of open banking is massive for traditional banks competing against newer, more agile, and online start-ups. And, combatting the data swamp is the first step. By developing a digital-first and data-centric approach, banks are able to use that data as one of the building blocks of open banking in order to empower users with agility, self-service access, and enterprise scale.