Proxima

12 November 2021
Topics in this article
  • Data & Digital
  • Finance & Procurement

Open banking, an emerging area of financial services, is changing the way consumers are interacting with their banking services. It is about empowering consumers to easily access and move their money via secure applications. What Open Banking also means is that businesses are able to access customer’s banking data and use it to develop tailored services.

All large businesses are receiving and making a significant number of payments every day, and most will be using old processes with more friction. Business leaders who do not adapt and integrate Open Banking technology risk being left behind whilst their competitors reap the benefits. Reducing your cost to serve and giving you the ability to settle payments instantly are just two of the benefits that should be music to ears of CFOs as they are able to keep capital in their business and redeploy as needed.

The Build vs. Buy dilemma

The time is now for businesses to take advantage of Open Banking but it can be a daunting prospect for business leaders. The first thing businesses need to consider whether they can build the technological capability in-house or look at the option to buy from external suppliers.

Open Banking is an emerging area of technology which is developing apace meaning that expertise is needed to identify where Open Banking can add value whether that is through solving problems or taking opportunities.  

So why choose build? This is ultimately about a business placing importance on control over their payments infrastructure and if their need is great enough that significant internal resources can be allocated. With this option businesses need to be certain that they have the internal resource to cover compliance, IT architecture, governance, and security as the reputational risk associated with failure is astronomical, not to mention the fines that could end up in the millions.

Taking all of that into consideration, the low-risk option for businesses may well be to choose the buy option and work with TPPs (third party providers) that have the necessary sector expertise to adapt to the ever-changing regulatory environment. This is an agile way to scale Open Banking quickly to address specific problems in a business or accelerate development. This also allows businesses to avoid making mistakes and provides them with the support needed to adapt with technological changes.

Taking all of this into account, there are some key things to consider when looking at Open Banking for your business:

  • Complexity: Choosing to build an Open Banking capacity in-house is a significant undertaking and you must understand the level of complexity, and reflect that in the level of investment you make. On the flip side, working with TPPs you must still have sufficient grasp of the complexity in-house to be able to challenge them effectively.
  • Regulation: The regulatory space is fast-moving, and changes will come thick and fast. The regulatory & compliance function of a business must be watertight before considering the build option.
  • Cost: There is a significant cost of ownership if a business chooses the internal route and external solutions must be carefully selected for each problem to optimise costs.
  • Consumer-driven: As customers become more confident with Open Banking, there will be further opportunities to introduce more services and push the envelope.  

Test, learn and refine

Once a business has taken all these considerations on board and made the choice on build or buy it is important to constantly learn and adapt. Whether you are building Open Banking internally or using an external provider a process of testing, learning, and refining must take place in order to make the most of the opportunities presented by Open Banking.

At Proxima, our experts are helping businesses harness Open Banking. Get in touch to find out how we can help you

Harnessing the power of supply chain in financial services, read our report

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