SURFING THE WAVES OF DIGITAL DISRUPTION IN THE OPEN BANKING REVOLUTION

By Pieter van Heck, Sales Engineering Manager, EMEA, Dynatrace

The clock is ticking. In just a few short months, banks across Europe will have to roll out a series of Application Programming Interfaces (APIs) prescribed under the EU’s Payment Service Directive II (PSD2) to encourage the growth of the digital single market. Ready or not, the banks will need to deliver APIs that open up customer transaction and account information to support services being offered by third-party providers; from merchants to lenders and even rival banks.

This shift will create a major advantage for consumers; fundamentally changing the way that they interact with their financial data and bank accounts to give them greater flexibility and choice. It will usher in a whole new wave of financial service providers, offering better, more personalised deals to consumers in a bid to win market share from the traditional banks. If they want to ride the waves of this digital disruption, rather than disappearing beneath the surface, banks will have to revaluate how they differentiate themselves in such a fast-paced, open-ended world.

Riding the crest of innovation

Whilst most banks are already well on the way to developing the APIs that PSD2 requires of them, they are still just in the early stages of implementation and have yet to explore their true potential. What’s more, many are treating it simply as a compliance project, rather than an opportunity for digital transformation. Instead of just viewing the creation of APIs as a box-ticking exercise, banks should be looking at how they can create new digital experiences and services using the data being exposed by others. For example, could they draw on customer account information from other banks to identify spending patterns that allow them to make a more targeted loan offering?

This new generation of services will add significant layers of complexity to an already complicated digital ecosystem. It will create a multitude of new IT dependencies, spanning internal applications and infrastructure, as well as those of the other service providers that lie upstream or downstream in the delivery chain. As a result, it will become increasingly difficult for banks to manage the quality of their customer experience; given the dependence upon factors that are outside of their own control. They will therefore need to ask themselves; what will happen when there is a problem with service performance; such as customer information not being displayed, or an application loading slowly? Who will the customer blame for the problem, and who will be responsible for fixing it?

Stay out of the water; the sharks are circling

As they ponder these questions, the banks will need to remember that there won’t be any margin for error in the era of open banking that PSD2 is ushering in. Fiercer competition will give consumers a multitude of choice that didn’t exist before, so the second that they become dissatisfied with a service, there’s a much greater risk they’ll simply switch to something that offers them a better experience. As such, it will be the survival of the fittest; those banks that offer the best performing services, the slickest APIs and the most seamless customer experiences will enjoy the biggest edge over their rivals.

It is therefore imperative for banks to maintain full control and visibility into the factors that impact digital performance in the open banking world. They need to be absolutely clear on where any problems that are affecting their digital services lie, and have full context around how those issues are impacting the customers that are using them. Without that insight, the banks will be hostage to fortune and could find themselves blamed for anything and everything that goes wrong, as the competition moves in for the kill.

Mastering the waves of digital disruption

To keep themselves out of the jaws of their competitors, banks need the ability to monitor the experience of every user and every transaction that crosses any layer of their digital ecosystem, regardless of who is delivering the end service to the customer. They need to maintain unimpaired visibility into the dependencies within the bank’s applications and the ways in which they interact with external services through APIs. They also need the ability to test whether those APIs remain available and performant, both internally and externally. Without that level of insight, it will be impossible for banks to pinpoint the root cause of digital performance problems, prove they aren’t at fault for issues with another service, or hold others to account when the fault lies elsewhere.

Given the hyper-complex, hyper-scale and hyper-dynamic nature of the digital ecosystems that will support open banking services, the task of achieving and maintaining that visibility and control will be impossible with accepted, manual approaches to digital performance management. The ability to automate monitoring processes and harness Artificial Intelligence capabilities (AI) to reduce the burden on IT teams will be critical to success. The good news is that if they master this complexity using those approaches, then banks will be in a much stronger position to truly reap the rewards that open banking has to offer. In doing so, they can create a lasting advantage that will see them through to the next big financial services revolution, and far into the future.

By Pieter van Heck, Sales Engineering Manager, EMEA, Dynatrace

The clock is ticking. In just a few short months, banks across Europe will have to roll out a series of Application Programming Interfaces (APIs) prescribed under the EU’s Payment Service Directive II (PSD2) to encourage the growth of the digital single market. Ready or not, the banks will need to deliver APIs that open up customer transaction and account information to support services being offered by third-party providers; from merchants to lenders and even rival banks.

This shift will create a major advantage for consumers; fundamentally changing the way that they interact with their financial data and bank accounts to give them greater flexibility and choice. It will usher in a whole new wave of financial service providers, offering better, more personalised deals to consumers in a bid to win market share from the traditional banks. If they want to ride the waves of this digital disruption, rather than disappearing beneath the surface, banks will have to revaluate how they differentiate themselves in such a fast-paced, open-ended world.

Riding the crest of innovation

Whilst most banks are already well on the way to developing the APIs that PSD2 requires of them, they are still just in the early stages of implementation and have yet to explore their true potential. What’s more, many are treating it simply as a compliance project, rather than an opportunity for digital transformation. Instead of just viewing the creation of APIs as a box-ticking exercise, banks should be looking at how they can create new digital experiences and services using the data being exposed by others. For example, could they draw on customer account information from other banks to identify spending patterns that allow them to make a more targeted loan offering?

This new generation of services will add significant layers of complexity to an already complicated digital ecosystem. It will create a multitude of new IT dependencies, spanning internal applications and infrastructure, as well as those of the other service providers that lie upstream or downstream in the delivery chain. As a result, it will become increasingly difficult for banks to manage the quality of their customer experience; given the dependence upon factors that are outside of their own control. They will therefore need to ask themselves; what will happen when there is a problem with service performance; such as customer information not being displayed, or an application loading slowly? Who will the customer blame for the problem, and who will be responsible for fixing it?

Stay out of the water; the sharks are circling

As they ponder these questions, the banks will need to remember that there won’t be any margin for error in the era of open banking that PSD2 is ushering in. Fiercer competition will give consumers a multitude of choice that didn’t exist before, so the second that they become dissatisfied with a service, there’s a much greater risk they’ll simply switch to something that offers them a better experience. As such, it will be the survival of the fittest; those banks that offer the best performing services, the slickest APIs and the most seamless customer experiences will enjoy the biggest edge over their rivals.

It is therefore imperative for banks to maintain full control and visibility into the factors that impact digital performance in the open banking world. They need to be absolutely clear on where any problems that are affecting their digital services lie, and have full context around how those issues are impacting the customers that are using them. Without that insight, the banks will be hostage to fortune and could find themselves blamed for anything and everything that goes wrong, as the competition moves in for the kill.

Mastering the waves of digital disruption

To keep themselves out of the jaws of their competitors, banks need the ability to monitor the experience of every user and every transaction that crosses any layer of their digital ecosystem, regardless of who is delivering the end service to the customer. They need to maintain unimpaired visibility into the dependencies within the bank’s applications and the ways in which they interact with external services through APIs. They also need the ability to test whether those APIs remain available and performant, both internally and externally. Without that level of insight, it will be impossible for banks to pinpoint the root cause of digital performance problems, prove they aren’t at fault for issues with another service, or hold others to account when the fault lies elsewhere.

Given the hyper-complex, hyper-scale and hyper-dynamic nature of the digital ecosystems that will support open banking services, the task of achieving and maintaining that visibility and control will be impossible with accepted, manual approaches to digital performance management. The ability to automate monitoring processes and harness Artificial Intelligence capabilities (AI) to reduce the burden on IT teams will be critical to success. The good news is that if they master this complexity using those approaches, then banks will be in a much stronger position to truly reap the rewards that open banking has to offer. In doing so, they can create a lasting advantage that will see them through to the next big financial services revolution, and far into the future.