Richard Price, UK&I Sales Director, TIBCO Software

More than ever before, banks need to stay relevant, as traditional financial services companies are competing with far nimbler challenger brands that are changing traditional service models and product mixes.

We’ve seen this accelerate, as the world continues to be turned upside down by COVID-19, with banks having to temporarily close retail premises and offices, pushing the majority of customers online. This has exposed a gap in many banks’ digital transformation programmes, which were primarily centred on self-service, rather than replacing face-to-face delivery processes.

As a result for some, like those recently seen in Asia, this has refocused and accelerated digital transformation projects, but it also exposed the challenges for banks looking to move to an agile open banking model – and they’re largely pegged around data, both in terms in quality and also the opportunities good data can create.

Older institutions, many of which have developed over centuries, rather than decades, often have a federated, unorganised, unstable data fabric and data curation cultures – indeed, a data swamp. This is as a result of balkanised data sources, a mix of old and new, real-time and streaming data, and a maze of organisational barriers.

This creates what data scientists call a GIGO (garbage-in, garbage-out) situation, where incorrect or poor-quality data input produces an equally incorrect output; and, this is also true in any bank or financial services company. 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, given the desire 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 incumbent institutions go about ‘taming the swamp’ and creating a data-centric culture that builds a data lake to allow trust in the data and true open banking?

It sounds obvious, but open banking depends on an open banking culture; a new way of thinking. A good way to think about this is a culture that has an API-first mentality. That is, a bias toward thinking about every product and service you provide as an API call – a software service.

This must be matched by a data culture that powers those APIs – for example, a banking app will need to connect to multiple institutions’ APIs to centralise information about all the accounts belonging to a customer. As a result, it’s essential for organisations to ensure there is governed curation of all (new) data, so the source of master records for each type of data can be identified, ensuring consistency across applications.

That is not to say that culture should be digital-only. Human oversight, management, legal implications, and process are all essential elements of an open banking culture. But the digital implications of the business must be considered first and not treated as an afterthought.

Open banking API calls, transactions, market data, and all elements of a digital banking ecosystem, generate events that must be managed and analysed, often in real-time. This event-driven banking way of looking at business is not common, but necessary in an open banking world.

One critical consideration is that you can’t manage what you can’t see, and open banking is dependent on data in real-time. Building business insights on streaming data gives all stakeholders real-time transparency and awareness of events that impact services, risk, and profitability.

Instead of over-using ETL (extract, transform, load), which would create a bigger data swamp for APIs, data virtualisation leaves data where it is and can help banks tame their data swamp. It is also an essential way to quickly create APIs that provide secure, high-speed access to customer account information in whatever form is needed by the programming interface.

Depending on the size, scale, and organisation of data in any given bank, that data may live in dozens of disparate systems, with variations by region, type, and breadth of customers. With data virtualisation, the complexity of the back-end architecture is abstracted away and can turn dozens of independent data sources into one virtual data warehouse – with nearly the same performance as a single system – that is reinforced with data management for access rights and regulatory oversight.

We saw this with KBTG Bank[1]  in Thailand, which provides services to 16 million retail banking customers and saw how data virtualisation brought business and IT together to deliver services to customers in a timelier manner. Its ‘My Portfolio’ mobile app shows users every banking product and account they have. The data that powers these services is stored in multiple systems – deposit account, credit card, mutual fund. Each API call can require data stored in 12 to 15 databases.

Another example, closer to home, is SIBS[2], the European payments processing and financial technology services company, which supports more than 300 million users across different geographies and processes more than three billion transactions annually. Its API-led open banking platform, ‘SIBS API Market’, has changed the way two million customers in Portugal do their banking – 95% of all bank accounts in Portugal are made available to trusted third parties, 24 banks are consuming APIs from the open-banking platform, and nine million daily transactions are supported.

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.

[1] KBTG Creates Digital Lifestyle Banking with Data Virtualization. August 22, 2019 https:// www.tibco.com/sites/tibco/files/resources/SS-KBTG-final_0.pdf

[2] How SIBS Created New Customer Value With Open Banking, May 14, 2020 https://www.tibco.com/blog/2020/05/14/how-sibs-created-new-customer-value-with-open-banking/