Long reads

Innovating financial services with open ecosystems

Janet Young

Janet Young

Head of Group Channels and Digitalisation, UOB

As greater digitalisation across the world pushes for more substantial innovations across sectors, the financial services industry has also seen the emergence of open ecosystems as a strategy to grow.

Open ecosystems bring like-minded parties together to create more value for end users – be it consumers or businesses. It sets the stage for open application programming interface (API) platforms to be used; that can create value for end users. For example, consumers can gain access to a richer and more integrated view of their finances and lifestyles, if they choose to share their data, or eCommerce merchants can receive their transactions, payment and banking information on real time basis, simplifying reconciliation processes.

Additional services and deals

With open platforms such as SGFinDex, launched in Singapore in December 2020, banks including UOB can work with partners to provide additional products and services for customers across physical and digital touchpoints, with a greater understanding of their customer’s needs. The customer too, benefits from more targeted financial management tools, as well as services, rebates and deals from players in other industries.

By allowing selected partners to plug-in to UOB’s open API, partner services can be extended to our customers. Customers can trust that these additional services are safe and secure to use, as the services must meet UOB’s robust security frameworks.

For example, the UOB API Developer portal is designed to provide access to parties who wish to integrate with our products and services seamlessly. It provides APIs on Account Services, Payments, Collections, PayNow enquiry, Notifications and Electronic Direct Debit Authorisations.

Other possibilities include real-time interest rate comparison and loan calculators that are integrated with data insights to recommend next steps for the customer at various life stages – tailored to the customer’s financial health and assets. Assessments and approvals to qualify for these services would not require additional sign-ups and will be faster or even real-time, as the necessary data would already be available.

Such partnerships can also lead to a more seamless banking experience. Aside from a holistic view of an individual’s personal wealth financial position on a single platform, corporate and consumer customers can access additional services such as credit and asset management in light of deeper insights on the customer’s goals.

Deeper financial insights

Open API platforms will also drive more cross-functional and cross-industry collaborations such that data from one entity, for example a telco, can be combined with data from other entities such as shopping malls or banks for richer data points. When organisations leverage a more holistic set of data, customers can be offered more relevant products and services, while gaining greater knowledge of their financial and lifestyle patterns.

For example, a consumer agreeing for shopping malls and their bank to share data, enables the bank to analyse his or her spending patterns and prompt him or her if there is a spike or change in spending behaviour. This helps the customer become more aware of how he or she is using credit for shopping and to be more prudent in spending. Such services can also be automated and integrated in a dashboard as opposed to customers having to manually integrate data from different sources to keep track of their spending.

More predictive, real-time recommendations

Also possible are higher levels of predictive analyses that can be critical for real-time portfolio trading and wealth management. UOB already has a purpose-built digital wealth advisory solution called the UOB Portfolio Advisory Tool (PAT), which draws on 12 years’ worth of historical market data to simulate the expected performance of a customer’s personal investment portfolio against various economic scenarios.

With the introduction of the open platform and open APIs, instead of just projecting how a personal investment portfolio might perform, UOB can also identify what other customers with similar profiles are buying or selling in real-time, and recommend these options to the customer in a timely manner. Such capabilities and others, can complement the meaningful face-to-face discussions our wealth advisers can have with their customers.

Opportunities for partners to scale their businesses

Open platforms are also a conduit to help partner ecosystems scale their businesses.

For example, if you are a specialised provider of a payroll solution, pairing up with a bank such as UOB by plugging your API into the bank’s digital services can open up a huge opportunity to scale your customer base. The bank can also enjoy cost-efficiencies while adding on to its existing plethora of end-to-end solutions for customers. Together, it makes for good innovation and supports the business growth of start-ups and smaller firms.

Partnering specialist companies remains a good practice for driving innovation and in fact, should be part of the core strategy for organisations. Partnerships help a bank add to its arsenal of capabilities while keeping costs low and expediting speed to market.

While these partnerships do not necessarily have to be facilitated by an open API architecture, there will always be a place for open API architecture since it facilitates real-time and fast exchange of data for parties.

There are also other options such as using a federated API architecture. A federated API architecture requires approval for members to access the network and this is the architecture that is being used by credit card networks today.

Such permission-based open architecture is especially pertinent for ecosystems that have robust risk management requirements, and is an approach already being used by the financial services industry.

Safeguards in the interest of the customer

One thing to note however is that even as platforms are opened up to more players across industries, this does not mean the dismantling of safeguards which serve to protect our customers.

Clear and defined rules must be in place to ensure the ethical and legal use of customer data. For example, in the area of wholesale banking, rules guide how transactions are carried out online. Processes must be in place to confirm the authenticity of goods and services and to identify easily the buyers and sellers. This is made possible by individuals in the transaction enabling the flow of open data to authenticate their identities, to log transactions and to ensure that sensitive information is not altered in any way.

Rules should also guide how the identities of users are protected online. For example, the use of a set of encryption and decryption keys can protect transaction data online from being stolen and misused. The use of keys instead of user identifiers can also help protect the identities of customers – this prevents unethical usage of data, for example, discrimination against certain users on demographic identifiers.

There should also be rules to verify if payment is processed and disbursed properly. All these controls and rules will mitigate risks for businesses and facilitate the digitalisation of trade finance.

Ultimately, banking should be simpler, safer and smarter for consumers and businesses. Open ecosystems remove borders and enable best-of-breed global financial services to be provided to them. It shifts the needle for the total customer experience.  

 

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