The top strategies banks are eyeing in open banking

  • By Christine St Anne

Banks around the world are eyeing a number of strategies as open banking regimes continue to be rolled out globally. 

A survey of 300 banks by Temenos outlined the key priorities for banks across the globe. 

The top strategy for many banks is building a greenfield bank followed by setting up innovation hubs.

Banks are also recognising that they will be part of an ‘ecosystem’ rather than setting up standalone offerings as they also assess strategies such as becoming an aggregator of third-party banking. 

“When we look at the survey results and what we're seeing in the market, Australian banks are attempting to innovate in a more active way and their focus is largely on customer experience,” Temenos PAC managing director Phil Finnegan said. 

In fact, improving customer experience and engagement, including offering personalized and ‘intimate’ products and services was a big priority for banks. 

By an “active” approach, Finnegan said that banks are now building digital ecosystems, to really work on their own in-house innovation.

This means “getting a best-of-breed from the marketplace, calling on multiple data sources and multiple capabilities that make the customer experience as rich as possible..” 

According to the survey, the primary way in which banks see their current digital business model evolving will be in the form a “true digital ecosystem”, that is offering their own and third-party banking and non-banking products and services to their customers as well as to other financial services organisations.

The survey also revealed that banks see their digital business evolve into keeping both their own product offerings and becoming an aggregator of  third-party banking and/or non-banking products (PFM comparison websites, etc.)

A number of banks in Australia have already set up a dedicated digital bank most notably National Australia Bank and Bank of Queensland. 

Recently of course NAB even bought the neobank 86 400. 

Finnegan sees this scope for similar acquisitions highlighting the recent decision by Challenger to buy the bank MyLifeMyFinance from a super fund. 

“Challenger is a large annuity business that has now entered banking through the acquisition of MyLifeMyFinance. 

“This gives them a cross-sell capability between their products as well as the opportunity to secure innovation in the business from what the fintech has achieved.”

He also highlights the multi-brand approach adopted by the big banks as paving the way for buying other banks. 

“A multi-brand strategy has allowed banks to use those brands to test the market from both a technology and innovation perspective.

This then allows these banks to roll out innovations to the larger market-facing brands..” 

As noted in an earlier Temenos report, open bank hub initiatives, give customers the option to connect their bank data with third-party providers and it is also a priority for both global and local banks. 

“We are seeing a number of banks pulling together propositions and solutions for the market that are quite interesting,” Finnegan said. 

Here he says such an approach through for example and API, cloud-based platform would allow them to become and aggregator. 

Banks are achieving this aggregated approach though adopting models such as a banking as a service (BaS) platform. 

Most notably Westpac has moved on this strategy and has already secured Afterpay and SocietyOne as partners. 

For Finnegan, this strategy will obviously depend on partnership and expects this trend to also continue. 

However, he also believes that BaS could also open the door for non-bank entrants.

“It does provide an option for other aggregators who are potentially looking to become a bank as well. We will ponder that one into the future.”