Implementing open banking APIs are seen as the top priority for bankers in the next year, according to a report by Infosys Finacle.
The 10th Annual Study of Innovation in Retail Banking assessed a decade of banking innovation and looks ahead at what’s in store for banking in 2022.
Out of a survey of 300 banks, 65 per cent identified open banking APIs as the number one issue to the future of innovation with the initiative being stronger than ‘emerging’ areas such as machine learning, chatbots and robotic process automation.
The research also found that in the short term, banks will leverage open banking for compliance such as the Payment Services Directive (Europe), Unified Payments Interface (India) and Australia’s New Payments Platform.
Eighteen banks in the Asia Pacific region including Australia participated in the survey.
According to Finacle global head of product strategy Rajashekara Maiya, Australia’s open banking framework will not only transform the competitive landscape but will also drive a shift from the “front-to-back-closed banking model”
By this, Maiya means that such a model will enable a bank to manufacture and distribute its product through its own channels towards a more open network with specialist manufacturers, distributors and hybrid banks.
However, he believes that the smaller players will be better placed in an open banking framework.
“As per our assessment, the small and medium sized banks with less IT complexity are much better prepared to play the open banking initiative, compared to the large and international financial institutions, which are struggling with legacy IT infrastructure,” Maiya said.
In fact, the research found that legacy technology was identified amongst the top three barriers for innovation - 74 per cent of banks are increasing investments in technology modernisation.
Fifty per cent of the organisations surveyed believe that product delivery channels followed by new product innovations will be where most innovation will take place in the next four years.
“Overall, organisations are taking a strategic perspective on the need for a return on investment to their innovation strategies,” he said.
This year 63 per cent of respondents are looking for a ROI in one to three years, compared with 54 per cent in 2017.
The survey also found that retail banks consider digital commerce platforms (such as Alibaba) and technology giants as the innovation leaders for 2022.
Similar to previous years over the next three years, the report predicts that the greatest impact from transformation is expected to be in the areas of payments, mobile wallets and lending.