How banks can adapt their operating models for open banking

20 January 2021 3 min. read

As banks look to secure their future relevance in the digital economy, Open Banking has become a key strategy for establishing credibility, developing a footprint in the data economy, and creating a stepping stone towards new business models. Josje Fiolet and Mounaim Cortet, Senior Managers at Innopay, share how banks must evolve their operating model to capitalise on the commercial opportunities of Open Banking.

Open Banking is a key strategic component of the future of banking. However, despite a growing shift towards Open Banking capabilities and propositions, many banks have been slow to recognise the importance of fully integrating Open Banking activities within their existing operating model.

Only by fully understanding the new dynamics at play, and then taking the right steps to evolve their current operating model, will banks be able to effectively integrate Open Banking initiatives and teams into their daily operations.

This requires Open Banking to become a fundamental part of the day-to-day value creating activities of the bank. Continuing to treat it as a standalone domain will not effectively contribute to the bank’s strategic objectives.

Six challenges in embedding Open Banking in banks’ daily operations

From our ongoing research into Open Banking and our experience in supporting transformations, we observe that six challenges are impeding banks from monetising the phenomenon at scale and speed:

1. API proposition development & management
2. API pre-sales & business development
3. API onboarding & risk management
4. API service, support & relationship management
5. API business plan, budgets & incentive schemes
6. API platform capability

For each of the activities, banks need to ask themselves: Are these activities, and the teams that conduct them, fully integrated within the daily operations of the bank?

Integrating each activity comes with a specific set of challenges that we discuss in more detail in the extended Paper. If integration is not managed effectively, banks will be unable to operate Open Banking at scale and speed, and ultimately struggle to deliver on their strategic objectives.

Three operating model elements which support the integration

Once the challenges of scaling Open Banking at an activity level are understood, it is possible to identify the required modifications to a bank's existing operating model. Although the operating model is built of many components, we have pinpointed three elements that require particular attention to successfully embed Open Banking: roles and responsibilities, governance & way of working, and data & metrics.

Three elements of operating models that drive Open Banking

Each bank should consider how the Open Banking activities can be effectively integrated by making adjustments to these three elements of their operating model. The answer will vary based on the particular setup and maturity within each bank.

By doing this, it is possible to manage changes in a consistent manner, and to maintain a coherent operating model that ensures efficient daily operations whilst supporting the agreed Open Banking strategy. And since the Open Banking journey has only just started, banks will need to constantly review and refine their ongoing responses to changing circumstances.

For more information on Innopay’s view on the topic, download the firm’s latest Open banking white paper.