Open Banking as an opportunity

At present, traditional banks are facing an additional entrepreneurial challenge from a threat of a completely different kind: Technology groups and neo-banks from the European region are entering the Swiss market as new players with innovative banking solutions and are affecting the core business. Traditional banks have little chance of keeping pace with the agility and freedom of these new competitors and must therefore find new approaches in order to remain competitive.

Open Banking offers banks an opportunity to open up their highly complex and specialised IT landscapes and to offer forward-looking digital services together with third-party providers. In this way, traditional banks can open up new business areas, benefit from the strengths of their new competitors and at the same time contribute their own strengths.

What is changing as a result of Open Banking?
The development of digital services and ecosystems often leads to collaboration with new partners, not least with young, innovative start-ups. In the process, different corporate cultures collide, which has a negative impact on operational resilience. If we look at the dimensions of the operating models of the two partners, these differences become clear:

People and skills
A start-up employs different people with different skills than a bank. The product and the technology are clearly in the foreground here. It is important to inspire customers with innovative ideas. Other customer interests are rigorously subordinated to this goal. Flexibility and a high degree of adaptability are a matter of course for an innovative company, but they can overwhelm bank employees and customers. Small start-ups cannot comprehend how massive minimal adjustments to internal tools can affect the efficiency of hundreds or thousands of employees and lead to disproportionate implementation costs. In contrast, a bank cannot afford to simply abandon large existing customer groups by discontinuing broad access channels or high-revenue products without an alternative. In the end, the average customer shows much less tolerance for incorrect account statements, erroneous bookings or account blocking than the start-up assumes.

A clear interface between the bank and the non-financial service provider therefore makes sense. In addition, an ongoing readjustment of the fundamental core activities (protection of client assets) and the surrounding mantle of services with added value, which can be provided much more easily by partners, also helps. Both innovation and the bank's traditional process thinking must be understood and incorporated. Employees with an affinity for innovation in the bank serve as a bridge between the two worlds.

Organization and governance
Organization and governance could not be more different. In the "start-up groove", young teams develop innovative solutions in an agile and self-organized manner without a complex organizational superstructure. The management is fully integrated into the development and often possesses comprehensive technical know-how. This contrasts with the organization of established banking institutions with their clear processes and management structures. Regulatory, legal and financial requirements are omnipresent and have a considerable influence on process execution.

In order to combine the strengths of both organizations, governance cannot be based on contracts and SLAs alone, as this would deprive the start-up of its advantages. The content of the shared customer experience should be determined by the organization. In doing so, all parties involved must be aware that the content-related responsibility towards the customer must remain with the bank. This has many concrete organisational consequences, such as data sovereignty.

Technology and information
In the technology and information dimension, interfaces are a central element. The banks' highly compartmentalized, sometimes somewhat outdated, but highly stable and efficient applications must be opened up to modern, often cloud-based systems. Data and information can be exchanged with the new partners via technical interfaces. However, every opening entails potential risks for cyber attacks and leads to new technical dependencies.

Different development processes also frequently collide. Innovative companies bring innovations to the users as quickly as possible. This can quickly overwhelm a bank with complex release management. In addition, bank customers have little understanding for regular maintenance-related outages of their digital banking services, such as e-banking.

Integrations must therefore be developed with the awareness that any externally sourced service can fail at any time. Similar to zero-trust concepts in cyber security, it therefore makes sense to move away from maximum availability requirements. "Chaos testing" of IT and business continuity anchors this new credo in the organization.

Technical components must be designed to function without dependencies on external services. For example, if a system loses access to real-time data, local data must be available for approximation.

A clear service architecture is based on flexible interfaces and enables the rapid exchange of technical components. With the help of microservices, applications are designed in a modular way, up to the ideal of an uninterrupted deployment - although this ideal state is not always desired. For example, information relevant to the stock exchange or financial data must never be accessible to only some of the users as part of a rolling deployment. API management allows easy integration of partners, with cleanly versioned interfaces and coordinated adjustments.

Partnerships
Young companies are often financially on shaky ground. They are founded quickly and liquidated just as quickly if they are not successful. One should not assume that such agile companies will be available as partners in the long term. Especially in a start-up or growth phase, losses are normal. It also happens that a formerly "hot" start-up is overtaken by even more innovative companies.

Accordingly, the question of multi-ven-dor strategies is permanently posed in open banking. For each partnership, it must be carefully evaluated which skills are to be built up internally or by other partners parallel to the partnership. This must be addressed through know-how management and appropriate training.

In any cooperation, the question of intellectual property also arises. If this does not lie with the bank, escrow mechanisms should at least be used to regulate access to technical components or interface documentation in the event of a total failure.

In order to stabilize the cooperation and to shape it in a spirit of partnership, it is advisable to offer business coaching, especially for young companies. This enables closer control than, for example, supervision of a board seat.

Business processes
Start-ups quickly change unsuccessful business processes and models because they do not operate along established value chains but deliberately try to break them up or redesign them. Just like SMEs, start-ups operate in different cycles than traditional banks. This makes joint decisions more difficult.

The bank must be able to react to changes in its partners' processes at any time. Lean, well-documented processes and well-trained employees increase the ability to react in such cases. At the same time, the bank must be in a position to compensate for missing resources and, for example, take on training or the creation of manuals itself. In principle, insisting on contractual agreements is less effective than rolling up one's sleeves on the spur of the moment.

If a bank wants to benefit from the enormous opportunities of Open Banking, it must identify the risks arising from the partnerships and bring them under control. Already with a functioning release management, for example, technical and process-related risks can be addressed and reduced.

It is important to align all measures in such a way that a gradual degradation of services takes place in the event of a fault in one dimension of the operating model. In this way, the entire IT landscape can function as reliably as an ATM that only deactivates individual functions in the event of a malfunction and thus constantly offers the maximum possible customer benefit.