CLOUDTWEAKS CONTRIBUTOR PROGRAM

Join the CloudTweaks thought leadership contributor program which includes a customized profile, branded identity page, newsletter marketing, social amplification and more...

The program is currently available to consultants, influencers or executive level contributors.

Daniel Eberhard

Open APIs Alone Won’t Change Banking

Open Banking API’s

Most people think of banks as one monolithic entity, but they are actually made up of hundreds of independent, pseudo-integrated systems. When a bank wants to make any kind of change, it has to conduct regression testing on potentially hundreds of systems and justify the operation-related and reputation-related risks if it fails.

Multiple players have aimed to step up to meet the opportunity (Plaid, Wipro, and Dwolla, to name a few). Although each has a different approach, they generally leverage API to function as a sort of middle layer, allowing banks to integrate with third-party applications and establish new distribution channels without disturbing their core infrastructure.

Most open banking platforms are still in the conceptual stage, but they represent the best shot a bank has at staying technically relevant without investing millions, or even billions, in a core tech overhaul.

Open Banking Is (Almost) Upon Us

Open APIs Banking

Calls for open banking have grown in recent years as consumers demand more transparency and increased data security. Open banking software would theoretically provide more transparency by allowing people to monitor their finances more closely through secure apps and APIs and employ fintech’s much quicker access to deploy their own products.

However, the fintech sector enjoys a key advantage when it comes to open APIs. Not only do APIs offer faster ways of deploying new tech, but they also raise customer expectations and hasten the value-creation arms race. If product experience becomes dependent upon technology, it’s only to the benefit of fintechs and the banks that deploy tech-first approaches.

The Post-API Era

Market pressures will eventually force most banks to adopt open banking, using APIs to make the transition. Some regulations, like the Second Payment Services Directive in the U.K., are actually forcing banks to make their data publicly available by 2018. Once APIs are deployed, access to the best financial products will be democratized, which is when things will get really interesting. Most banks still rely on selling expensive credit and investment vehicles to meet quarterly projections, and convincing boards and staff to cannibalize their own revenue streams is incredibly difficult.

Until we have truly open banking and API access, fintechs need to focus on a few narrow approaches:

1. Go really niche, and offer extrapolations. Target a small group of customers using your scaling strategies. Once you’ve achieved success with a core audience, extrapolate the results to demonstrate the broader potential. Focusing on a very narrow niche provides the best chance of getting strong engagement metrics. At Koho, we get users from 18 to 60, but we focus on 28- to 33-year-olds who are starting to prioritize their finances.

2. Map out an end game. For an API partnership to work, you must understand what the client’s goals are. Make sure its leadership takes innovation seriously. Many “innovation departments” are well-intentioned but end up as academic tire kickers.

A recent Bain & Company survey found that innovation was among the top three priorities for many top executives, yet less than 25 percent considered their organizations “effective innovators.” Don’t be misled by promising verbiage; establish what success looks like to the client from the outset.

3. Pursue decision makers who aren’t bound to profits and losses. Motivating traditional banks through revenue is unlikely, even for the most successful fintech, so they’ll be more inclined to listen if there’s a strategic benefit.

The biggest benefit fintechs offer is risk control. Banks can’t afford reputational risk, which ties their hands on implementing new technology. Investing in startups as minority shareholders provides a low-risk way for them to get insight into customer behavior and hedge with the winners.

Ethical cross-selling is another in-demand ability. Customers generally need six to eight financial products by the time they reach adulthood. Most people would prefer to get them all from their primary banks. But these companies rely on entrenched branch and sales teams that are compensated through incentive structures that hurt customers.

The Wells Fargo scandal is a prime example of this phenomenon. Employees were rewarded for the number of products sold to each user, driving many of them to take drastic and unethical measures. Fintechs that can crack above-board, transparent cross-selling improve their chances of attracting banks to their APIs.

Open APIs enable companies to meet consumer demands for secure, transparent, user-friendly banking without executing a complete overhaul of their technology stacks. Those with established proofs of concept and traction will be in the best position to take advantage.

By Daniel Eberhard

Daniel Eberhard

Daniel is the co-founder and CEO of Koho Financial, which offers Millennials a no-fee, modern mobile account and Visa card to manage their financial lives. Daniel and his team built Koho for two reasons: Banks shouldn’t profit from fees — hidden or otherwise — and technology can empower people to live better financial lives. Prior to Koho, Daniel was a co-founder and vice president of Kineticor Renewables, a wind energy company acquired by Algonquin Power (TSX:AQN).

View Website
The Lighter Side Of The Cloud - Google Glass
The Lighter Side Of The Cloud - Beta Testing Gone Wrong
The Lighter Side Of The Cloud - Best Friend
The Lighter Side Of The Cloud - The Future Hitchhiker
The Lighter Side Of The Cloud - Whatever Happened To Alone Time?
Will 2018 Be the Year Augmented Reality Moves Outside ‘Pokémon Go’?

Will 2018 Be the Year Augmented Reality Moves Outside ‘Pokémon Go’?

2018 Augmented Reality If you’ve never heard of “Pokémon Go” — or at least never had the concept explained to ...
The Connected Car: The Unknown Hero of Automotive Innovation

The Connected Car: The Unknown Hero of Automotive Innovation

Connected Car Innovation Spanning the last decade, the automotive industry has seen an explosion of technological innovation which has, and ...
Mitigating Cyberattacks: The Prevention and Handling

Mitigating Cyberattacks: The Prevention and Handling

Mitigating Cyberattacks New tools and technologies help companies in their drive to improve performance, cut costs and grow their businesses ...
Open APIs Alone Won’t Change Banking

Open APIs Alone Won’t Change Banking

Open Banking API's Most people think of banks as one monolithic entity, but they are actually made up of hundreds ...
3 Ways to Protect Users From Ransomware With the Cloud

3 Ways to Protect Users From Ransomware With the Cloud

Protect Users From Ransomware The threat of ransomware came into sharp focus over the course of 2016. Cybersecurity trackers have ...
How Artificial Intelligence Is Revolutionizing Business

How Artificial Intelligence Is Revolutionizing Business

Artificial Intelligence Revolution 84% of respondents say AI will enable them to obtain or sustain a competitive advantage. 83% believe ...
ERP Ain’t Got the Same Soul, I Like that Old Time Rock ‘n’ Roll

ERP Ain’t Got the Same Soul, I Like that Old Time Rock ‘n’ Roll

Designing Enterprise Software around People Looking back, business owners talked to their customers and employees in person or by phone ...
Cloud Migration – 10 ‘Do it Right’ Tips

Cloud Migration – 10 ‘Do it Right’ Tips

Cloud Migration Tips Businesses continue to adopt the cloud at break neck speed. Inherent benefits like lower operational costs, no infrastructure overheads, and quick access to better technology make cloud a very attractive proposition for businesses, especially start-ups and SMEs ...
real time hacking attacks

Live Real Time Hacking and Ransomware Tracking Maps Online

Real Time Hacking Attacks We've recently covered a few real time hacking maps but have decided to extend the list based on the recent ransomware activities with some additional real time hacking attack and ransomware tracking maps. Ransomware refers to malicious ...
15 Promising Cloud-Based Video Conferencing Services

15 Promising Cloud-Based Video Conferencing Services

Cloud Video Conferencing Services We have put together a compilation of some of the best cloud based conferencing services for businesses. The cloud video conferencing services market is expected to reach US$ 6.40 Billion by 2020 from the current $3.31 ...
12 WordPress Managed Hosting Services

12 WordPress Managed Hosting Services

WordPress Hosting Services WordPress hosting services has exploded in popularity as a blogging tool and content management system in recent years, and is now used by more than 23.3 percent (2018 Edit: 53%) of the top 10 million websites worldwide. Due ...
Cloud And Cybersecurity: 5 Things CISOs Need To Consider

Cloud And Cybersecurity: 5 Things CISOs Need To Consider

The Cloud and Cybersecurity Tomorrow’s digital enterprise is at war today. War not only with external cybersecurity hackers and viruses, but also within the organization itself – a conclusion based on my discussions with information security managers and cloud architects ...
Machine Learning Open-Source Tools

Do More With Machine Learning Thanks to These 6 Open-Source Tools

Machine Learning Open-Source Tools We are in the middle of a machine learning, AI and big data renaissance — at least, that’s what we’re calling it. Seemingly everyone is interested in this technology these days, and for a good reason ...