Overcoming technological challenges to join the open banking systems revolution does not mean that banks should turn a blind eye to the universe of opportunities that open banking will provide.
The financial sector is on the verge of a major revolution: open banking. For almost two years, the topic has dominated the conversations of Carlos Augusto de Oliveira, director and coordinator of the technology forums of the Brazilian Banking Association (ABBC), with the 90 members of the entity.
Carlos Augusto is a key player in the financial sector’s efforts to make change an opening to new business opportunities and not a threat to the survival of institutions. “The financial system has been structured [over centuries] to protect bank details and has created internal strengths for that. Open banking changes this premise and establishes that the data is no longer owned by the bank. It is a violent cultural change. ”
Institutions have no choice. In just over a year, the customer will own his own information and will be able to authorize its sharing between institutions. The Central Bank defined that the process will begin to be implemented on November 30, 2020 and will be completed in four stages, until October 2021.
The decades of secrecy about data and banking services will be left behind in Brazil.
Due to his strategic role and the knowledge he has, Carlos Augusto became the intermediary between ABBC and the Central Bank. He recalls that the first conversations were very “heated”. There was much fear and uncertainty about the impact of the measure, including with regard to the security risks that this new model could bring to the sector.
Less resistance: more open banking systems opportunities
After the initial scare, banks realized that cultural and mentality change is inevitable and these debates started to flow better. But the challenge of transforming to receive open banking remains immense. “Banks will have to innovate and seek a more customer-centric strategy. At the same time, they will gain this powerful tool, which facilitates integration with new platforms. It will be simpler and cheaper for the institutions that do their homework”, he summarizes.
It is precisely the integration with other platforms that can represent the biggest obstacle for banks to do their “homework” and enjoy the benefits of open banking. After all, they are traditional institutions that have legacy systems that date back to the 1970s, with monolithic structures that do not easily connect to other platforms (any correlation with mainframes is not a coincidence).
With a solid career as a technology leader in the banking sector, Vitor Sousa, now COO of Digibee, knows the structure of financial institutions well. According to him, the core data of the institutions – the main point of interest in open banking – are stored in this legacy environment.
“These systems generally have technologies that are out of date with the needs and standards of security, performance and scalability that are required for today’s connected world,” says the COO.
A major impasse that involves the sharing of information concerns the difficulty of connecting with the banks’ APIs, including for the developer who will make the integration. “It is not clear how all this API consumption becomes a business. This connection needs to be simplified. We can make this lemon a lemonade. The bank’s job now is to empower the customer with their own data and make it a business line, ”adds Vitor.
This new business opportunity, however, may escape the attention of managers, who have a complex dilemma in front of them: to review their entire legacy system and find an internal way to make these integrations feasible or seek alternative platforms that work with focus on open banking. “I see this second option as a trend, the market is moving in that direction. With the platforms that connect more easily, banks enable and accelerate this integration without needing a high investment, which is essential, taking into account the tight schedule and limited budgets of some institutions,” points out the director of ABBC.
API or HIP? The soup that goes beyond the letters
In addition to taking the work of building this tool out of the banks, the integration platforms, also known as the Hybrid Integration Platform (HIP), represent a benefit in terms of security, since they already have a layer that protects the institution from risks involving the partner that is connecting on the other side. This feature makes the integration platform a benefit not only for large institutions, but also for small partners, who do not have the same technical capabilities as traditional banks.
“HIP creates a strong layer of security to protect the other side and ensure that it has access to shared data while respecting all necessary requirements. At the same time, it also gives strength to the legacy, so that it can expose the core data and allow the exchange of information between institutions ”, he says.
Within this universe of alternatives, there are several opportunities. Vitor suggests, for example, the offer to banks of a package that allows replacing the developer’s portal, where open banking is delivered today, by an integration marketplace that already solves use cases, such as student credit for a network of teaching, a solution that at Digibee has been called a capsule.
“The bank will be able to deliver, on its portal, not only the API, which generates friction; it leaves the ready-to-use solution available, without the partner having to worry about the challenge of integration, business modeling and security. The trend is that this space will facilitate the generation of business more quickly, both for customers and business partners of the financial institution ”, explains the COO of Digibee.
By saving time and reducing costs, banks will be better able to take advantage of open banking, expanding their portfolio and offering new products and services. “There will be an evolution in terms of innovation and business simplification, and the institutions are preparing to take advantage of this cultural change”, concludes the ABBC director.
See how the Digibee Hybrid Integration Platform helped Santander with its open banking systems. Read the case study here.