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Beyond payments and APIs: open banking and the new banking ecosystem

By Inês Maurício, Industry Architect, Microsoft Enterprise Services on October 18, 2017

Filed under Financial Services - Banking & Capital Markets

open field

Digital technologies are transforming industries worldwide. In the financial services industry, the outlines of transformation are now becoming clear, with open banking assuming its place front and center, in addition to what’s emerging in the areas of payments (thanks in part to the influence of fintechs), blockchain, and artificial intelligence.

Reordering the financial services landscape

Open banking is fast reordering the financial services landscape, at once breaking the traditional rules of engagement and bringing vital new energies to the table. Organizations of different kinds are joining forces to influence the future of the industry, potentially shrinking the role and relevance of traditional banks, while making it possible to launch new products and services, as well as promote agile and innovative business models. With open banking at its heart, a new banking ecosystem is evolving, the purpose of which is to open information access to new entrants—both financial and non-financial organizations—who will play an active role in shaping the industry.

Innovation, transformation … and regulation

Over the past few decades, changes in customer behavior and expectations have been primary drivers of industry transformation, pushing institutions to focus on providing a more seamless customer experience with easier access to financial services. Now, banks and other financial services organizations are seeking ways to transform how they fundamentally operate, in no small measure prompted by regulatory initiatives such as Europe’s PSD2, the purpose of which is to:

  • Contribute to a more integrated and efficient payments market.
  • Level the playing field for payment services providers.
  • Promote the development and use of innovative online and mobile payments.
  • Make payments safer and more secure.
  • Protect consumers.
  • Encourage lower prices for payments.

Of course, it’s not just about payments, and goes much deeper, as the UK’s Open Banking Standard makes clear: it’s about removing systemic bottlenecks that are impeding innovation, the delivery of more agile services, and growth. Incumbent financial institutions and new entrants should thus perceive such policy initiatives as catalysts for much needed change—upending the established order, to be sure, but also facilitating business and partner relationships and fostering strategic renewal in global financial markets. In short, regulation in specific markets has created the foundations for a new mindset in the industry worldwide, driving both disruption and transformation.

Making a smart investment in open banking

In this context, it is imperative for banks to get started now building service-oriented platforms that facilitate integration and communication throughout a diverse ecosystem. The investment in the required technology solutions will pay significant business dividends, from transformed customer experiences and new product and service offerings, to new ways of working, interacting, and communicating.

The technologies behind API management have emerged as a key area of investment for creating value and generating revenue. And it’s not hard to see why: API management solutions offer the possibility of addressing the challenge of reducing operational costs on reduced margins, while enabling them to identify and exploit new scenarios for monetizing their data.

API management, however, is not the only prerequisite for PSD2-compliance, joining the open banking ecosystem, and pursuing digital transformation objectives. In addition to API management platforms, banks need strong cloud-based enterprise architecture solutions that also offer the following capabilities:

  • Security and identity management
  • Analytics and data insights
  • Machine learning and artificial intelligence
  • DevOps
  • Compliance
  • Scalability

To “future-proof” their open banking investments in constantly evolving, competitive marketplaces—in which turbulence from new entrants and new services will be a constant—banks need to go beyond API management to consider all these areas, and more besides. They need to envision how they can create centers for innovation that incorporate new concepts in a highly integrated, well-orchestrated system.

Importance of mastering the data

Finally, a word about data. Open banking is wholly about the sharing of data across business boundaries in an ecosystem of linked providers and services. Analytics and machine learning are thus essential to making sense of the available data, both proprietary and external, for the sake of profiling financial markets, identifying trends (and risk) in customer behavior, making it possible for other interested parties to join in offering value, and so forth. This will mean in many cases the displacement of existing intermediaries in the value chain; attrition is an inevitable outcome of disruption. Ultimately, the goal of all of this is to eliminate friction and empower a healthy, diverse, and highly responsive banking ecosystem.


Empowering our customers in financial services to innovate is central to our mission: we understand that transformation can be challenging, but we also believe that it holds incredible promise. Our approach is to leverage technology in novel ways—enabling business agility with the tools that will define the future of banking. As your trusted technology partner, we offer both industry know-how and enterprise-grade solutions. We can help no matter where you are on your digital transformation roadmap.

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