# Open Ecosystems in Financial Services: what does this mean for banks?
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2018-02-14
Category: BANKING
Category URL: https://financedigest.com/category/banking
Meta Title: The Future of Banking: Disruption, Data, and Trust in a
Meta Description: Find out how traditional banks are navigating the changing landscape of banking with the rise of disruptive start-ups and open banking initiatives like PSD2.
URL: https://financedigest.com/open-ecosystems-in-financial-services-what-does-this-mean-for-bankshtml

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**Dixit Patel,** VP of Technology at SapientRazorfish

As we move towards a globally connected, ‘always on’ world, many traditional banking and financial services business models are facing significant disruption by smaller start-up banks that provide personalised banking experiences for customers as well as other intermediaries that are positioning and offering engaging experiences that capture the customer relationship.

**Consumers’data and trust**

The [PSD2 directive](https://ec.europa.eu/info/law/payment-services-psd-2-directive-eu-2015-2366_en) in Europe has started the conversation about open banking, as banks are now forced to share their customer data and to execute payments initiated by third parties on behalf of their customers – encouraging small businesses, as well as start-ups, to use that data for innovation and breaking decade old ways of working within banks that now need to respond in unfamiliar ways.

As the directive creeps closer, debate surrounding what it means for banks and consumers is [ramping up](http://www.telegraph.co.uk/business/2017/10/01/two-thirds-consumers-dont-want-share-financial-data-blow-open/) – with some commentary suggesting that consumers may not be ready to share with organisations such as retailers, outside of the financial services industry.

Meanwhile, the 2016 Edelman trust barometer suggested that, by and large, [consumers do trust financial services](https://www.financedigest.com/do-consumers-want-robo-advisory-services.html "DO CONSUMERS WANT ROBO-ADVISORY SERVICES?") organisations with their personal information.For the time being, it seems that mainstream banks have an advantage, retaining – in large – the [trust of consumers](https://www.financedigest.com/trusting-in-trust-marks-enhancing-consumer-trust-in-your-ecommerce-business.html "Trusting in trust marks: enhancing consumer trust in your ecommerce business ") with their personal data. But this doesn’t [mean they don’t have to keep up with the services](https://www.financedigest.com/what-does-software-as-a-service-mean-for-healthcare.html "What Does Software As A Service Mean For Healthcare?") offered by outside competitors and disruptors.

**What are we** [seeing from disruptors and innovators?](https://www.financedigest.com/the-next-upcoming-years-to-see-the-aesthetic-lasers-and-energy-devices-market-get-through-the-best-of-both-innovation-and-inquisition.html "The Next Upcoming Years To See The Aesthetic Lasers And Energy Devices Market Get Through The Best Of Both – Innovation And Inquisition")

Digital is undoubtedly changing [customer expectations](https://www.financedigest.com/how-omnichannel-cx-can-help-insurers-meet-customer-expectations.html "How omnichannel CX can help insurers meet customer expectations") and behaviours. Customers are offered ever more choices through personalised interactions. Today, most customers expect to complete an electronic, personalised [banking transaction anywhere at any time](https://www.financedigest.com/now-is-the-time-for-banks-to-introduce-intelligent-account-analysis.html "Now Is the Time for Banks to Introduce Intelligent Account Analysis").

What’s more, the [rate of innovation is moving at a rapid pace](https://www.financedigest.com/ecb-should-raise-rates-at-steady-pace-chief-economist-says.html "ECB should raise rates at steady pace, chief economist says"). Monzo, once a cash card app, now has the ambition [of becoming a banking platform provider](https://www.moneywise.co.uk/news/2017-10-10/monzo-to-close-prepaid-card-sign-ups-week-users-to-be-migrated-to-current-accounts) – removing its original use entirely to facilitate this. Start-ups that aim to disrupt traditional business models now have previously unparalleled access to customers and data. In fact, every company can see the potential benefit of the massive increase in data generated from [smart phones and smart devices](https://www.financedigest.com/smart-home-devices-market-is-expected-to-grow-at-a-healthy-cagr-of-over-18-during-the-study-forecast-period-2021-2031.html "Smart Home Devices Market is expected to grow at a healthy CAGR of over 18% during the study forecast period 2021-2031"), but not every business is taking advantage.

**How will this disruption** [impact traditional banks?](https://www.financedigest.com/the-latest-trends-in-instant-payments-and-how-they-impact-banks.html "The latest trends in instant payments and how they impact banks")

Traditional [banks need to ensure their existing business models continue to operate smoothly while also focussing on transforming their businesses to innovate](https://www.financedigest.com/transforming-the-retail-banking-ecosystem-its-all-about-technological-innovation.html "TRANSFORMING THE RETAIL BANKING ECOSYSTEM: IT’S ALL ABOUT TECHNOLOGICAL INNOVATION") and keep up with the changing needs, behaviours and expectations of customers.

This means re-orienting from a traditional ‘bank first’ to a ‘life first’ mind-set and model that is able to offer financial experiences that embed traditional products and services to [meet a customer’s](https://www.financedigest.com/meeting-customers-where-they-are-through-financial-inclusion-and-hyper-personalization.html "Meeting Customers “Where They Are” Through Financial Inclusion and Hyper-Personalization") life stage requirement (for example, selling a mortgage becomes helping a customer find and purchase a home, and then protect that home).Also, they need to move from a historical product and business line operating model to a more [customer value model that mirrors the customer journeys](https://www.financedigest.com/how-to-navigate-a-seamless-journey-from-cio-to-chief-customer-officer.html "How to navigate a seamless journey from CIO to Chief Customer Officer").

**An [open ecosystem](https://www.financedigest.com/open-finance-can-help-unlock-innovation-across-the-financial-ecosystem.html "Open Finance can help unlock innovation across the financial ecosystem")**

An ecosystem that allows customer [data to be shared](https://www.financedigest.com/how-data-sharing-can-give-brands-confidence.html "How data sharing can give brands confidence") with both external and internal parties to ultimately facilitate the best customer experience and engagement is critical. From here, banks can design [predictive services](https://www.financedigest.com/the-digital-first-world-financial-services-predictions-for-2022.html "The digital-first world: financial services predictions for 2022") for the needs of both customer and employee. This will involve [planning for significant increases in customer](https://www.financedigest.com/a-ccm-platform-is-crucial-to-your-customer-communication-plans-heres-why.html "A CCM platform is crucial to your customer communication plans: here’s why") interaction and engagement – whether through existing channels or entirely new ones.

It’s also imperative for [large banks](https://www.financedigest.com/swiss-national-bank-makes-another-large-draw-on-fed-swap-line.html "Swiss National Bank makes another large draw on Fed swap line") to self-disrupt. They can do this by partnering with third parties to accelerate the pace of innovation and [change that will be required in order to sustain competitiveness](https://www.financedigest.com/foley-catheters-market-pin-point-analysis-for-changing-competitive-dynamics.html "Foley Catheters Market: Pin-Point Analysis For Changing Competitive Dynamics").Identifying and on-boarding relevant partners requires careful thought to ensure [successful outcomes](https://www.financedigest.com/attorney-and-founder-of-chukwuma-law-group-jeff-c-chukwuma-on-intuition-as-a-tool-for-successful-outcomes.html "Attorney and Founder of Chukwuma Law Group, Jeff C. Chukwuma on Intuition as a Tool for Successful Outcomes").Or, create an incubator or innovation lab that is able to test, learn and roll out new [ideas to the business](https://www.financedigest.com/top-4-blockchain-business-ideas-for-2022.html "Top 4 Blockchain Business Ideas for 2022") which will challenge often stagnant departmental silos.

[Banks must provide the right product or service](https://www.financedigest.com/the-gmp-cell-banking-service-market.html "The GMP Cell Banking Service Market") to the right customer at the right moment. All [banks can benefit from the opening](https://www.financedigest.com/the-future-of-financial-services-how-apis-are-fuelling-the-rapid-rise-of-open-banking.html "The future of financial services – how APIs are fuelling the rapid rise of Open Banking") of data, and both the external and internal sharing of this data, with banks being able to utilise their own and their partners’ customer data to bring to light those unmet, or even just under-served, customer needs.

[**Banking for the future**](https://www.financedigest.com/what-is-the-future-of-banking-in-the-metaverse.html "What is the future of banking in the metaverse?")

If banks are to compete in the [open](https://www.financedigest.com/what-does-2022-hold-for-open-banking-some-predictions-from-the-ecosystem.html "What does 2022 hold for open banking? Some predictions from the ecosystem") banking revolution world, they need to plan for the future while upgrading their existing technology capabilities to ensure strategic needs of the bank are kept in mind. The evolution of a traditionally [lagging product](https://www.financedigest.com/apple-plans-to-cut-iphone-14-production-lag-between-china-india-bloomberg.html "Apple plans to cut iPhone 14 production lag between China, India – Bloomberg") and service business model to a proactive customer centred service model that is dynamic and near real time is crucial.

The future of banking will be determined by those banks that start early, and ones that are willing to disrupt traditional business models to push the boundaries of customer experience, making use of data and insights along with expanding operating models that work within an eco-system of third party partners. Undoubtedly, this is a [big challenge for traditional banks](https://www.financedigest.com/big-bank-ceos-to-sell-lawmakers-on-relief-diversity-efforts-amid-economic-regulatory-challenges.html "Big bank CEOs to sell lawmakers on relief, diversity efforts amid economic, regulatory challenges") with inherited structures; it’s uncomfortable, but it’s absolutely necessary to compete in today’s market.


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