A call to rethink the banking value chain

Financial services is shifting to platforms for business functions and processes, and that’s a good thing. Moving from applications to Software as a Service (SaaS) and then to Platform as a Service (PaaS) can create new value chains. It can also dramatically reduce the number of error-prone manual processes and foster industry collaboration for superior efficiencies.

Leverage open APIs and core banking systems

But financial services organizations can move even further — and to stay competitive, they’ll need to. Open APIs can help them combine bank data with third-party data and services to create innovative capabilities, essentially “hiring” third parties to provide these services. Banks can also provide best-of-breed capabilities as services to others.

As part of this shift, core financial systems and capabilities can become “consumable” via API-driven interfaces, creating specific outcomes. These core systems, such as payments and mobile wallets, essentially become services that both a bank and its third-party providers can consume.

Conversely, services from third-party providers can be integrated into banks’ own platforms. This may sound daring, but some tech giants — Facebook and Amazon among them — already do this, building new capabilities with APIs that can integrate and interact with capabilities provided by third-party providers. Banks can do it, too.

Partner with providers

Providers can also become partners. Some banks have invested in FinTechs, adopting an attitude of “If you can’t beat them, join them.” This should facilitate the development of important new services, including “know your customer” (KYC) and new accounts. A single bank can essentially stitch together a passel of services, then present them to customers under a single bank brand.

This reassessment of the value chain can free banking and capital markets organizations from the need to provide all services end-to-end. Instead, they can add open APIs that allow trusted third parties to provide various microservices.

The right platform can help banks grow through mergers and acquisitions, making it far easier to integrate disparate systems. This same feature can make it easier for banks to integrate the systems of partners too.

At the end of the digital transformation journey, financial services providers will enjoy a new position in their reconstituted ecosystem. They’ll fully understand their position in that value chain, their competitive advantage and areas of specialization, and their need to partner with third parties.

Read more in the position paper, Master digital banking to succeed in financial services.


Tom Hetterscheidt is chief technologist for banking and capital markets at DXC Technology in North America and a Distinguished Engineer. He has more than 25 years of experience in technology consulting, software development and strategic planning for financial services. Tom works closely with client executive teams and provides innovative insights and guidance to align customers’ technology roadmaps with their strategic business objectives. @thetter

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