Open Platforms: The Future of Fintech

Bharat Rathod, Head-Market Development, Financial, Thomson Reuters, South AsiaWe are living in an age when an idea can progress from paper to reality almost overnight to become the `new normal'. People used to Xerox a document, now Amazon is the new shopping hub and Uber is the disruption which has changed the face of public transport. While it is difficult to predict what the future of financial services will be like a decade from now, the sector will continue to be driven by cutting-edge technologies such as open platforms, or open API (application programming interface).

Three years ago, Gartner, the world's leading research and advisory company, predicted that by 2016, 75 percent of the top 50 banks in the world would open their API and 25 percent of these would have app stores for customers. Today, embracing an open platform strategy has become crucial to a fundamental shift in the financial industry landscape.

An open platform is a plug-and-play business model that allows multiple participants, including producers and consumers, to connect and interact with each other, and create value beneficial to all stakeholders. A key characteristic of a well-designed platform is that it can be programmed through APIs and is consistent in common operations such as authentication, authorisation, data models and entitlement.

An example of a robust Open Platform is Salesforce, the American cloud computing company, which has software, content, third-party developers and an entire ecosystem of app developers. It allows users to perform key functions and integrate its own sales data with that of other potential third-party data. Once you have embedded it into an organisation, it is powerful, scalable and hard to replace. It is imperative for financial services companies to follow suit and innovate by adopting open platforms.

But how can open platforms drive effective innovation in financial services? Here is a checklist.
Consumers Demand Innovation
Customer demand has led to various disruptions in retail space leading to a host of digital and mobile applications, which are fairly intuitive and can intelligently tag people, places, events, and cater to various financial services, including banking and wealth management. The idea of API-based Open Platform is to make this content and analytics available across digital channels and internal portals to link big data to deliver insights for effective and efficient decision-making.

Collaborative Ecosystem
Innovation is possible with participation of a wide range of players within the ecosystem to create apps instead of just providing raw data. While data providers may continue to make available leading industry insights and content, open platforms that allow clients, third parties, fintechs and the ecosystem to build new transformative apps which will provide clients with greater choices and significantly enhance their decision-making abilities.

As innovation thrives on open plat-forms, there is an underlying need for trusted data, scalable infrastructure and far-reaching distribution and marketing channels. Apple's App Store imposes strict restrictions on developers, thus ensuring their complete trust. Similarly, the ability of open platforms to ensure compliance and provide credible data is a critical aspect.

Users expect everything to be avail-able on the go -- seamless updates, real-time information and ease of operations. The need to balance choice and control underscores the need for an open platform to handle activities such as administration, compliance, authentication and other vital services.

Standards help create a level-playing field and foster and expedite innovation. Open APIs, Web standards (HTML5), and administrative procedures and controls are a few examples of standards that facilitate more efficient business development and transformation.

Experience is Key
The key ensuring greater use of open platforms is to offer a seamless experience through common global data models, taxonomies and system procedures, thus empowering consumers and partners to innovate at a faster pace without relying on intermediaries or institutions.

Merits of Open Platform
• Fosters innovation and collaboration
• Enables leveraging a growing pool of fintech talent for creating new propositions
• Provides new disruptive opportunities with cost efficiency
• Offers flexibility with new technology architectures
• Enhances customer experience and brand value

Considering the challenges and opportunities in the financial services sector, it is inevitable that we will see innovative problem-solving apps across the industry. The question is who will go first to create the platform that allows exponential innovation?

With a clear open platform strategy and focus on collaboration, financial institutions will offer services to help them stay ahead of disruption, and perhaps even become disrupters themselves.