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APIs, Cloud & apps will bring key transformation in transaction banking

A survey suggests open banking, APIs, Cloud and apps - not blockchain – will drive the major changes corporates will see in transaction banking services. The white paper by Finextra and Misys – Transaction banking in an open, connected world – explores attitudes among transaction banking professionals regarding the emerging technologies that could improve their services for their corporate clients.

The research asked:

  • how is PSD2, open APIs and the Internet of Things (IoT) currently being viewed by corporate banks;
  • how are corporate banks factoring these trends into their technology and strategic thinking; and
  • how well-positioned they are to take advantage of these changes?

Blockchain not the main driver of change for corporates

The technology expected to have the greatest impact was fintech collaboration through open banking, APIs, the Cloud and apps. Despite the hype surrounding blockchain, this was seen as the emerging technology that will have least impact on value-added bank services for corporate customers in the next five years. Artificial intelligence (AI) technology in conjunction with smart objects was also expected to have less impact.

The report said: “Given the extensive hype around blockchain for the past two to three years, the fact that AI is considered more likely to contribute to value added services for corporate customers is perhaps slightly surprising. That said, the survey respondents were asked to think about customer-facing applications, and blockchain is clearly a back office infrastructure play.”

The graph below shows how respondents answered the question:

PSD2: opportunity or distraction?

The survey also asked whether PSD2 was an opportunity for transaction banking or a drain on resources. The report noted a shift in thinking by banks: from a fear that opening up bank data to third parties through APIs would lead to the disintermediation of banks, towards a new mindset that focuses on how banks can innovate and provide more transparent, value-added services to clients. The report's graph below shows that almost 80 per cent of banking professionals now think that PSD2 is a great opportunity for them to win new business.

Overall, the report suggests that transforming in step with digital changes is a huge challenge for banks and the majority say that legacy technology systems, regulation and overcoming existing processes are some of the main obstacles to the transition to open banking and the adoption of emerging technology. Nonetheless, the attitude to digital transformation and open banking among the bankers surveyed is generally positive. Almost three-quarters say that between 10 and 50 per cent of revenues is now derived from digital channels and 17 per cent derive more than 50 per cent of revenues from digital. And almost three-quarters have some form of strategy (partially or fully developed) to use digital to enable employee excellence. Luckily only 5 per cent have no strategy at all and no plans to develop one.

CTMfile take: This survey suggests that banks are – on the whole – not quite there yet when it comes to transitioning to emerging technologies such as the Cloud, APIs, apps and open banking. But it's good to see that overall the banking mindset is changing and most banks see opportunities associated with PSD2 and the value they could bring for corporate clients.  

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This item appears in the following sections:
Bank Relations & KYC
Evaluating Banks’ Overall Performance

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