The increased use of online platforms for transactions and payments has contributed to the growth of the banking and financial sector in recent years. According to the World Report Series Payments 2022, conducted by Capgemini, in 2016 there were 60 billion digital payments in Latin America, a figure that, according to projections, would reach 78 billion by 2023. Globally, there were 989 trillion payments in digital ecosystems in 2021 and there are expected to be 1.374 trillion this year.
The implementation of increasingly mature technological infrastructures impacts the growth of cashless transactions. Banking platforms allow financial services businesses to adapt market trends, offer their customers the products they expect, create unique and valuable experiences; All that set of characteristics to maintain its profitability and competitiveness.
What is a banking platform
Banking as a platform, also known as BaaP (banking as a platform), is a model that enables the integration of banking and non-banking services through a provider, a bank and/or a third party.
Banking platforms use open banking models that allow the creation of services and applications around the needs of the business and those of its customers. Open banking is a technology that frees data and information to be shared and exploited, as long as you have the consent of the people or the company. Entities using open banking can access entire libraries of data rather than individual points, identifying patterns, insights and algorithms that drive personalization, transparency and security.
Such information is shared securely through APIs, which offer suppliers easy ways to communicate with each other and relay the information that customers have allowed them to share. For example, a travel agency can use an API from a global bank to view account balances and offer a discount on a vacation package at the right time.
A banking platform expands the offer of traditional financial institutions and requires a microservices architecture that allows you to significantly redesign the infrastructure of your current applications to successfully implement the new functionalities, in addition to an efficient and fast integration with third parties, which can become the main competitive differentiation in this ecosystem.
Advantages of implementing open banking systems
- Use customer data to improve their experience: open banking allows to offer a complete view of the financial life of customers (credits, transactions, savings, pensions, etc.) and companies can use this data to provide personalized offers according to their needs and moments of their life (birth of children, university, travel, among others).
- Ability to manage governance successfully: People need to know that they can trust the institutions they share their data with and what service channels they need to access when things don’t go as expected. A company immersed in the open banking ecosystem needs to have clear and agile processes to resolve customer requests and/or complaints.
- Opportunity to educate customers: Many customers don’t know much about open banking and its implications, which sets up a challenging barrier to data sharing. However, explaining the benefits of digital and online services, along with the new functionalities that are implemented, can encourage them to use it.
Technologies immersed in a banking platform
According to The Guide to Open Banking by PYMNTS, banks must implement a comprehensive digital architecture that is essentially based on a modern banking platform, which is:
- Based on APIs: the provision of these tools allows banks and institutions to collaborate with suppliers, offering consumers countless services.
- Driven by artificial intelligence analysis: it is possible to use data and information internally and thus obtain high-quality information for better personalization of the financial portfolio.
- Elastically scalable: Advanced technologies, especially those that are cloud-based, can handle rapidly growing and highly variable usage.
- Robust and secure: A banking platform must have the highest security standards in areas such as authentication, authorization, and access control.
Core competencies of an effective banking platform
In order to enhance your business capabilities, accelerate innovation in your product portfolio, and provide the best possible customer experience, you should assess the following core competencies:
Handling and custody of personal data
- Ensure that data is reliable, collected correctly and secure storage is ensured.
- Establish algorithms that manage the processing, storage, identification and categorization of data.
Data management and analysis
- Implement a common framework for collecting, sorting, integrating, and maintaining data.
- Integrate data warehouses, data identification and categorization algorithms, machine learning capabilities, and data auditing mechanisms.
Establish greater security
- Implement appropriate authentication and authorization protocols.
- Secure and encrypt API traffic.
- Use biometrics and be prepared against new threat factors.
- Use mitigation bots to protect open APIs from data loss and fraud.
Finding the right supplier/partner
Establish relationships with the right suppliers or partners; developers who understand the APIs behind the tools, financial regulations, who have the experience, technologies and knowledge.
The time is now for financial solutions entities that want to remain competitive in the market. Robust banking platforms with microservices allow you to drive your digital transformation around your business objectives, flexible applications and better decision making, as well as customer satisfaction and an improvement in the experience in various channels.
Cobis Topaz’s full banking platform supports all the operations of your financial services business, anywhere in the world. It is customer-centric and enables the agile creation of new products to drive innovation. It is also highly configurable through open banking rules, through the API strategy. To learn more about it and our technological solutions click here.