When it comes to delivering personalized, integrated, real-time experiences, banks can no longer go it alone.

Digital business change across financial services didn’t start with the pandemic, but the crisis has certainly made it an imperative. Amid uptake by new customer segments — such as a 20% acceleration among older customers, according to some estimates — banking and financial services executives globally expect to boost the percent of revenues obtained through digital channels by 54%, according to our recent research.

In addition to fulfilling the increased appetite for digital interactions, banks are also intent on offsetting the challenges of a sustained low-interest-rate environment by focusing on acquiring new clients, such as underserved communities. 

To meet these goals, financial institutions (FI) will need to deliver banking experiences that meet and exceed consumers’ demand for greater personalization and anticipation of their needs. Ideally, they will fully integrate customers’ financial behaviors and interactions into a cohesive set of capabilities that enable them to manage money, credit, insurance, income and expenditures in a simple, streamlined way.

The mismatch of legacy systems and current needs

Doing so hinges on three key elements: a deep understanding of the clients the bank serves, standardized ways of interacting with them and a commitment to creating better experiences. As data-driven insights are a key component of creating these experiences, FIs will also need to make privacy, security and transparency the core of every customer interaction.

None of these elements will be easy (or even possible) to achieve, however, with the traditional technology infrastructure at many banks today. Many FIs rely on legacy systems and technologies that have little front-to-back dialog to serve their customers. These fractured workflows can limit a bank’s ability to deliver real-time personalized experiences to clients, explore new segments and offer full-service banking solutions.

The way forward with open banking

To overcome these hurdles, banks need to embrace new business models driven by open banking ecosystems and smart aggregation with third-party providers. Through the open banking industry initiative, banking capabilities can be developed, exposed and aggregated across the financial services ecosystem. Using these plug-and-play capabilities, banks can develop timely, personalized products and services either internally or via white-labeled arrangements with fintechs, without the need to build solutions from scratch.

FIs can meet customer needs by aggregating, provisioning and ultimately using data to create meaningful, contextual client experiences — and to accomplish this personalization at scale. By doing so, they can drive efficiency, foster innovation, enable customer growth and improve overall speed to market. An example is BBVA's banking as a service (BaaS), which allows third parties to integrate payments and banking services with their own business models.

With an open banking model supported by integration technologies, banks can simplify their technology stack and connect to their back-end systems while also paving the way to cloud-based business change, which can be vital for automating banking processes and deriving analytics quickly. Ultimately, open banking plays directly into banks’ aim to reach underserved clients, allowing them to derive actionable insights into the wants and needs of these new segments.

For example, a major European bank used an open banking platform to launch a digital bank in multiple markets to expand its customer base. This same approach is used by small-to-medium-enterprise-focused banks (SME) like AZLO and Oxygen to provide bespoke business services (e.g., accounting, incorporation, cash flow analytics, etc.), to extend the SME portfolio beyond traditional financial services.

Bringing open banking to life

To fully embrace the open API economy, banks need to overcome key challenges, which include customers’ reluctance to share data, the need to educate customers to increase buy-in, new tech-savvy competition (especially non-bank financial companies), the industry’s own anxiety about data sharing and, perhaps most importantly, legacy system constraints.

Banks are approaching expert partners to help them with a clear positioning strategy and a holistic approach to dealing with entrenched and insurgent competition — critical first steps in their open banking journey. We have assisted banks by building innovative interoperable solutions, robustly secure APIs and API-led modernization initiatives to address legacy systems challenges. Ultimately, all of these initiatives help FIs ready themselves to plug-and-play in open banking ecosystems.

Earlier this year, we partnered with a top-performing US bank with more than $35 billion in assets to help modernize its existing digital payments infrastructure — especially its payment schemes such as Wire, ACH, Swift and real-time payments.

In this engagement, we helped the FI move from multiple proprietary message formats (Swift MT, FED, etc.) to the ISO 20022 standard. To meet the ambitious integration demands of numerous payments channels and bulk transaction validation, we leveraged MuleSoft’s out-of-the-box runtime engine and gateway layer features to create a richer, faster and open API standards-based payments network.

This approach allows for the addition of a dedicated orchestration layer on top of back-end services, thereby separating orchestration from implementation concerns. Applying these governance capabilities led to a 100% faster payment products rollout, with robust security, metering of the traffic flowing through the APIs using rate limiting and throttling, and last-mile security to back-end services for enhanced fraud prevention. 

The MuleSoft approach

MuleSoft’s API-led architecture gives banks the internal and external connectivity they need to create end-to-end experiences. This connectivity enables FIs to unbundle and bundle product capabilities in real-time, increasing speed to market. It also allows banks to more efficiently derive insights from the data they’ve acquired and convert those insights into impactful client interactions. 

The secure API gateway approach and MuleSoft integration capabilities provide the necessary flexibility for banks to deploy on-premise or cloud services, and customize security to their needs. As ecosystems broaden into a hybrid infrastructure, it will be key to have a unified API management and integration platform to manage users, monitor and analyze traffic, and secure APIs with ordered policies in one place. This is how banks can enable plug-and-play marketplace operations and deliver superior customer experiences.

Given the ongoing global talent shortage, FIs will increasingly need to create roadmaps that effectively integrate API-powered approaches like MuleSoft into their environments. Doing so will enable them to deliver on the market’s growing need for highly integrated and personalized banking services with greater agility and more predictable outcomes.