Turn Banking APIs Into Your Competitive Edge

Transcription

1 Turn Banking APIs Into Your Competitive Edge Hitachi Smart Financial Services Solutions September 19, 2017 Tony Reid Mark Nott CTO, Financial Services, EMEA Hitachi Vantara VP, Global Solutions & Innovation Hitachi Consulting

2 Discussion Agenda Part One Background where did this all start? Digital transformation leaders Digital transformation laggards Potential customer benefits Market impact API economy in financial services

3 Background We are witness to a seismic change in consumer behavior. Any company sitting here today that embraces the status quo as a business proposition is literally facing a collision course with time. Howard D. Schultz, CEO, Starbucks

4 Background Banking for the digital age requires transformation 20 th Century Bank Physical Paper Buildings and Humans Proprietary Closed Tightly coupled Slow Capital intensive Regulation as a barrier 21 st Century Bank Digital Data Software and Servers Standardized Open Loosely coupled Fast Cheap Regulation as an enabler

5 Digital Transformation Leaders Europe has introduced legislation to drive digital transformation In early October 2015, the European Parliament voted to pass a Payment Services Directive (PSD) to increase competitiveness between payment providers BBVA is a European bank leading digital transformation with an open innovation strategy A major change is to open its APIs. Since the BBVA API market, companies can access a number of APIs to help them develop new business, open up new services or simply improve user experience

6 Digital Transformation Laggards Section 1033 of the Dodd-Frank Wall Street Reform and Consumer Protection Act grants the Consumer Financial Protection Bureau (CFPB) the authority to prescribe rules governing access to consumer data CFPB has Project Catalyst to encourage collaboration, but has issued no regulations mandating open access Richard Cordray, Director of the We are gravely concerned by reports that some financial institutions are looking for ways to limit, or even shut off, access to financial data rather than exploring ways to make sure that such access, once granted, is safe and secure

7 Potential Customer Benefits: Lower Costs Through Disintermediation Retail Website Merchant Acquirer (e.g. First Data) Card Scheme (e.g. Visa or Mastercard) Customer Bank Retail Website (Payment Initiation Service Provider) Customer Bank (Account Servicing Payment Provider) Card details Money Permission Authentication via Token or API

8 Market Impact Financial Services organisations recognise the digital imperative (Hitachi-commissioned survey by Forbes, May 2017) Top External Drivers of Digital Transformation Top 5 Investment Priorities Over the Next Two Years New business models 41% New technologies to enable digitization 51% New technologies 40% Competitors from our industry 36% Customer expectations 35% Disruptive competitors from other industries 23% Increasing data and analytics capabilities Development of new products and services Expansion into new geographic markets 51% 45% 40% Partners, vendors and third parties 16% Internet of Things, machine-tomachine technologies 38%

9 Market Impact The U.S. and Europe are at the tipping point in terms of financial innovation Impact of digital disruption on US Consumer Banking Revenue $850 billion $870 billion $1.05 trillion $1.2 trillion Total banking consumer revenue Revenue impact from digital distribution 1.1% 5% 10% 17% Source: Citi Digital Strategy

10 API Economy in Financial Services The introduction of open, secure, scalable API ecosystems is required to unleash the potential in FinTech and beyond API platform Bank A MyAcc01 Bank B MyAcc02 Bank C MyAcc03 Securing Account consolidation Managing Publishing Energy Company A Energy Company B Energy Company C Energy-cost optimization MyBill

11 Discussion Agenda Part Two Hitachi s position and views on open banking APIs Possible impact on core system interaction Level 1 create a scalable PSD2-enabling data platform Level 2 built-in consent management as a differentiator Level 3 proactively detect anomalies Level 4 enrich the platform for greater services

12 Open Banking APIs Hitachi Opinion and Potential Impact Hitachi history in central IT we understand the complexity Changing workload shape through different channels Can existing systems cope with unpredictable workload? Hitachi recommends a 4-step approach from compliance to new revenue

13 Open Banking APIs Hitachi 4-Step Approach to API-Based Services Level 1 A PSD2-enablement platform Design and build a scalable, modern data store with a common data layer populated through modern Pentaho Data Ingestion and message broker tools SCALE OUT

14 Open Banking APIs Hitachi 4-Step Approach to API-Based Services Level 2 Enhanced control of data exposure Create a granular consentmanagement capability Rich end-user control over TPP use of their bank account data

15 Open Banking APIs Hitachi 4-Step Approach to API-Based Services Level 3 Proactive claims-management data capture Use advanced machine learning to detect and alert on anomalies Typical activity Possible fraud

16 Open Banking APIs Hitachi 4-Step Approach to API-Based Services Level 4 Enable new revenue streams through advanced API services Provide a mechanism to add external data sources to enrich the services available through the API platform

17 Open Banking APIs The Blueprint Putting It All Together Internal Data Sources Business Silo Data Core Systems Retail Banking Corporate Banking Wealth Mgmt. API Services Consent Management Authorisation Logging Audit Security Layer API Layer Claims/Fraud Management Anomaly Detection Alerting Insurance Capital Markets Data Extraction Event Extraction Message Broker Common Data Layer Operational Datastore Extermal Data Sources Event Feeds

18 Open Banking APIs Summary and Close The world is changing fast You can wait until you are made to change (regulation) or you can embrace Digital Transformation A modern API infrastructure provides a fastrack to open up your legacy systems to the FinTech revolution allowing you to define new business models and gain a competitive edge

19 Q&A

20 Thank You

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