This month, FinConecta’s whereabouts were mainly in Africa, where the banking industry is experiencing rapid changes. Our approach to Open Banking (OB) revolutionizes the way players from different countries in the continent approach financial innovation.. OB allows Financial Institutions all over the world to leverage customer data in a secure manner, providing access to services in an affordable way, which will in consequence encourage financial inclusion. Is Africa ready for the new API Economy?
Why open banking?
Consumers display a rising preference for digital channels. Mobile money transfer companies and FinTech are attracting such consumers with their digital, innovative offerings. African banks need to transform in order to be able to adopt a platform business model and ecosystem banking. Those able to innovate effectively will be better at leveraging data and technology resulting in successful digital transformation. Open Banking will improve the ability of financial institutions to meet the needs of customers by leveraging the data held by a bank in a secure manner, typically via application programming interfaces (APIs). It can facilitate more useful data analysis and presentation for individual customers and for financial services providers.
Millions of Africans now have access to savings accounts and small loans. Banking industry in Africa is experiencing rapid innovation at the hands of non-banking new members, as well as some traditional banks. Banks who describe themselves as innovation pioneers are very customer oriented, with a clear idea of customer goals and how to achieve them. But most players still lack KPIs to measure the outcome of their transformation attempt.
Africa’s banks suffer from high cost to asset ratios. Banks need to improve cost efficiency in and productivity. Many of these challenges can be addressed with the help of digital transformation and innovation, such as moving from physical to multiple digital channels for customer engagement and service delivery, collaborating for innovation -thus sharing cost of innovation via synergistic relationships, shifting CAPEX to OPEX through subscription models.
Emerging FinTech and mobile banking players have already improved financial inclusion in Africa by developing mobile payment and transfer solutions. By fully harnessing the potential of Open Banking, banks, telecommunication companies and other FinTech players can further strengthen and broaden African financial markets.
Regulation in a digital financial world
Kenya’s recent history sets a great example: the ideal situation is when FIs are able to operate in an ecosystem, without need for regulations. This is what happened when Safaricom created MPesa. This was one of the first attempts to move financial services out from traditional players, and embed the functionality into other verticals. In Kenya, regulators waited until there was enough size and scale, then applied some boundaries, and allowed the market to grow.
FinConecta enables digital transformation leveraging Open Banking as a business opportunity
FinConecta is partnering with local players in different countries in the continent, to participate in Africa’s enormous potential to disrupt and transform the financial ecosystem.
One-to-one integrations are extremely cumbersome and time and people-intensive: creating APIs, and producing the required “dialogue” between a Fintech API layer and a financial institution require several months -sometimes more than a year – to yield meaningful results. On the other hand, there is a different approach, FinConecta’s approach: We create the API layers for a financial institution, and we integrate our middleware solution to the core banking system of such institution. This provides them access to our vetted and curated store of FinTech solutions. Like when you browse iTunes, a financial institution can browse, pick and choose to try one or many Fintech solutions in our regulatory-proofed sandbox. Once the trial is successful, the 3rd party solution is moved into production, and available for customers to interact with.
For many banks, the simplest way to add value will be to use private APIs to cut time-to-market for their own digital services—delivering payback in the form of increased customer retention and share of wallet. However, there are many opportunities to go further. By offering open APIs via a marketplace, banks can create a revenue-driving ecosystem for FinTechs and Third Party Providers (TPPs, based on per-API charges or revenue-sharing agreements. A few front-runner organizations are already enjoying success with this API monetization model, and will definitely benefit from their early-adopters strategy. FinConecta is also impacting digital transformation exponentially, by developing marketplaces of financial and non-financial services, aiming to multiply economic value for all participating stakeholders.
Banks can also add value by bundling financial services from third-parties with their own products. These integrated services, which can be monetized through revenue-sharing agreements, enable banks to drive up service quality without the cost and complexity of developing all the required components and capabilities in-house.
FinConecta: Where finance and technology meet.
– Jorge Ruiz, FinConecta Founder & CEO