Seven impacts Open Innovation can have on your bank!
Open Innovation has been used more frequently in the banking sector in recent years. It is from it that, for example, the concept of Open Banking arises.
It is no coincidence that the financial market, banks specifically, are among the most innovative. The disruptive initiatives that have emerged with external partnerships have kept this sector at the peak of global Innovation.
We’ll talk more about that in this article. Keep reading to understand this movement and see what the main benefits of Open Banking are!
Why are banks investing in Open Innovation?
Market conditions for financial service providers are changing more and more rapidly.
New technologies and new consumer behaviors are forcing banks to move. Those who best exploit Innovation are those who can compete and keep up.
The 2008 financial crisis was decisive.
Numerous experts point to the 2008 global financial crisis as an epicenter. It had a rapid impact on customers, and loyalty to banks plummeted. Since then, it is increasingly important for financial institutions to promote differentiation with innovative products and services.
Fintechs arrive to change the game.
With technology, new competitors have also emerged. Fintechs – startups where technology is applied in financial services – are perhaps the most tangible examples.
They are causing a real revolution in one of the most consolidated markets for global capitalism. They provide dynamic and tailor-made solutions, reduced bureaucracy – but more details on that later.
Banks feel that it is necessary to look outside.
Structuring innovation strategies with only internal teams in mind is not enough. This is where Open Innovation has been employed. In short, it consists of the use of knowledge entry and exit flows to accelerate Innovation internally and expand markets.
Open Banking is born.
This effort to look outside and absorb knowledge and contributions has given rise to the concept of Open Banking. It, quickly speaking, concerns the practice of collaboration between traditional banks with startups, fintechs, and technology companies. The goal is to create innovative solutions and applications.
We will return to this concept later and explain it better. The important thing now is to know that Open Innovation applied to banks gives rise to Open Banking. And it has been one of the main responses of the banking sector to the challenges of current market dynamics.
How the fintech movement forced the birth of Open Banking
As we have already mentioned, fintechs are integral keys in this new global financial market movement. Understand now how they are decisive for the emergence of the concept of Open Banking. Also, how they can be allies in this strategy.
It is not an exaggeration to say that we are going through a moment of “Fintechization.” China, the United States, Brazil, and other developed and emerging nations are experiencing a financial revolution. And at the base of this are the financial startups. They use emerging technologies like Big Data and Artificial Intelligence to optimize customer experience and fill system gaps.
The business model, which mixes technology and finance, bases its processes on pillars such as API, user-centric strategies, and data science. Thus, it is able to offer differentiated products and services, all 100% digital.
Fintechs are very effective, as they reduce cost and time-to-market, in addition to expanding their service power. Consumers who have never been covered by traditional banks can now have digital checking accounts.
Union of strength
With legislative regulations becoming increasingly sympathetic towards fintechs, banks must act now. And if you can’t beat them, join them.
This is where Fintech and Open Banking meet. When setting up an Open Innovation strategy, the most successful banks have entered into partnerships with fintechs.
In this way, they absorb knowledge and manage to innovate even further. They focus their workforce on what they are good at and take advantage of financial startups’ disruptive services.
7 benefits of Open Innovation applied to banks
So far, you have understood what Open Banking is and why it is important to invest in open Innovation in banks. Check out the main advantages of this strategy below.
- Creation and monetization of digital services
By partnering with innovative startups, it is possible to increase profitability by creating and monetizing digital services.
By creating means of online contact, through Artificial Intelligence, it is possible to serve more customers in less time. Offering digital services, the returns are increased without hiring labor, material expenses, equipment, etc.
- Cost reduction
Operational and solution development costs are reduced with the better use of digital. Data research and analysis can also be automated, which results in lower costs and faster delivery of new products and services (time to market).
This is felt immediately by the bank and its partners, but mainly by customers. They can see their apps doing more and start managing their finances better with digital applications.
- Improved user experience
It has never been more important to work well with customers. From simple current account transactions to asset purchases, people now want to explore technology through other banking routines.
If we look at generations born after the 1990s, this maxim is even more urgent. Accustomed to the information in the palm of their hands, individuals do not want bureaucracy.
Banks that can deal with this new reality are standing out. And they do it based on excellent Open Innovation strategies. That is a better understanding of stakeholders and creating innovations that make a difference.
- Acceleration of digital transformation
By building a good Open Banking strategy, which contemplates the partnership with fintechs and other market agents, digital transformation is also accelerated.
That is to say: partners specializing in innovative technologies provide the capabilities and resources needed to move away from a traditional business model and enter the era of digitalization. And the bank maintains its efforts in its core business.
- Increase in business value
Another critical point is the generation of more value for the business.
By innovating and adapting to a constantly changing world, it is possible to offer more cost/benefit. It is also possible to make customers, shareholders, and even the market, in general, perceive the value.
Recently, the image of “innovator” has been decisive for the longevity of businesses. It is no different in the banking sector.
Look at the recent history in the Brazilian banking sector. How many traditional institutions have disappeared due to their lack of adaptation to market movements?
- Community effect
Last but not least, banks also need to get on the digital wave of creating communities.
By working with Open Banking, they are now able to better engage with their customers and employees. And they can remain loyal and continue to grow and follow changes in consumer behaviors and needs.
How about, did you manage to understand the importance of investing in Open Innovation in the banking sector? Can we show you what Open Banking is and why this concept is so important?
→ Continue to delve deeper into this subject. Download the e-book “Open Banking: the biggest transformation of the financial market” now!