Open X: the path to the decentralization in the financial sector
Here, we’ll explain what Open X is and how it’s changing the game.
The rules of the financial market are changing, and this shouldn’t come as a surprise. We have already touched on the regulation of Open Banking and its pillars. The cycle from Run the Bank to Change of Bank and how important it is to monitor these transitions to stay competitive.
Given the information at hand, it’s safe to say that the entire banking sector is diving into an innovation era. All these fronts within the market – and probably other emerging ones – are on the path towards maturity.
In this new reality, collaboration and integration should be at the top of everyone’s minds. An effective collaboration system enables the structured exchange of data and services between the many agents that inhabit the financial ecosystem.
We are talking about a new decentralization paradigm for banks and financial institutions: Open X. We will be delving deeper into this concept within this article and what you can do to adapt.
Open X: understanding the X of the issue
Open X is the combination of Open Banking, Open Insurance, and Open APIs. We will explain each one so you can understand what this combo means.
- Open Banking: guarantees open banking regulations through the full integration of APIs, enhancing competition, and the efficiency of providing financial services. At the same time, it is necessary to prioritize the protection of customers’ personal data in accordance with the General Data Protection Law. The regulation of Open Banking in Brazil by the National Monetary Council and the Central Bank will serve as a guide for the entire banking system, bringing it up to date with global innovation in this sector.
- Open Insurance: The application of Open Innovation practices in the insurance market, defined through the provision of services and data to partners, communities, and startups. Designed to create new services, applications, and innovative business models.
- Open APIs: the name says it all – open APIs. APIs are nothing more than programming structures that enable systems to talk and exchange data with each other. There are countless APIs in the world and, within the concept of Open APIs, they are available for external developers (a company, for example) to access.
These three items are complementary. Its integration allows financial institutions to go beyond the concept of Open Banking or Change the Bank.
Open X represents another level, marked by a much more efficient and structured form of communication, collaboration, and exchange between corporations.
Yes, we are talking about a new era. A new market will emerge from here: with specific activities for each player but in a more integrated way, with a constant exchange of data and services. This new exchange will lead to an exponential improvement in customer experience and innovation.
Why do I need to dive into Open X?
The answer is simple: because it will change – or is already changing – all the norms and premises of the financial sector.
There are already two competing movements within this context: Fintechs are trying to expand their operations while big banks and insurance companies are breaking up their alliances with them – often to create their own.
Also, new business models will appear, as well as new financial products. Many interactions will change for both customers and companies.
- Ways to relate to money
- Forms for business models to operate
- Ways for management platforms to coordinate
For the financial system, the major turning point needs to be the focus. The center of their universe must be the customer.
In the context of Open X and so many transformations, banks need to ensure a resilient, secure, and “anti-break” financial system through a new portfolio of products and services centered on the user.
Note that this strategy solves several challenges for banks, from generating excellent service to processes improvement.
The changes we are seeing, guarantee an improvement in the financial market’s business performance.
We urgently need to think about new businesses to operate within a changing process and connect other companies to their customers; it is necessary to rethink strategies and mindsets!
The future has arrived, and there is no turning back. It’s time to dive into the transformations that all companies are going through.
In other sectors, many changes were a direct effect of the global pandemic and social isolation. However, in the case of the financial industry, Open Banking has been knocking on the door for some time.
In that sense, we see three fundamental measures and opportunities that can – and probably will – arise from Open X.
- Proper planning
When we talk about planning, we can also speak about re-planning. That’s right: recalibrating and adjusting strategies taking into account the business objectives of that moment.
- New business models
From the strategic redesign, new business models will emerge, and from these new models, new services and new products may develop – with the customer always at the center.
Keep in mind:
- Applications for managing multiple accounts
- Digital insurance companies
- Creating new products, services, and even companies
- Investing in technology
Companies must connect empathetically throughout the consumer’s journey. Understanding the client’s situation and niche market makes it much easier to create an excellent solution to their challenges. That’s where technology comes in, or rather, technologies.
Keep in mind:
- API Management
- Cloud Integration
- Application Networks
Open X can – and probably will – change the purpose, strategies, and value of your business.
Decentralization is the way.
As we move towards decentralization, there is an opportunity to plunge into digital transformation, strategic repositioning, and adopt a user-centric mindset. More than ever, the user needs to be the center of all companies’ strategies.
The financial ecosystem is undergoing a profound transformation. The market and the government’s regulations increasingly demand a change in SOP, focusing on business niches. It is this decentralization of business that will drive innovation across the financial sector, in addition to increasing competitiveness.
It is time to restructure your strategy into a more humanized approach, genuinely connected with its users and collaborators. Not to mention digital!