Ecosystems: Banks, Insurers and Digital Payment Tools

Ecosystems, particularly in the context of fintech, are vast, complex, and difficult to define, yet they provide a wide range of benefits to companies across various industries. These ‘ecosystems’ foster collaboration, innovation and new business opportunities by connecting diverse stakeholders such as customers, service providers, technology partners and regulators. 

However, one of the most crucial steps in building and sustaining an effective ecosystem is determining its scope – the boundaries and limits within which the ecosystem will operate.

Defining the scope helps clarify which services, partnerships and technologies will be included, ensuring that the ecosystem remains focused and aligned with goals. It also establishes the limits on growth, resource allocation and potential risks, allowing companies to manage the complexity of the ecosystem while ensuring it remains sustainable and beneficial. 

When well-defined, the scope acts as a guide that helps businesses avoid overextending resources or diluting their value propositions, making the ecosystem more resilient and purpose-driven.

By participating in well-defined digital ecosystems, banks can access cutting-edge technologies, tap into new customer segments and offer more comprehensive and personalised services. This collaborative approach enables banks to remain competitive in an era of digital disruption, where customer expectations are constantly rising and new entrants are challenging traditional business models. Digital ecosystems can facilitate compliance with regulations like PSD2, which mandates open banking initiatives. Through APIs and data sharing, banks can foster partnerships that lead to the development of novel financial products and services.

The rise of digital ecosystems is not limited to traditional institutions. According to Hans Tesselaar, Executive Director at Banking Industry Architecture Network (BIAN): “With more than nine out of 10 consumers now using some form of digital payment tools, banks and other financial institutions are increasingly relying on data obtained through an open-source digital ecosystem.” 

This ecosystem approach helps bridge the knowledge gap between fintechs and the market, enabling all players to deliver more secure, efficient and streamlined customer experiences.

Paul Weiss, CTO at Adaptive, says banks’ ability to swiftly and cost-efficiently adapt to changing industry dynamics has become critical to stay competitive. 

“By leveraging digital ecosystems, financial institutions can build proprietary trading technology solutions that allow them to innovate at their own pace and differentiate themselves in the long term.”

The insurance industry is also experiencing a profound transformation through digital ecosystems. Rory Yates, CSO of EIS, notes: “From neo-carriers to micro-insurers, on-demand coverage, mobile-only carriers, and new insurance technologies, the market is boiling with new entrants, and new partner potential, increasingly giving consumers the choice, speed, and simplicity they demand.” These ecosystem-based business models are reshaping the insurance landscape, offering unprecedented flexibility and customisation to consumers.

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“The continuous rise in influence and scale of fintechs and non-bank financial institutions across the globe has accelerated the need for all parties, including established banks, to deliver a more secure, efficient, and streamlined customer experience,” says Hans.

“With more than nine out of ten consumers now using some form of digital payment tools, banks and other financial institutions are increasingly relying on data obtained through an open-source digital ecosystem. This ecosystem helps to tighten the knowledge gap between fintechs and the market."

This shift has prompted banks and financial institutions to increasingly rely on data from open-source digital ecosystems, helping to bridge the knowledge gap between fintechs and the market.

Digital ecosystems are transforming customer experiences across industries. Zach Burks, CEO of Mintable, explained how NFTs can drive deeper customer interactions and boost revenue. “One client saw a tenfold increase in valuable customers and reached 500,000 users through an NFT strategy,” he continues. 

“Mintable's APIs also enhance engagement at retail points of sale through loyalty tracking and membership features.”

Challenges

Rory Yates highlights a more complex challenge faced by insurers when integrating third-party services into their ecosystems. He points out that “the profound challenge insurers face exploiting ecosystems more effectively is you need a lot more than an API or the ability to connect to a service.” 

“It’s about the ability to exploit their new partner services and gain rapid shifts in experiences for employees and customers. It means configuring those services and orchestrating them so that they make a difference to an employee or customer experience.

“To achieve this, the insurer needs to simultaneously achieve a massive increase in the knowledge of a customer, while at the same time, enabling their ability to act on it in near real-time. The latter part of this typically requires a huge shift in both foundational technologies and operational data models and therefore the business model it is operating in."

Zach Burks explains that integrating third-party services into Mintable's digital ecosystem is relatively straightforward due to its advanced backend architecture, which he compares to Amazon Web Services. “Integrating third-party services isn't much of a challenge for us because Mintable’s systems are built similarly to Amazon Web Services, operating seamlessly in the backend,” he explains. This allows for a smooth process, whether they are incorporating legacy financial systems or mobile apps. “Whether integrating with financial systems using legacy code or a mobile app, it’s as simple as making an API call.” 

Ecosytems and innovation

"Our Coreless Banking initiative was designed to integrate existing banking infrastructure into the digital open banking ecosystem. We launched the initiative as part of one of our working groups, in collaboration with banks and technology providers like HSBC, Zafin, IBM and JP Morgan Chase,” says Hans.

“Coreless banking empowers banks to select the software vendors needed to obtain the best application area solution, without concerns about interoperability and being constrained to the service providers that share the same technical language. By integrating proprietary messages into one standard message model, it helps to speed up legacy banks' path to digitisation and standardisation by adopting a ‘plug-and-play’ solution. It also enhances the speed these banks can deliver tailored, high-quality services in line with the latest technology for their customer base."

Rory Yates also highlights how ecosystem-based models act as a catalyst for innovation by facilitating the implementation of new technologies and services on a large scale. According to Rory, innovation in banking is not merely about conceptualising ideas in a controlled lab environment but about "achieving it at scale by creating that value in an employee or a customer outcome.” 

Coreless Banking

At the heart of the Coreless Banking initiative is a modular design that allows financial institutions to update or replace individual components without disrupting their entire system. This flexibility is further enhanced by an API-first approach, which facilitates seamless integration between various banking services and third-party applications. By leveraging cloud-native architecture, the framework also promotes scalability and cost-efficiency, helping banks to optimise their operations and reduce expenses.

These early adopters, which include major banks, have reported improvements in operational efficiency and customer experience, highlighting the potential impact of this innovative approach.

There are numerous benefits to the Coreless Banking initiative. Banks can enhance their agility, quickly adapting to changing market conditions and customer needs by easily updating or replacing individual components. The modular structure and API-first approach also facilitate faster integration of new technologies and services, fostering innovation within the industry. Additionally, by moving away from monolithic core systems, banks can potentially reduce maintenance costs and improve overall operational efficiency.

As the initiative continues to evolve and gain adoption, it is poised to play a crucial role in shaping the future of banking operations and technology infrastructure, paving the way for a more agile, efficient and customer-centric financial services industry.

“From automating customer experiences in digital, which allows customers choice in claims processes, to the ability to move between channels in order to gain the reassurance and understanding they need,” he adds. “All the way to new products that are usage-based, or more adaptive or risk-mitigating. Ecosystems allow these outcomes to be far easier to achieve because insurers can rapidly adopt enabling technologies, new data services, channel capabilities, or embed themselves deeper into people’s things and lives.”

Strategies for connectivity

Hans Tesselaar also emphasises the power of collaboration in maintaining a competitive edge: “As a member-led non-profit network, BIAN’s success is built upon valuable contributions from a network of vendors, banks, and fintech institutions in the industry. There is also a widespread understanding that many of the problems being experienced can be solved by coming together. This understanding is crucial for any ecosystem model.

“Organisations like BIAN help traditional banks, for example, foster new relationships with fellow financial service providers and fintech companies. In doing so, banks are able to draw expertise on digitisation from an established global network of software vendors, service providers and consultancies. Initiatives such as Coreless Banking are also great launchpads for traditional banks to accelerate their digital transformation efforts and reach success through a standardised model capable of bringing together siloed data.”

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