Turn Banking APIs Into Your Competitive Edge Hitachi Smart Financial Services Solutions September 19, 2017 Mark Nott Tony Reid VP, Global Solutions & Innovation CTO, Financial Services, EMEA Hitachi Consulting Hitachi Vantara
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
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
Background Banking for the digital age requires transformation 20 th Century Bank 21 st Century Bank Physical Digital Paper Data Buildings and Humans Software and Servers Proprietary Standardized Closed Open Tightly coupled Loosely coupled Slow Fast Capital intensive Cheap Regulation as a barrier Regulation as an enabler
Digital Transformation Leaders Europe has introduced legislation BBVA is a European bank leading to drive digital transformation 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 In early October 2015, the European Parliament voted to pass a Payment Services Directive (PSD) to increase competitiveness between payment providers
Digital Transformation Laggards Section 1033 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Richard Cordray, grants the Consumer Financial Protection Director of the CFPB, Bureau (CFPB) the authority to prescribe @Money2020: rules governing access to consumer data We are gravely concerned by CFPB has Project Catalyst to encourage reports that some financial collaboration, but has issued no regulations institutions are looking for ways mandating open access 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
Potential Customer Benefits: Lower Costs Through Disintermediation Merchant Card Scheme Acquirer (e.g. (e.g. Visa or Mastercard) First Data) Customer Bank Retail Website Customer Bank Retail Website (Account Servicing Payment Provider) (Payment Initiation Service Provider) Money Permission Authentication via Token or API Card details
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 technologies to New business models 41% 51% enable digitization New technologies 40% Increasing data and 51% analytics capabilities Competitors from 36% our industry Development of new 45% products and services 35% Customer expectations Expansion into new 40% Disruptive competitors geographic markets 23% from other industries Internet of Things, machine-to- Partners, vendors 16% 38% and third parties machine technologies
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 $1.2 trillion $1.05 trillion $870 $850 billion billion Total banking consumer revenue Revenue impact from digital distribution 1.1% 5% 10% 17% 2015 2017 2020 2023 Source: Citi Digital Strategy
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 Bank B Bank C MyAcc01 MyAcc02 MyAcc03 Securing Managing Energy Energy Energy Account consolidation Publishing Company A Company B Company C MyBill Energy-cost optimization
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
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
Open Banking APIs Hitachi 4-Step Approach to API-Based Services Level 1 – A PSD2-enablement platform Design and build a scalable, SCALE OUT modern data store with a common data layer populated through modern Pentaho Data Ingestion and message broker tools
Open Banking APIs Hitachi 4-Step Approach to API-Based Services Level 2 – Enhanced control of data exposure Create a granular consent- management capability Rich end-user control over TPP use of their bank account data
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 Typical activity Possible fraud on anomalies
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
Open Banking APIs The Blueprint – Putting It All Together Security Layer Internal Data Sources Business Silo Data Core Systems API Services Claims/Fraud Retail Consent Management Management Banking Authorisation Anomaly Detection Logging Corporate Alerting Banking Audit Wealth API Layer Mgmt. Insurance Data Capital Extraction Common Data Layer Markets Message Event Operational Datastore Extraction Broker Extermal Data Sources Event Feeds
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
Q & A
Thank You
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