With new open banking regulations coming into effect February 2020, banks are ramping up their in-house engineering efforts, and finding themselves going head to head with global tech companies for developer talent.
According to a recent 2018 Fiserv-sponsored survey done in conjunction with LM Research & Marketing Consultancy, 32 percent of financial institution decision makers in Australia are finding it very difficult to recruit engineering talent for open banking initiatives.
Although banks are the world’s original fintechs, they often lack the cool factor of start-ups.
Yet, with data, rather than cash, becoming the new lifeblood of financial services, the door is open for banks to take pride in their place within the digital financial services ecosystem.
As competition for developer talent intensifies, banks can think beyond compliance to leverage the opportunities of open banking and appeal to a developer mindset that reflects how they want to work and what provides them with a sense of success. While open banking might be driven primarily by regulatory requirements, it is also driving a shift towards a more open, collaborative, and engineer-friendly way of working and as it matures, its impact will become more tangible and widespread.
Given their increasingly central role and visibility, developers are better placed than ever before to help banks figure out the products and services that will help them stay competitive in the connected banking era. This, in turn, will make banks more desirable places for talented developers to work.
In order to attract and retain developer talent, we suggest the three key open banking related approaches below.
Make the API the product
Open banking requires that banks create application program interfaces, also known as APIs, to make customer information held by the bank available to other third parties, with the permission of the customer. In the modern software reality, banks are increasingly recognising that the API does not just provide access to information for products – it is the product and should be managed in a way that will provide optimal value to the bank as well as to the API users.
Banks that think like a software or technology company are going further to view the developer (internal as well as external) as a type of customer, because they can access services via APIs. This means that there is a completely new way for both parties to engage. Now, developers at the bank can create new services by mashing up or distributing core features they already use internally, or by integrating with third parties to enable new customer experiences. This is not only compelling for developers who can create these services, but also for the customers that will be able to use them. As counterintuitive as it may sound, customers are more likely to be loyal to banks that allow them access to the richest variety of services, even if these include services from outside the bank.
It’s in a bank’s interest to build and operate APIs that are accessible, flexible, and secure. The best, most usable APIs will attract the most developers and the bigger a bank’s developer ecosystem, the more successful it will be. The ecosystem business model is one companies such as Google and Apple have followed for some time: their success depends on many and varied third parties building on their platform.
To drive this change, which is cultural as much as technological, some are trying on the ‘startup mindset’ like a new suit, with developers working in environments that empower them to create and build APIs for other developers, collaborate with third parties to add on their services, launch services early and update them frequently.
Focus in-house teams on what adds value
Many developers are driven to create new services that will appeal to customers and make their lives easier. More than anything, developers like to see working technology in customers’ hands. But they cannot be expected to do this if they are continually focused on compliance and are up against changing regulation road maps. Creating and running basic infrastructure services, such as test automation frameworks, code pipelines, container management and workload management schedulers, as well as the classic (though now hopefully virtualised and fully automated) ‘tin’, can also be a drain on developers’ time.
External solutions, tools, collaborations and partnerships can give this time back to developers. Looking outside the bank can make sense, particularly when it comes to ‘already solved problems’ that aren’t core to the bank’s mission. This does not necessarily mean purchasing fully developed solutions. Leveraging existing frameworks and technologies will enable internal teams to deliver a range of projects more quickly, allowing them to spend more time focusing on delivering services that customers love and review positively.
Collaborate to innovate
In Australia, where the big four banks are required to adopt open banking by February 2020, only 24 percent of the Fiserv survey respondents said their strategy for open banking goes beyond day one. Banks that take a longer view will be best positioned to capitalise on the opportunity of open banking, facilitating greater transparency and building trust between themselves and their customers.
The banks that will ultimately win in the open banking race will be the ones that collaborate with third parties to maximise the use of their APIs and those who can provide developers with the tools, resources and time to be able to get innovative products out the door.
Collaboration also gives developers a chance to extend their capabilities and creativity in new ways, and brings “fintech” appeal to the development process.
Outsourcing the baseline of Open Banking compliance will give developers more time and headspace to focus on strategic customer-focused innovation, while still meeting regulatory requirements. In-house developers can focus on creating great customer experiences, building ecosystems, growing with their customer and engendering trust and loyalty. Moreover, with its introduction of an API-focused ecosystem, open banking provides banks with an opportunity to connect with developers in ways that resonate with them, giving banks a new way to attract and retain talent in a highly competitive market.
Theo Gough, director of product and technology Strategy for FinKit, Fiserv
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