Just a few years ago the mention of fintechs and financial institutions in the same breath was enough to silence any boardroom discussions. However, as we?ve all experienced over the past 12 months, the world of payments is changing rapidly and the ability for banks to embrace collaboration is now an essential approach to meet customer expectations and drive innovation.

2020 saw a number of high-profile examples hit the headlines - Bank of America announced its partnership with Ripple, and Google signed up six more partners for its digital banking platform. With many things being cited as 'the new normal?, partnerships between banks and fintechs falls firmly into this category these days. The collaboration environment has pivoted from a one-to-one model to one-to-many. These opportunities are also now fostering a new way for banks to approach product design. Below are some examples.

Taking an outside-in approach
At its core, an outside-in approach is about an obsession with the customer, such as relying on customer needs and preferences to guide product strategy. The outside-in perspective is data-driven and avoids making presumptions about customers but puts them front and centre and tests new ideas with them directly. The more traditional inside-out approach, in contrast, tends to either base strategies on the resources that IT says are already available, or on an internal presupposition about what developers and end users might want or need.

Improving time to market with MVPs

Previously banks assumed it was usually best to get to market with a fully functioning solution ready for all. This would lead to long development times and, once live, often see the solution as now obsolete. Embracing APIs, cloud and third-party pilot programs using a minimum viable product (MVP) approach allows for rapid iteration and test and learn phases in a fraction of the time.

Rethinking monetisation models
Monetisation is an essential part of any business case and many API initiatives are started or funded based on the ability to monetise assets. This can come in many forms; reducing the cost of existing ?analogue? services, enabling the value of the data banks hold, and even savings seen with a rapid app development and prototyping approach should be considered. But sometimes even the ability to reach a customer through a new touchpoint enhancing acquisition and loyalty could earn you more in the long term.

Overall, the new collaboration model means that every banking product, third party or partner can extend its value by connecting with others via open APIs. This benefit applies whether the value is derived from utilising payment processing services, increasing clearing reachability, or leveraging rich ISO 20022-derived data to increase automation and gain insights into customers? behaviour. Making good use of the expertise and resources outside of their own four walls and embracing new product approaches, as well as the new technologies that are making this possible, will help fuel competition and ignite innovation.

We will be discussing this topic at our Finastra Universe virtual event, beginning on 2 March and streaming on-demand until 2 April. Register now for free here.

To learn more about the new era of open API innovation, download our white paper on Powering payments with open banking and APIs