When switching to open banking, one of the most important considerations for banks is the operating model and governance structure. If banks do not adapt to new ways of working, there is a risk that they will lose market shares to experienced new digital market participants.
Based on our experience with banks around the world, we have determined that for Open Banking to be implemented successfully, it is critical to focus on defining the end-state operating model as early as possible.
A long-term strategy for the operating model
Most Open Banking implementations have been managed as part of the bank’s compliance program. However, compliance programs are only the beginning of the open banking journey. As these programs develop into a long-term strategic roadmap, it is important to define the operating models to support future open banking proposals, including the supporting organizational structure.
Based on our experience, the ideal operating model for the final state is a multi-layered “network model”, in which Open Banking is owned as a skill and is coordinated centrally, but is provided in partnership with individual business areas (LoBs) on site.
While the desired status is the federation model, a gradual transition approach is usually recommended for most organizations. This allows enough time to identify suitable owners and form new teams.
Align governance structure
As with the Open Banking operating model, we have found that banks that focus exclusively on compliance have lacked a mature Open Banking governance structure. The ideal governance structure should be layered – with:
- A central team that delivers strategies and instructions for partner management and technology decisions
- LoB teams with the flexibility to run their own open banking workstreams to meet their specific business priorities
Technology teams for API design and development, data and security management, consent management, and platform and service management.
Create new functions
Open banking requires a number of new functions that must be reconfigured from scratch in order for the new operating model to flourish. They should span the entire bank and include governance, third-party management, technology, data management, service management and monetization.
These new functions must be embedded in the operating model and raised to a level of “advanced” based on future business priorities.
The right know-how for project management
This brings us to project management. It is important for banks to have open banking experts on site from day one. At the beginning of the trip, outsourcing or working with selected partners may be the best solution. However, banks must ensure that they build their own open banking capabilities to support future implementations.
Your open banking program plans should also include the transition to business as usual (BAU) to ensure that the transition covers the business, organizational, and technical components.
On this open banking journey, it is critical for banks to treat compliance changes as pioneers for future opportunities and growth. Therefore, the right operating model and the right governance are required to align it with a long-term strategy.
In my next post, I’ll look at the last set of important considerations on the path to open banking – partnerships and the ecosystem.
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