Turn Banking APIs Into Your Competitive Edge Hitachi Smart - - PowerPoint PPT Presentation

Hitachi Smart Financial Services Solutions

September 19, 2017

Turn Banking APIs Into Your Competitive Edge

Tony Reid

CTO, Financial Services, EMEA Hitachi Vantara

Mark Nott

VP, Global Solutions & Innovation Hitachi Consulting

Discussion Agenda – Part One

Digital transformation laggards Background – where did this all start? Digital transformation leaders Potential customer benefits Market impact API economy in financial services

“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

Background

20th Century Bank

Physical Paper Buildings and Humans Proprietary Closed Tightly coupled Slow Capital intensive Regulation as a barrier

21st Century Bank

Digital Data Software and Servers Standardized Open Loosely coupled Fast Cheap Regulation as an enabler

Europe has introduced legislation to drive digital transformation

Digital Transformation Leaders

In early October 2015, the European Parliament voted to pass a Payment Services Directive (PSD) to increase competitiveness between payment providers

BBVA is a European bank leading 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

Section 1033 of the Dodd-Frank Wall Street Reform and Consumer Protection Act grants the Consumer Financial Protection Bureau (CFPB) the authority to prescribe rules governing access to consumer data

Digital Transformation Laggards

CFPB has Project Catalyst to encourage collaboration, but has issued no regulations mandating open access

Richard Cordray,

Director of the CFPB, @Money2020: We are gravely concerned by reports that some financial institutions are looking for ways 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

Card details Money Authentication via Token or API Customer Bank Merchant Acquirer (e.g. First Data)

Card Scheme (e.g. Visa or Mastercard)

Retail Website Customer Bank (Account Servicing Payment Provider) Retail Website (Payment Initiation Service Provider) Permission

Financial Services organisations recognise the digital imperative

§ (Hitachi-commissioned survey by Forbes, May 2017)

Market Impact

New technologies 40% Competitors from

• ur industry

36% Customer expectations 35% Disruptive competitors from other industries 23% Partners, vendors and third parties 16% Top External Drivers of Digital Transformation 41% New business models Top 5 Investment Priorities Over the Next Two Years 51% New technologies to enable digitization 51% Increasing data and analytics capabilities 45% Development of new products and services 40% Expansion into new geographic markets 38% Internet of Things, machine-to- machine technologies

The U.S. and Europe are at the tipping point in terms of financial innovation

§ Impact of digital disruption on US Consumer Banking Revenue

Market Impact

Total banking consumer revenue Revenue impact from digital distribution

Source: Citi Digital Strategy

$850 billion $870 billion $1.05 trillion $1.2 trillion 1.1% 5% 10% 17%

2017 2020 2023 2015

The introduction of open, secure, scalable API ecosystems is required to unleash the potential in FinTech and beyond

API Economy in Financial Services

Account consolidation Energy-cost optimization

Bank A MyAcc01

API platform

Securing Managing Publishing

Energy Company A

MyBill

Energy Company B Energy Company C

Bank B MyAcc02 Bank C MyAcc03

Discussion Agenda – Part Two

Level 1 – create a scalable PSD2-enabling data platform Hitachi’s position and views on open banking APIs Possible impact on core system interaction 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

Level 1 – A PSD2-enablement platform

Open Banking APIs Hitachi 4-Step Approach to API-Based Services

Design and build a scalable, modern data store with a common data layer populated through modern Pentaho Data Ingestion and message broker tools

SCALE OUT

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 2 – Enhanced control of data exposure

Use advanced machine learning to detect and alert

• n anomalies

Open Banking APIs Hitachi 4-Step Approach to API-Based Services

Level 3 – Proactive claims-management data capture

Typical activity Possible fraud

Provide a mechanism to add external data sources to enrich the services available through the API platform

Open Banking APIs Hitachi 4-Step Approach to API-Based Services

Level 4 – Enable new revenue streams through advanced API services

Open Banking APIs The Blueprint – Putting It All Together

Message Broker

Security Layer Claims/Fraud Management

Anomaly Detection Alerting

API Services

Consent Management Authorisation Logging Audit

API Layer

Common Data Layer Operational Datastore

Data Extraction Event Extraction Event Feeds

Internal Data Sources

Business Silo Data Core Systems Retail Banking Corporate Banking Wealth Mgmt. Insurance Capital Markets

Extermal Data Sources

§ 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

Open Banking APIs Summary and Close

Q & A

Thank You