None have managed to come up with a strategy that can keep themselves as relevant and as innovative as start-ups.
In the quest for innovative financial services, traditional banks have tried to bring themselves closer to the fintech start-up ecosystem through acquisitions, sponsorships and other support programmes, but with limited success.
But Nedbank has finally nailed it with the open banking concept by releasing data for innovation. Earlier this week, Nedbank launched its version of an open banking platform through a self-service portal that enables companies outside of Nedbank to create financial products based on the Nedbank platform.
Nedbank’s Application Programming Interface (API) platform, API_Marketplace, is the first in Africa to provide a variety of APIs that meet the technical standards for open banking. This move by the bank makes it the first financial institution in South Africa to release data for the purpose of enabling innovation and serving bank users.
This is a master-stroke for Nedbank as it can access the fintech innovation eco-system to innovate for the benefit of the bank. It allows the bank to not only rely on its internal staff for innovation, but the eco-system beyond the institution
Local fintech start-ups now have an opportunity to build products that are guaranteed to be used by Nedbank clients if one gets accepted into the bank’s API Marketplace.
This also partly means that Nedbank clients will now have an opportunity to control their data, which is rare in the South African banking environment.
Consumers will be in a position to give or deny consent to companies whenever necessary. It will also enable better access to financial services based on integration and products developed by e-commerce companies as well as fintech companies.
The open banking concept has already been implemented in Europe and other parts of the world.
Open banking requires financial institutions to open their data for third parties to access and develop financial tools. This is a big deal for local fintech companies, consumers as well the banking sector.
Data is the key ingredient for enabling innovation in any sector. Open banking makes it possible for tech start-ups to access data and develop services that could have never been imagined by traditional banks.
As for the banking sector, this marks the beginning of a new era. More banks will need to follow suit and release data for innovation.
Open banking across the banking sector in South Africa would be a huge boost for the fintech start-up sector and a great enabler for local innovation.
Wesley Diphoko is the founder and editor-In-chief of The Infonomist. He also serves as the chairperson of the IEEE Open Data Initiative. Follow him on Twitter via: @WesleyDiphoko.