Why open banking can be the most important catalyst for change in wealth management
AI and Blockchain are sexy innovations in the wealth space but one Fintech company has staked its future on open banking being the biggest catalyst for change.
Open banking is the process of digitally opening up banking infrastructure to third parties in order to build applications and services around financial institutions.
With pressure on leading FIs to modernize and improve the client experience, InvestorCOM CEO David Reeve said this is difficult for banks to do themselves, with IT teams often preoccupied with “keeping the lights on” and maintaining legacy systems.
The key to effective open banking, said Reeve, is addressing challenges of compliance and security, although he maintains the service is really about architecture and design, which allows the banks to open up their data to external partners through APIs.
A crucial stakeholder is the advisory community and he added that they are a vital part of the client experience.
“If an advisor wanted to onboard new clients and they have new prospects, traditionally that involves a bunch of forms, and weeks and weeks to go by.
“If they now want to move to a more digital onboarding relationship with their clients, which obviously involves more friction, they are going to have to push their clients to a site that is going to contain all of the information that is captured in terms of onboarding information, the KYC information, assets and holdings.
“So if clients ever have a self-service component to that, that capability is likely to be delivered by a fintech or an organization like ours versus being built out by CIBC or TD or RBC.”
InvestorCOM believes the top issues facing financial institutions when becoming digital include:
- Compliance challenges: this includes risk, disclosure, suitability and transparency.
- Security considerations: opening up systems and data.
- Change management: challenges in preparing and supporting organizational change.
Reeve said that concerns over security have been a “false obstacle” with many of the products now improving this aspect for FIs, with many banks now realizing they are adding protection for their customers.
He said: “Open banking offers the bridge needed to cross the digital gap that the wealth management industry face to better compete with the more nimble, purely digital firms.
“At InvestorCOM, we assist our clients in building the digital foundation needed for today’s expectations.”