By FintechOS · August 25, 2022
5 minute read

Open source banking: proprietary is out; standardization is in

Money 20/20, Teo Blidarus, FintechOS CEO, talks no-code/low-code incumbent digital transformation

Open source banking has become part of mainstream technology in today’s innovative fintech landscape, but its full potential hasn’t yet been realized by many companies. Our CEO, Teo Blidarus, recently talked on a panel at Money 20/20 to discuss open source technology, and why it’s not quite hit that peak in adoption by more businesses.

The prestigious Money20/20 event was held in Europe on 7 to 9 June 2022. Our CEO and co-founder Teo Blidarus was thrilled to be invited to be part of a panel on open source banking, utilizing his expertise learned from ensuring our platform is as secure as it can be.

Teo shared valuable insights into open source banking’s current role in the market and what he believes can be done to change open source technology from being viewed as a complex and specialized field, to an accessible and financially inclusive industry-standard framework.

FintechOS enables every company to become a fintech company. A large portion of our client base are regulated entities, such as banks and insurance companies, and more than 80% of these businesses use open source banking to support their platforms and customer interfaces.

When the conversation arises around safety and security, more than 95% of these companies believe that open source banking is more secure than the systems they used previously. The reason why open source banking isn’t more widely implemented is not through a lack of trust in the security of the technology; rather, it’s the lack of understanding of how it can be used and developed by these companies.

Moving from open source banking to open innovation

When discussing this with clients, we found that the issue doesn’t lie with worries over security. It’s actually the lack of specialized skill sets needed to fully mobilize the technology that is holding people back from adopting it fully. As Teo explained:

In reality, they trust the technology, but they don’t know how to use it, and 95% of them will embrace any type of supplier who can help them cross that chasm.

This is where the opportunity arises for fintech platform providers to bridge the gap between open source banking and open innovation. At the moment, deploying these new innovations to the business world is a “three-party game”.

Open source banking technology is obviously at the forefront, but low-code development is also important, as it can help people to navigate the complexity that intrinsically comes with open source in a very simple and accessible way. There’s also a software-as-a-service (SaaS) infrastructure movement providing a way to consume and implement open source technology as web-based services instead of companies needing to manage and maintain complex software and hardware systems.

If you are able to make this transition from open source banking to open innovation…To make the transition from developers – who are the typical consumer of open source tech, to digital makers – who are the typical consumers of open innovation, then you can start lowering the cost of builds for certain financial services around lending, around payments, around insurance.

Of course, no single company is going to solve the problem by itself, but working to facilitate this transition helps to make solid steps toward financial inclusion for brands and financial entities around the world.

Proprietary is out; standardization is in

As the use of open banking technology has grown across the global financial industries, the paradigm shift from institutions wanting bespoke systems built specifically for them to embracing the idea of standardized compatibility has become readily apparent.

Speaking on conversations he’s had with clients, Teo explained that It’s much easier to sell a solution when you can explain how it integrates easily into a current ‘facet’ of a set-up or established framework, rather than try to convince someone that you know how to integrate your IP into their system.

As we started to move from the pioneers in the market towards the more Tier One established players…I was having a tough time sometimes, convincing them ‘yeah, we know how to integrate with your data silos in an enterprise manner, and we do know how to cross-pollinate between identity services’…

This is where the decision to move away from the proprietary integration patterns was made, and instead, FintechOS worked to create solutions that integrated using the open source banking framework Apache Camel. Now, when a potential customer asks how FintechOS can tie into their core infrastructure, the answer is a lot simpler:

Well, ‘We have decided to embed Apache Camel, and we put a layer of no code/low code in place’ and all the conversations just go ‘oh okay, great, next topic.’

Utilizing an open-source banking framework such as Apache Camel helps to put the customer’s mind at ease in a number of ways. Not only is it much easier to explain the implementation of the tech, but it also reassures them that their internal development team isn’t building out their UI on proprietary tech that could one day disappear if the supplier loses funding or goes bust. Building a solution on an open-source banking framework gives longevity to the product.

The bottom line for open source banking

At the moment, open source banking still feels a bit too ‘techie’ for a lot of businesses. The big banks are adopting the model as they see the growth potential, but a lot of fintechs are still shying away. FintechOS wants to change that.

The more we, as an industry, work towards building and investing in the open source banking ecosystem, the quicker we get towards open innovation. The smaller that skill set ‘chasm’ gets, the more financially inclusive the technology becomes.

Open source technology is well on its way to completely reshaping the financial services sector, and our mission is to make it an innovation that is accessible to all.

To find out more about the FintechOS platform, book a demo.

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