How HSBC Collaborated With Third Parties to Adopt Open Banking
Despite a rocky, tension-filled start, incumbent banks and disruptive fintechs are fully aware that they are not in competition with each other. They are more likely to collaborate to harness the benefits of the relationship.
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For banks, collaborating with fintechs offers opportunities to innovate quickly and serve their customers better. While for fintechs, banks offer an established client base, better reputation and technical knowledge.
Yet, legacy institutions struggle to interact effectively with the faster-paced, less structured fintech world. Banks also often lack a clear path for fintech approval and development, and struggle with setting benchmarks to measure success.
On top of that, as platforms-based banking emerges, a seamless collaboration between the two will prove even more critical.
But if traditional financial institutions are to collaborate with fintech successfully, they “should implement a fast-fail approach to fintech experimentation and establish a precise engagement path with a single point of initial contact.”
How HSBC Used Rapid Prototyping to Embrace Open Banking and Third-Party Collaboration
The Hongkong and Shanghai Banking Corporation Limited — the founding member of the HSBC Group, provides financial services to more than 37 million customers in 67 countries and territories across the world.
HSBC serves customers through four global businesses: Retail Banking and Wealth Management, Commercial Banking, Global Banking and Markets, and Global Private Banking.
The 156-year-old bank required new models to support engagement with developers and fintech startups to drive their digital transformation journey towards Smart Banking.
They used an Open Banking project sandbox to build a culture of collaboration across the bank and between the bank and third-party developers.
The bank’s goal was to use rapid prototyping aligned to business needs to discover what kind of APIs they could prioritise across their organisation and do so safely within a sandbox. They worked with Berlin-based Open Banking project company TESOBE, who provided the bank a complete sandbox dataset along with over 200 banking API endpoints to explore innovative new digital customer solutions for retail banking.
Working with ten fintech groups, the bank did a hackathon that resulted in 50 apps built, including APIs for:
- Access to accounts
- ATMs and branches
- Bank information
- Card management
- Foreign exchange
- Metadata
- Onboarding APIs
- Payment initiation
- Transaction history
Peter Dingle, the Head of Business Model Innovation at HSBC, says,
“Rapid Prototyping is key to validating new products with customers and the business. The Openlab, built on the Open Bank Project sandbox will help us accelerate toward the bank of the future.”
As legacy financial institutes work together with small fintechs, rapid prototyping and hackathons can be a powerful tool to secure relationships with fintech third parties, gain access to new ideas and cultivate a culture of change and continual improvement.
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