In today's banking, financial services, and consulting industries, digital ecosystems offer the basis for a plethora of innovations, digital disruptions, and use cases.

Digital ecosystems can range from those set up and maintained by industry authorities to guarantee adherence to regulations to those created by individual companies looking to implement platform business models. To stay competitive in the market, these companies spearhead the distribution of digital services via outside partners.

In essence, a digital ecosystem offers a platform that makes a wide range of advantages possible for people and companies, as well as opens up new economic opportunities for all stakeholders.

However, how did they come to be so significant now?

We spoke to Barry O'Donohoe, co-founder and CEO of Raidiam and a major player in the UK's adoption of open banking, on the significance of the modern digital ecosystems made possible by open banking.

The importance of Open Banking collaboration

According to Barry: "Digital ecosystems are important because of what they facilitate as well as how they make it happen.

"As we move toward a truly digital society and economy that supports economic growth and prosperity, the safe sharing and use of data is essential to unlocking a range of benefits across sectors, communities, and businesses," he says.

Establishing trust early on is crucial, especially when it comes to exchanging data. It's also important to make sure that all interactions are safe, legal, and that the data owner's consent is always obtained.

In fact, PSD2 was the driving force behind this revolutionary shift in financial services. Barry observes: "Payments has always been a company founded on teamwork, but this legislation's requirements have pushed it to a new level.

A variety of third-party providers (TPPs) have recently emerged with the ability to access consumer data sets and banks' payment infrastructure in order to provide cutting-edge new goods and services.

In order to effectively facilitate this without exposing themselves or their clients to possible fraud and abuse, the established players in this market have to work together in a way that isn't anti-competitive.

This is a good illustration of how to eliminate the need for "screen-scraping," allowing a client to provide a TPP access to their account in order to carry out authorized tasks, manage how much they can view, and do so without having to reveal private login information.

Collaboration in Open Banking has evident advantages for the economy as well. According to a recent United Nations research, data ecosystems have an estimated economic worth and return on investment of 32x; that is, for every dollar spent, 32 dollars are returned.

Social, environmental, and institutional advantages make up the return on investment in this. The research also emphasizes how efforts to create and fortify national data systems would further facilitate the development of strong regional and global data ecosystems, as integrated ecosystems at the national level serve as the foundation for regional and global systems.

As to the research, "data ecosystems present a remarkable chance to optimize resource efficiency and impact, empowering decision makers to enhance lives and livelihoods by better comprehending their surroundings and taking more focused and efficient actions."

Digital ecosystems: Driving innovation

Digital ecosystems have changed how customers access and utilize their financial data, even in spite of the economic rewards.

Barry points out, "We've seen innovations like niche products for people with specific needs (like dementia) because they can be created and operated appropriately to protect the customer from any form of financial abuse because they can access, share, and use consented data."

The UK has also witnessed several noteworthy innovations, such as HMRC being the first tax body globally to incorporate Open Banking into its operations.

"They now offer the option to pay a tax bill straight from your bank account, reducing the possibility of errors and making it a feasible, quicker, and easier way to pay than using a credit or debit card. The reference information is all pre-populated and securely shared with your account provider."

The PSD2 requirements have resulted in substantial investment in the banking industry overall.

For financial institutions to ensure their digital channel technology and service infrastructure—Web, Mobile, and API—is future-proof, modernization is imperative. Customers can now manage their financial life with more contemporary digital experiences thanks to technological investments, which have also strengthened the industry's cyber-security and resilience.

In addition to helping banks better serve their first-party clients, contemporary digital channels have also aided third-party suppliers by opening up creative new consumer propositions.

For this reason, according to Barry, "having a digital ecosystem brings about innovations for an enterprise that are multiple and quite frankly, endless."

For instance, improving customer service by simplifying the onboarding process, assisting clients in locating and using the services they require among those offered, and minimizing the amount of forms that need to be filled out.

"In order to boost operational effectiveness and find cost savings, businesses may have complete visibility and administration of all their services in one location from an internal standpoint.

"We are constantly witnessing the emergence of novel and intriguing applications, ranging from streamlining the home buying process to providing comprehensive administration and facilitating volunteerism and social services accessibility. In fact, digital ecosystems are the cornerstone of innovation across all domains.