The product-centric bank of the past, concerned with keeping proprietary control over all its offerings, is ceding ground to the customer-centric bank of the future, according to Andy Brown, CEO of Sand Hill East, a tech advisory firm that also invests in early-stage startups.

A 30-year IT veteran with 20 years of experience in finance, including a stint as group chief technology officer of UBS from 2010 to 2013, Brown currently serves as a conduit between fintech startups and banks. In an interview with Bank Innovation, he discussed how traditional large banks are responding to rising competition from challenger banks, as well as the opportunities and risks that open banking presents. An edited version of that conversation follows.

How would you approach filling a gap back in your days at UBS, for example, and what would that look like today?
My personal mantra has always been, ‘If it already exists, don’t build it.’ Back then, there was a propensity — not so much in technology, but more in the business — to want to make as much proprietary as possible and lock in customers. These days, if you look at it at the most basic level, open source is being used broadly inside the banks. As you go up the stack a bit as well, collaboration has become more important. If you’re creating a new wealth management company or a new bank, aggregating assets from elsewhere so that you can see what the total net worth of that individual is has become a price of entry. Payments also are much less proprietary than they were before.

What should banks be worried about with respect to opening up?
Security is at the top of the list. I think they’re also watching the change to digital supply chains, which I feel like Amazon has kind of led. That’s coming into financial services more, now that things are more plugable than they used to be.

What I mean by the digital supply chain is there’s API connectivity upstream and downstream for your business, and you deliver value across that electronic supply chain. Banks are becoming more and more a part of that, but the West Coast tech companies like Apple and Google, with Apple Pay and Google Pay, are absolutely front-ending some piece of that. There’s fighting going on in that layer, as you can see when you get to the checkout page and you get all the little logos. That ecosystem will settle down, but the companies that become the most customer-centric are most likely to end up owning the customer.

What advantages do banks have on that front, considering the data they have on their customers?
I wouldn’t underestimate how much data the big tech companies have on the customer. Probably a lot more than the banks do, actually. If you look at the Apple-Goldman Sachs deal, for example, or if you look at Apple Pay more broadly, as soon as you lose sight into who the transaction was with, a lot of your intelligence goes away. It moves to the person who owns the transaction, whether that’s PayPal or whoever. On the back end, that just looks like a transaction that maybe you can identify, maybe you can’t. It depends on how much data is passed through.

The payments layer is one of the keys to understanding the customer and customer behaviors. If you’re out buying strollers and prams, you’re probably having a baby. This is the kind of life event that banks traditionally have been able to use to engage with the customer. The more that is obfuscated, the harder it will be for them to participate. I think you’re going to see the battle continue in the intelligence around payments for at least another five years.