Open banking has gained prominence in the last few years. It’s not a fait accompli just yet, much more will evolve as banks turn to open banking for better customer experiences.
Chris Wood, Axway Catalyst as the moderator, was joined by three experts in the field, Mark Boyd, writer/analyst, Platformable, Giulio Rattone, CIO Fabrick, Liad Bokovsky, Innovation and APIs expert at Axway to discuss how banks evolve as API providers within the open banking framework.
Open banking takeaways
Mark’s background is extensive. As the founder of Platformable, he writes the State of the Market report and measures the value of ecosystems.
Since 2021, open banking has progressed. The question is how to create open banking to benefit stakeholders? With a range of challenges, such as COVID-19, market issues, with a greater number of banks, such as tech giants, Fintech’s, and neo-banks.
Much of Europe and the UK have adopted open banking and implemented APIs that enable payment and accounts integration use cases.
Currently, Norway and Denmark are pushing ahead in terms of the number of available open banking platforms. The greater value lies in the digital infrastructure because of the regulatory environment.
Mark’s research states that seven stakeholders will benefit. Banks can create new business models, while Fintech’s provide alternative systems to lower costs and a digital experience.
Consumers and individuals benefit from new digital services through the opening up of access to their accounts to their favorite apps and products.
Enablers are part of this vibrant open banking ecosystem. Society can also benefit from digital systems and new opportunities via tax revenues.
For example, PermataBank increased new accounts by 375 percent in four years. Also, DBS Property Marketplace has generated more than SGD 300 million in home loan requests in 12 months.
Fintechs benefit from the means to innovate in the payments and accounts integration space.
Four models of development with Fintech
- Open platforms, released as part of PSD2
- Partnership platforms
- Incubators and acquisitions
- Banking as a service (unbundling banking services)
The value lies in using open banking APIs by monetizing the openness of data, overcoming service competition, and developing smart solutions.
An estimate of two-thirds of Fintech’s is found at medium-sized enterprises. The value generated by consumers (individual and business) and the underserved from open banking APIs is quintessential.
Giulio Rattone, CIO Fabrick
Fabrick operates in Italy with an open banking focus and is expanding to other European countries.
Open banking evolving
Since 2013, Europe has been at the epicenter of open banking when PSD2 (Payment Services Directive) came into fruition at the European Commission.
By 2016, they published open banking standards in the UK. By September 2019, PSD2 open banking started within the whole of Europe.
1: Reactive: expected from 0 to 12 months (the cost of the API interface is a key factor. PSPs expose mandatory interfaces. Some plan to monetize this by providing data beyond the PSD2 perimeter.
- Proactive: 12 to 36 months (bank connections coverage and service quality are key. Some PSPs are starting to play an active role.
It enriches payment interfaces with services such as account aggravation, along with digital and multi-banking solutions for corporate and SMEs.
- Adding value, expected from 36 to 72 months. Leverage big data and AI. Some PSPs create an open banking-oriented data strategy.
Behavioral analysis for marketing automation provides forecasts for automation with campaigns and customer merchants.
Additionally, data can be leveraged to allow Fintech and third parties to offer advanced solutions to customers by creating an ecosystem offering.
Other industries leverage open banking (energy, oil, food). Financial services go beyond the banking system. The platform model evolves the financial offer by leveraging ecosystems. The value chain is open, modular, and data-driven.
Bottom line: Open banking is about offering products and capabilities to other banks’ customers.
Liad Bokovsky, Axway Innovation and APIs expert
“Where are you on the open banking hype cycle?”
This involves visibility, peak designing marketing place, sliding through the trough, technology trigger, and a plateau of productivity.
Open banking is growing. The key question is what drives the growth? PSD2 is important to create an open banking strategy for data.
Same end goal different path
It takes time to initiate changes and exposure. The backend can remain the same even though open banking has been introduced in banks.
Below the surface, market-driven regions design a stack that can quickly compete, yet they lack the ecosystems to measure up — adaptability is key. Traditionally, banks are horizontal and it’s difficult to implement and fall behind in the innovation curb.
Companies need to raise the focus on this problem. Fintech’s applied pressure to bigger banks to innovate. Open banking highlighted the differences between banks and how they need to change.
Expand and comply
Banks need to compete to provide data to consume it. This helps leverage other banks’ data to aggregate it. Some banks have transformed to become an enabler for third-party providers.
Four powers of APIs to drive open platforms
- Be open
- Network economy
Axway’s purpose: expand and innovate our customer’s capabilities to drive success with an Open Everything mentality.
Axway provides the tools to enable services via third-party providers, using the full cycle of API Management to govern behaviors and ensure quality and consistency of approach.
Revenue generated platform, discovery, testing, and analytics are all key elements of a successful open banking platform.
Watch the webinar replay to learn more about Open Banking and what to look out for.