Observation: The future of open banking and the banking model is under attack — negative rates, loss of payments (GAFA, Crypto), fintech disintermediating the customer relationship. They only have two assets left:
- Customer confidence — but, with the various bank failures (Lebanon, Cyprus), collapses (Deutsche Bank) and scandals (Lehman Brothers) — is it sustainable?
- Physical network — but not sustainable without a profound rethinking of the services offered (desertification branches).
Banks have to think about their digital transformation, but for the moment, they’re only thinking about digitizing their processes.
Future of open banking: Incomprehension of the two forces is at work
- The application of Metcalf’s law to business. This assumes that the strength of a business grows according to the number of connected partners (Open Network Economy).
- The banks’ unique position as a trusted third-party would allow them to embrace a digital marketplace status (Platformization).
Open banking is the sum of BaaS + BaaP
Banking as a Service (BaaS) allows third parties to consume services to invent a new business via API banking.
Banking as a Platform (BaaP) is a digital marketplace that exposes banking services and also the services of other players. Value proposition: trusted third parties (such as Amazon), operator of the monetization of services via APIs, the guarantor of verified digital identity.
PSD2 is a failure
Banks have failed to:
- Understand that an API has a consumer (the developer) who must be involved in the design and the customer journey.
- Work with fintech on the construction of the directive.
- Enable fintechs to develop services by making the authentication process more complex, limiting the scope to payment accounts only
- Understand that if this APIsation does not involve stopping screen scraping, fintechs would continue to scrap data directly.
- Federate (except in Luxembourg with LUXHUB) to allow exposing a single URL to fintech (PSP) (as many acts as different banks)!
Digital world? Where do the banks fit in? It’s a race against time because few will survive.
Things to consider: Positioning as a digital marketplace, exposing banking services, but also services from other players bring value.
Proposition: trusted third parties (such as Amazon), operator of the monetization of services via API, the guarantor of verified digital identity are necessary.
Why API integration is critical to an open banking strategy.