Open API Banking: Defining the Potential and Opportunities; Strategies for a world of open banking

  • ID: 3846507
  • Report
  • Region: Global
  • 43 pages
  • GlobalData
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  • BBVA
  • Credit Agricole
  • Monzo
  • OCBC
  • Silicon Valley Bank
  • Starling Bank
  • MORE
Provision of banking services in the UK and beyond has traditionally been dominated by a few large incumbents, leading to a landscape characterized by inertia and a lack of dynamism. New entrants have found it difficult to break into the banking market, and as a consequence competition has been limited, leading to sub-optimal outcomes for consumers.

Regulatory and technological developments are pushing banks in Europe and the UK to open up access to their systems and data via the use of Application Programming Interfaces (APIs). Consumers will benefit from easier product comparisons, safer account aggregation, and enhanced personal financial management (PFM) services. If banks embrace the concept, they will able to become one-stop shops for the best products on the market, crowd source the development of new services, and generate revenue by selling access to their data and capabilities. However, there is also a danger of banks becoming disintermediated and commoditized as they lose exclusive access to their data.

Critical success factors:

Offer access to enhanced data - Go beyond minimum compliance to share enhanced data with third parties. This will create new sources of revenue where third parties pay for access to advanced customer insight and analytics.

Become an aggregator - Avoid the threat of disintermediation by becoming an aggregator that facilitates customer access to accounts they hold elsewhere. Use these larger datasets to provide customers with a holistic view of their finances, together with more accurate and relevant insights and recommendations.

Provide integrated access to third-party services - Become a one-stop shop through which consumers can access best-in-class products from across the market. Consider working with developers, for example via an API-based developer portal, to create bespoke products that differentiate the bank and cater for the needs of niche segments.

The second Payment Services Directive (PSD2) in Europe and the Open Banking Standard (OBS) in the UK aim to tackle the dominance of the established banks by forcing them to provide third-party access to their data and thus create a more competitive market. Providers that use a bank-as-a-marketplace strategy will become portals where third-party services can be accessed from within their own user interfaces.

The report “Open API Banking: Defining the Potential and Opportunities; Strategies for a world of open banking” is a Retail Banking Insight Survey report explores the impact of open banking initiatives and assesses the various strategies that banks can employ. Additionally, this report provides you to understand the opportunities and threats that open APIs will create for banks. Moreover, it describes how specific banks around the world are already using APIs, their rationale for doing so, and their experiences to date.
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  • BBVA
  • Credit Agricole
  • Monzo
  • OCBC
  • Silicon Valley Bank
  • Starling Bank
  • MORE
1. Executive Summary
- APIs have the potential to bring about an open banking revolution
- Key findings
- Critical success factors

2. Defining the Open Banking Landscape
- Open banking will be the most important banking trend over the next few years
- The free exchange of data will increase competition and benefit consumers
- Consumers will benefit from access to enhanced services
- Easier product comparisons
- Safer use of account aggregation tools
- Wider access to credit
- Provision of enhanced PFM services
- Consumers are put off account aggregation by security concerns
- There is a reluctance to give external aggregators access to account information
- Concerns about account aggregation are high among those who are the most favorable towards the concept
- The use of APIs will address most consumer concerns
- Several initiatives are pushing providers towards open banking
- PSD is at the forefront of European efforts
- The UK is pushing ahead with the creation of an OBS
- The OBP in Germany has developed its own open API standard
- US moves towards open banking are more limited

3. Alternative Open Banking Strategies for Banks
- Bank as a marketplace
- Table of Contents
- Open API Banking: Defining the Potential and Opportunities
- Page VFIA, Published September
- Crédit Agricole’s CA Store offers customers a choice of in-house and external apps
- Starling Bank will create a Marketplace Platform
- Financial Hub enables full integration of services from other fintechs
- Assessment of the bank-as-a-marketplace strategy
- Bank as a facilitator
- BBVA aims to replicate the success of AWS with its API_Market
- Capital One has launched the US’s first fully open banking platform
- Monzo is encouraging developers to create bespoke apps based on its API
- Assessment of the bank-as-a-facilitator strategy
- Bank as a service
- Fidor Bank offers a complete software-as-a-service solution for startups and non-banks
- solarisBank operates exclusively as a banking service for fintechs
- Silicon Valley Bank and Sutor Bank also offer banking as a service
- Assessment of the bank-as-a-service strategy

4. Opportunities and Threats from Open Apis
- Opportunities
- Banks can become aggregators for consumers with multiple relationships
- Banks can boost customer acquisition and reduce attrition by becoming one-stop shops
- Crowdsourcing of new products will let banks meet the needs of a fragmented market
- Smaller banks can offer their customers access to a wider range of products
- Integration of products from incubator and accelerator programs will be easier
- Banks will be able to access external data sets for added consumer insight
- Banks can open up new revenue streams by selling access to their own data
- New revenue streams will arise from selling access to a bank’s core systems
- Banks can make it harder for particular fintech providers to become too dominant
- Threats

5. Open API Banking: Defining the Potential and Opportunities
- Page VFIA, Published September
- Treating open banking as just a compliance issue will lead to competitive disadvantage
- Banks may become disintermediated and commoditized
- Loss of data control could result in damage to security, trust, and reputation

6. Appendix
- Abbreviations and acronyms
- Definitions
- Open banking
- Methodology
- Interviews with industry executives
- RBI Survey
- Secondary research
- Bibliography
- Further reading

List of Tables

Table 1: Timetable for OBS implementation in the UK

List of Figures

Figure 1: A selection of the data available through TfL’s unified API
Figure 2: Open banking will facilitate the development of third-party products and services
Figure 3: Consumers value the usefulness of account aggregation but worry about its safety
Figure 4: Information security is of the most concern to consumers who have the strongest opinions about account aggregation
Figure 5: There is strong resistance among account aggregation enthusiasts to using third-party services
Figure 6: Several banks have already implemented open API strategies
Figure 7: Crédit Agricole currently offers 47 separate apps in its store
Figure 8: N26 will offer access to a growing range of third-party products via its Financial Hub
Figure 9: BBVA has enabled access to four specific APIs via its developer portal
Figure 10: Capital One’s DevExchange is intended to boost the creation of external services
Figure 11: Fidor Bank provides clients with access to its core systems via open APIs
Figure 12: SolarisBank offers a full range of banking services to its clients
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- Capital One
- Credit Agricole
- Fidor Bank
- Monzo
- N26
- Open Bank Project
- Silicon Valley Bank
- Starling Bank
- Sutor Bank
- solarisBank
Note: Product cover images may vary from those shown
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Note: Product cover images may vary from those shown