The evolution of open banking
This report analyzes post-regulatory global trends in open banking, identifying use cases for commercial and retail clients based on value-added services supported by open banking for treasury management operations, acceleration of prebuilt enterprise resource planning (ERP)connectors, and how open banking can support new models for payments.
Key takeaways from the study include an understanding of post-regulatory global trends in open banking, including use cases for commercial and retail clients based on value-added services supported by open banking for treasury management operations, acceleration of prebuilt enterprise resource planning (ERP) connectors, and how open banking can support new models for payments.
Download the report to learn more about these key takeaways from the study:
- “Platformization” is at the core of open banking deployment: The development of open banking is accelerated by fintech firms that provide robust API integration platforms through which financial institutions (FIs) and businesses can quickly and easily consume on-demand apps built by a healthy ecosystem of third-party developers.
- Banking-as-a-Service (BaaS) responds to increasing business needs for embedded finance: Leveraging APIs, banks have started to offer BaaS to fintech firms and other enterprises. The services are delivered through the bank’s API platform or through a third-party platform with which the bank has contracted.
- Banks are testing strategies to monetize open banking: To remain competitive, banks are developing end-to-end specific journeys that help them identify how to monetize the adoption of open standards, how exactly to find—and partner with—the right fintech vendor, and how to effectively provide the banking back end to the fintech front end that will turn the construct into a repeatable business.
- Open (banking) payments respond to business needs for new payment methods: Online merchants have a growing interest in adding open payments as a new payment method to their checkout page, as open payments can offer several advantages over cards. Conversion and cost reduction are the main business drivers.
- Open payments are a strategic opportunity for FIs: Banks and payment service providers (PSPs) can offer innovative account-based payment services to their clients. FIs that go beyond compliance and integrate open payments into their payment strategies will create new customer value and compete for the increasing share of account-to-account (A2A) payments in commerce and other industries.
Open Banking: An API-first model
The distribution of banking products is changing to an API-first model as the next step in the evolution of bank distribution models. APIs enable new open API business models that facilitate partnerships between banks and enterprises. Open API banking enables banks to more flexibly distribute its products through third-party channels provided by fintech partners, facilitating innovation and reducing time to market. A bank can also connect to open APIs of other financial services providers and integrate their products into its own offering. This makes the API technology a strong driver to open banking.
Open Banking APIs make banking programmable
APIs make banking programmable, opening opportunities for new entrants to innovate and compete with incumbent banks. At the same time, banks can create new value for customers and monetize the API economy. While still in initial stages, open banking will lead to the next wave of digitization in payments, reconfiguring age-old value chains and changing business models. Banks that look at API development beyond regulatory compliance(e.g., the second Service Payment Directive [PSD2]) are now starting to ask where the real value is—and if there is any—in such an approach, how can such value be generated, and how to extend, expand, and grow the business through that reach.
FIs and fintech vendors are aware that APIs are part of the bigger picture of open banking. They want to know, now, up to what point they should be further developing APIs without common standards and a clear indication of what services clients would be ready to pay for.
Open banking research report methodology
For this paper, Aite-Novarica Group strategic advisors relied on information collected through briefings conducted withAxway executives,getting insights into current product set offerings and competitive positioning and messaging.In addition, Aite-Novarica Group leveraged existing research and expertise, knowledge base and proprietary contact databases, and publicly available information.
Open banking market overview
Open banking is often associated with regulatory requirements to allow third-party access to bank accounts, most notably in the U.K., where “Open Banking,” written with initial capital letters, is the national program to implement the legal requirements for access to the account. However, open banking (or more broadly, open finance) is also understood as the development of a new financial ecosystem based on connectivity among FIs and businesses, powered by APIs.
FIs are enabling fintech firms and other businesses to integrate financial services into their customer proposition, not only providing access to bank data but also delivering entire banking services through APIs.
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