APIs are creating new open banking systems that allow fintech startups to offer citizens and businesses new services. How well are new open banking systems doing at creating ecosystems of stakeholders? Are businesses, citizens and the financially underserved better off with new open banking opportunities?
Open Banking: Who Wins?
In Europe, the Second Payments Services Directive (PSD2) has encouraged banks to open APIs. This has heralded a new range of fintech products that support businesses and citizens to build their wealth and access a broader range of financial services.
The European model is now being pursued around the globe. Some governments – including the UK, Australia, Canada, Israel, Singapore, Mexico and Japan – are introducing new regulatory models that insist banks open their services (securely and with consumer consent) to third parties, such as fintech startups. In other countries, like the United States, banks themselves see the opportunities of open banking and are opening APIs to create new digital finance ecosystems.
But who is benefiting from this new open banking activity?
Platformable's 5 Wins data model measures the impacts of open banking APIs on five key stakeholder groups:
- Banks themselves: Are they benefiting from new business model opportunities?
- Fintech: Are they able to enter new markets and offer banking customers new services and products?
- Consumers: Do citizens and businesses have greater access to new financial services in a way that helps them build their wealth?
- The underserved: Do new open banking models invite in those marginalised populations who had previously been locked out of wealth-creation and financial management opportunities?
- The API industry: Is open banking help to mature and develop new API tools and products that can benefit all industry?
Platformable's data model also looks at the enablers that can facilitate open banking:
- Regulation: Are regulatory approaches balanced with appropriate controls to ensure the safety of citizen and business finance while also encouraging innovation?
- Developer experience (DX): Are banks and fintech focused on creating great developer experiences that make it easy to integrate with open banking APIs to build innovative products and services?
- Standards: Are the banking and financial services industries using agreed standards to speed up product development and allow fintech and other market entrants to scale successfully?
- Security: Are new open banking systems secure? How are data breaches being managed?