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Emerging Trends in Open Banking

Open Banking has been becoming a central theme of digital transformation in Banking and Financial Services. Open Banking has led to the emergence of Neo Banks as well as Challenger Banks, while at the same time, it has contributed to the growth of Fintechs to build new products & Services on top of Banking services. The growth and adoption of Open Banking can be seen across the globe. Amid this growth, some notable trends can be observed.

 

SMEs and Millennials across globe opening up to adopt Open Banking: Fintechs are building services to open checking accounts for SMEs, Traders with ease of management, multi-currency transactions support, Cross-border payments, etc. This becomes a good proposition for SMEs to open an account with such Fintechs esp they are involved in international trade.  One example is Hongkong based Fintech “NEAT,” which allows SMEs to open checking accounts in a short time and start the business.

The transition of Fintechs to fully managed banking services: Fintechs typically have focussed on one business line, be it payment, lending, wealth, insurance. Open Banking facilitates integration with Banking services in partnership with Banks. These Fintechs see good potential to expand their business line on top of Open Banking, so Fintechs across the board are transitioning to banking services such as open & manage accounts, card-based services, and other financial services offerings. Stash, well established wealthtech firm having an investment platform, now works like Bank. Stash recently hit 1 Million mark of banking account customers on their platform. Stash has tied up with Green Dot Bank.

Accounting Firm Fintechs go big on Banking APIs: This has been initial significant use cases of Open Banking. SAAS based accounting Fintechs are best placed on integrating banking APIs and enabling SMEs to manage banking and accounting from the same platform. Bank Open, XERO has been notable Fintechs in the accounting-based Neo Bank platform. New entrants such as Ezo Banks and others also making good inroads.

The emergence of Open Banking Platform to the main league: With Plaid acquisition by VISA, and the recent acquisition of Galilio by SOFI suggests that these Open Banking platforms or Data Aggregators have a big play in the progress of Open Banking. These platforms provide ease of integrations on the plug-and-play model for Banks, Fintechs to hook on banking services and start the business.

Big Tech will go Big on Open Banking: Google has already announced checking account services while Apple successfully launched Credit Card. Amazon has set its path clear on launching banking services. Recently, Microsoft announced integration with Plaid platform to directly fetch banking data to Microsoft Excel. The direction is clear where we are going to see big tech companies will partner with banks & platforms to launch full-fledged banking services.

The market will push for API Standards and Operability: Except for a few countries, there has not been much push to standardize API specification and documentation. Notable progress is from UK Open Banking, which has released technical standard documents while Singapore has also launched an API Playbook with clear instructions of data standards, security standards. Though, the same can not be said uniformly across the globe. With the broader adoption of Fintechs services and the emergence of Neo Banks & Challenger banks crossing borders, standardization of APIs specification is need of the hour and will soon be the reality.

Open Banking can transform banking services across the globe, and we would see a significant transition in more use cases, better banking products, and efficient services driven through Open Banking.

Shashank Shekhar,

Head of Consulting, The Digital Fifth

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