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

Publisher Name :
Date: 15-Sep-2016
No. of pages: 43

Summary

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). If banks embrace the concept, they will be able to become one-stop shops for the best products on the market, crowdsource the development of new services, and generate revenue by selling access to their data and capabilities.

Key Findings


  • Regulatory initiatives such as PSD2 in Europe and the Open Banking Standard in the UK are forcing banks to open up their systems to third parties, and this will hasten the rollout of open APIs.

  • Starling Bank and N26 are among those using the bank as a marketplace approach. Here, banks transform themselves into portals, using their open APIs to allow third-party services to be accessed from within their own platforms.

  • Fidor Bank is an exemplar of the bank as a service strategy. Startups and other entities that want to offer banking services to their customers can connect to Fidor Bank's capabilities via its APIs and build their own services and user interface on top.


Synopsis

Verdict Financial's "Open API Banking: Defining the Potential and Opportunities" explores the impact of open banking initiatives and assesses the various strategies that banks can employ. This report is based on findings from our Retail Banking Insight Survey, together with interviews with industry figures and secondary research.

The report offers insight into:


  • The current state of open banking and open API initiatives in the UK, Europe, and further afield.

  • The advantages and disadvantages associated with the main open API strategies banks can use.

  • Advice and recommendations for how to effectively deploy an open API strategy.


Reasons To Buy


  • Learn more about the distinct open API strategies a bank can deploy, together with the specific advantages and disadvantages associated with each approach.

  • Gain an understanding of the opportunities - and the threats - that open APIs will create for banks.

  • Discover more about how specific banks around the world are already using APIs, their rationale for doing so, and their experiences to date.


Companies Mentioned


  • BBVA

  • Capital One

  • Credit Agricole

  • Fidor Bank

  • Monzo

  • N26

  • OCBC

  • Open Bank Project

  • Silicon Valley Bank

  • solarisBank

  • Starling Bank

  • Sutor Bank.

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

Table of Contents

Executive Summary
APIs have the potential to bring about an open banking revolution
Key findings
Critical success factors

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

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
N's 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

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
Table of Contents
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

Appendix
Abbreviations and acronyms
Definitions
API
Open banking
Methodology
Interviews with industry executives
Verdict Financial's RBI Survey
Secondary research
Bibliography
Further reading
About Verdict Financial
Disclaimer

List of Table

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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