Open-Banking was driven largely by regulations in the EU and the UK. However, policymakers in other nations like Japan, the USA, Australia, and Hong Kong have already taken notice of its successes. They are now adopting Open-Banking practices.
Open-Banking has brought several new benefits to consumers. Banks now inform users by text if there isn’t enough money to cover a direct debit. This has led to the dearth of charges for missed DD payments.
Banking apps now feature insights. Users can see patterns of spending that increase awareness of their financial health. And there’s more.
Why Open-Banking is gaining ground
Open-Banking is gaining popularity with consumers and banks through the relatively new phenomenon of marketplace-banking. Marketplace-banking is attractive to consumers because it provides a wealth of new services via their bank’s app.
In March of 2018, Monzo Bank had 500K customers. By September 2018 Monzo announced it had reached 1 million customers. A year later by September 2019, they had over 3 million customers. It’s clear that Monzo is experiencing a phenomenal 100% increase every six months.
This growth is thanks to its API-first approach which allows offerings that are clearly attractive to consumers.
Marketplace-banking is also attractive from a bank’s perspective because it deepens the consumer’s relationship with the bank.
A white paper from TLT (a law firm for banks and fin-tech outfits) found that 84% of financial services companies are investing in Open-Banking products and services.
Starling bank planned for 25 new partnerships in 2018. Its API-first approach allowed the challenger bank to connect speedily to partnerships that provide new offerings that customers find delightful.
What is Marketplace-Banking?
Marketplace-Banking is the financial equivalent of an online retail platform. Think of how you can get a variety of retail goods from Amazon, eBay & Alibaba, etc. These online retail platforms are digital shopfronts. They partner with many different products and service providers to bring you almost all retail goods on the planet.
In the same way, Open-Banking allows consumers to get a variety of financial products & services from their bank’s digital financial ecosystem.
Marketplace-banking is making great strides because of the ease of integration afforded by APIs.
Open-Banking APIs have enabled partnerships built on insights into consumer data. These insight-led partnerships have caused the creation of financial ecosystems. Products and services can be combined and offered in this new marketplace for the benefit of consumers.
Open-Banking API-led offerings now include but are not limited to:
A few of Marketplace-Banking’s offerings
Flux is a London based Fintech that offers paperless receipts and loyalty rewards. It’s so easy to use because it's integrated into your bank's marketplace.
Just use your card at participating outlets like Schuh, KFC or JustEat. You won't need to track receipts. Flux allows visibility of your rewards and receipts within your bank's app.
Innovative offerings like CreditLadder help your credit score by reporting your rent payments to Experian. Rent payments are reported from the bank’s app automatically. Each time you pay rent, it counts towards building up your credit score.
Some Open-banking offerings require a business account.
For example, CyberSmart is a cybersecurity offering that helps SMEs identify digital vulnerabilities and fix issues from a cloud-based dashboard.
Money and financial services move much faster
There's an unlimited number of partnerships possible with Open-Banking. This opportunity for numerous partnerships puts a new suite of tools in a customer’s hands. It also brings about speedier decision making and more control to the customer.
For example, Iwoca is a small business financier. It allows its SME users to complete loan applications for up to £150K in as little as 15 minutes. Iwoca determines loan eligibility levels based on customer's data. And provides loan offers at those levels. All during the application process.
So a business can quickly know if they have a better chance of approval for a 5K loan instead of a 10K loan. The user simply updates the loan amount within the application process and improves the chances of approval. All of this is conveniently done from the bank's app.
Is this the financial equivalent of the iPhone?
Steve Jobs had to repeat himself several times to get the press to understand and appreciate what Apple had achieved at the launch of the very first iPhone. No one else had thought of a phone, an iPod, a camera and an internet browser all in one device.
Today smartphones are much more advanced. And they are ubiquitous across the world.
The iPhone marked the rise in the use of smartphones. You can expect Open-Banking and marketplace-banking will get better. It’s barely two years in and a lot has happened already.
Ian McKenna, the director for the Finance & Technology Research Centre (F&TRC) says:
How Banks can create their own financial ecosystems
Concierge BankTM is a comprehensive marketplace-banking solution from Torry Harris. It allows quick integration to third party services helping banks to create their own marketplace via its managed API platform.
With Concierge BankTM’s managed API platform, banks can offer customers a wide range of new products and services. Each of these services is personalized with users' banking data.
The Concierge BankTM integrated marketplace is designed to onboard third parties quickly. This leads to quicker time to market for service offerings.
At the front end, customers use a mobile app to reach the marketplace via the API manager. The user sees an easy to use, intuitive user interface and they enjoy the benefits of delightful new services from their bank.
Interested in learning more? Watch our on-demand webinar about Open-Banking APIs and marketplace-banking.