michael-dam-mEZ3PoFGs_k-unsplash.jpg
blocshop
August 14, 2020
0 min read

Can banks win with Open Banking?

Can banks win with Open Banking?.jpeg

The Open Banking framework/PSD2 directive has got everyone in the banking industry pretty excited. Finally banks must open a limited set of APIs (Application Programming Interfaces) to third party organisations, providing fintechs with the opportunity to offer value added services for banking customers. It is also advocated by the consulting industry as a massive opportunity for banks who can leverage partnerships to create new revenue streams. This might all sound fantastic. But it is important to remember one key element. The customer. Customers have rightly been notoriously careful with their banking data in light of numerous security issues and phishing attacks etc. Even though PSD2 demands strong and secure authentication as well as common and secure communications, any fintech presuming that customers will happily provide access to their banking data is likely to be disappointed unless it has a compelling business incentive. 

A core set of services in the directive centre around transactional data. So called Account Information Service Providers (AISPs) can demand access to banks' transactional data to provide enhanced services for customers. Perhaps you might allow access to your transactions for the AISP to help you find the best mortgage or consumer loan or to provide you with a credit score or robo-advisory services. The categorisation of transactions has been key to the success of many PFM (Personal Finance Management) applications and there is no doubt that some fintechs (AISPs) can do this better than many of the existing banks. Some offer budget planning applications which can aggregate multiple accounts or financial education platforms that may support you by providing a better visual overview of your transactional data. There are certainly cases whereby customers will be happy to provide this access, especially if they require loan finance or need a credit rating. But these benefits do not fall to the banks themselves unless they use the directive to provide services such as account aggregation with a view to cross-selling as is already the case with some pioneering incumbent banks. It is also likely that some customers using secondary financial platforms such as Revolut will provide access to their primary bank's transactional data as the secondary platform may provide improved PFM services.   

A second set of services fall around payments. We know that the interface massively influences consumer behaviour so providing the consumer with a faster more frictionless experience when shopping or using retail services online will be extremely compelling. Initiating payments for the customer by acting as a Payment Initiation Service Provider (PISP) is likely to be hugely successful for online retailers like Amazon as it will lead to a more frictionless retail experience threatening the traditional players (e.g. FirstData, WorldPay, Visa, Mastercard) in the payments' ecosystem. It is difficult for banks, known as the Account Servicing Payment Service Provider (ASPSP) in PSD2 jargon to monetise this process unless they were to act as the PISP in their own right, which would prove challenging. One can also imagine that currency exchange services such as TransferWise will have a strong enough product offering to persuade customers to provide access to their payments to allow for less friction in the currency exchange processes. And here the banks may be forced to collaborate with TransferWise or similar businesses or to offer mid-market rates themselves. This would be in the spirit of the directive in that it provides for the level of competition that the legislation envisioned. 

Of course, the core benefits here do not pertain to the banks themselves despite the consultancy overtures unless they act as PISP or AISP. Some new kids on the block such as Starling Bank are taking no chances and will take the role of AISP and PISP in addition to their core role of ASPSP (Bank). However, many incumbent banks would struggle to move that fast. Of course, banks can invest and partner with fintech, as for example with HSBC's recent investment in Bud and we will surely see more acquisitions and partnerships. Where PSD2 may have a transformational impact is by driving competition in forcing banks to remain relevant business partners that truly deliver on an engaging experience for the customer, in some cases negating the need for the customer to look for additional services from third parties. And in the cases where value is outside the banks competence, being brave enough to partner with new players. This will require bravery from legacy banks to concern themselves first and foremost with the financial health of their customers, even if that means giving up on some traditional revenue streams to avoid losing further ground to more innovative fintech competition. Exciting times indeed and fortune favours the brave.


Learn more from our insights

Top 15 micro-SaaS ideas for your startup in 2023.png
December 06, 2021

Top 15 micro-SaaS ideas for your startup in 2022

What exactly do we mean by micro SaaS? Micro Saas solutions use a web browser or mobile app interface. Micro SaaS solutions usually come about through the effort of an individual or very small team. It aims to solve precise problems. Micro SaaS projects have small budgets and overhead. Customers use Micro SaaS solutions on a monthly or yearly subscription basis. Micro SaaS projects target a small niche of the consumer market.

Software engineer hourly rates in 2021 (based on experience and location).png
November 22, 2021

Software engineer hourly rates in 2021 (based on experience and location)

Region influences salary more than any other factor. Taxes rates, cost of living, and government benefit programs affect the rates software developers charge. Software developers in the USA  and Canada earn more than software developers in other countries.

The best programming languages for app development in 2022.png
November 15, 2021

The best programming languages for app development in 2022

Software developers usually have three main ways to create an app. They can choose to code a native app, a hybrid app or a progressive web app. Developers create native apps to function on one specific platform, usually either iOS or Android. They create these apps using Swift or Objective C for iOS. For Android they use C++, Kotlin or several other languages. 

Cross-platform mobile app development: Tools & frameworks for 2022.png
November 09, 2021

Cross-platform mobile app development: Tools & frameworks for 2022

The cross-platform development project aims to create apps compatible with several operating systems. Cross-platform apps work on iOS, Android, and Windows. Cross-platform apps look and feel like apps developed specifically for the operating system.

App development cost breakdown in 2022.png
November 08, 2021

App development cost breakdown in 2022

Your business needs an app, but you aren’t sure about the cost of creating an app. Without some figures, you can’t even begin to estimate the potential budget, so let’s get you sorted with the information you need to make your app a reality.

unnamed.png
November 04, 2021

Web app development: a detailed guide

The best web apps give a responsive and engaging user experience through a browser instead of a single application. Think of web app development as a super-charged website. Web apps have many features of mobile apps coded for iOS or Android without the need to code for specific platforms. Developers create web apps using HTML, javascript, Python and CSS.

15 useful web app development tools for 2021.png
October 29, 2021

15 useful web app development tools for 2022

Web development vs app development: Choose the best for your business.png
October 19, 2021

Web development vs app development: Choose the best for your business

Outsource web development in 2021 and beyond: benefits & tips.png
October 15, 2021

Outsource web development in 2021 and beyond: benefits & tips

8 IT outsourcing trends in 2022.png
October 11, 2021

8 IT outsourcing trends in 2022

More and more firms choose to outsource their IT operations and functions. IT outsourcing grows each year. The Gartner report announced that firms spent $3.8 billion dollars on IT outsourcing in 2019. They expect that the trend will continue. Companies aiming for digital transformation need partners and tools. They need tools that they cannot build in-house with speed and accuracy. 

In-house development vs outsourcing software development.png
October 01, 2021

In-house development vs outsourcing software development

Every business starting software development must ask themselves what will serve them better, in-house or outsourcing? There is not a simple answer to the question. Making the choice to develop in-house or to outsource will have long-term consequences.

16 Software development project ideas.png
September 17, 2021

16 Software development project ideas

Every startup needs a great idea. Something unique and compelling. Startup businesses succeed when they find a customer need that they can fulfill. Startup businesses and independent software developers constantly search for just such needs.

Software development budget estimation.png
September 16, 2021

Software development budget estimation

An unlimited budget would make many teams very happy. But that approach has pitfalls. If the team works without much oversight or customer input, they may waste money. They might create features that the customers won’t use.

What are the differences between Agile and Waterfall?.png
September 07, 2021

What are the differences between Agile and Waterfall?

These days, most software development teams choose Agile methodology to organize their work. The Agile vs. Waterfall debate still rages, though. Many people question whether Agile works better than Waterfall in all circumstances. Does Agile deliver great ROI? Does Agile help teams work faster? Let’s take a close look at both Agile and Waterfall. We will examine the merits and drawbacks of each approach.

unnamed.png
September 06, 2021

Converting Story Points to Hours: Why Doesn't It Work?

In traditional software development, teams would describe the amount of work they had in hours. But Agile software development teams have a better way. Agile teams use Story Points to estimate the work they have ahead of them. Let’s take a closer look at Story Points and hours, and examine the benefits of Story Points.

Scrum vs. Extreme Programming (XP): What's the difference?.png
September 02, 2021

Scrum vs. Extreme Programming (XP): What's the difference?

We've covered the Software Development Life Cycle (SDLC) and the Agile development framework. Now it's time to look at different methodologies and approaches to their implementation. There are several, but we'll focus in this article on just two of them, Scrum and Extreme Programming (XP). We'll look at the differences between them and how they can even be used together for even better results.

The Scrum Sprint cycle explained.png
September 01, 2021

The Scrum Sprint cycle explained

Agile Scrum teams break down large development projects into small bursts of activity, called Sprints. A Sprint in Agile is a short, time-boxed period where a software development team completes work. They choose which items and fixes they will tackle in Sprint Planning Meetings. The Sprint cycle sits at the very center of Agile methodology. 

Use Cases vs. User Stories: relationships and differences.png
August 12, 2021

Use Cases vs. User Stories: relationships and differences

Product Backlog prioritization techniques & tips.png
July 27, 2021

Product Backlog prioritization techniques & tips

Software development project management guide.jpeg
July 26, 2021

Software development project management guide