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

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

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 Tables

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

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

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

Researcher “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.