GlobalData Plc

Marketplace banking will open up big opportunities for banks

The era of open banking is fast approaching, and providers seeking to make the most of the opportunities on offer should seriously consider adopting a marketplace model. Research by GlobalData has identified a number of key advantages associated with a marketplace strategy, both for incumbents and for new entrants seeking to make their mark.

GlabalData’s recent report, Banking as a Marketplace: Opportunities and Threats, found that this approach can lead to higher revenues from access and commission fees levied on third parties, and enable banks to harness the expertize of FinTech specialists.

Regulators in the EU and the UK are forcing banks to open up access to customer data to third parties by January 2018, with the aim of stimulating competition and improving consumer choice. However, while some banks will treat this merely as a compliance issue, the more far-sighted will use the new rules to significantly improve their propositions.

Daoud Fakhri, Principal Analyst for Retail Banking at GlobalData, states: “The most ambitious banks will use open banking technology to integrate the best third-party services into their own platforms, thus converting potential rivals into partners and allies. So-called marketplace banks will become one-stop shops for the best financial products on the market.”

New entrants are leading the way. Providers such as Starling Bank in the UK and N26 in Germany are focusing their limited resources on creating a few core products in-house, and then teaming up with outside specialists to offer payments, investments, and other additional services.

Established banks, too, recognizing that they can never single-handedly create an entire range of market-leading products, can use a marketplace strategy to quickly and cheaply substitute superior offerings from third parties.

Fakhri concludes: “It’s a win for everyone concerned. Banks will be able to engage more effectively with their customers, third parties will be able to reach a wider audience, and, most importantly, consumers will be able to easily access the best financial products from across the market, all via their own bank.”