The era of “open banking,” in which banks will have to allow third parties direct access to customer data, is fast approaching, and the most ambitious banks will use this concept to turn themselves into marketplaces where consumers can access products from a variety of providers, according to GlobalData, a recognized leader in providing business information and analytics.
The company’s latest report identifies a number of key advantages associated with a marketplace strategy, both for incumbents and new entrants seeking to make their mark. Indeed, 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 allow third parties access to customer data, where requested by customers, 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, with providers such as Starling Bank in the UK and N26 in Germany focusing their limited resources on creating a few core products in-house. They are also teaming up with outside specialists to offer payments, investments, and other additional services.
Established banks, recognizing that they can never single-handedly create an entire range of market-leading products, can also 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 expand their audience and, most importantly, consumers can easily access the best financial products from across the market, all via their own bank.”
– Information based on GlobalData’s report: Banking as a Marketplace: Opportunities and Threats.