The Brave New World of Open Banking

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What banks can learn from 17th-century Dutch traders

Most market watchers now view Open Banking as an inevitable and accelerating structural trend. Indeed, what’s coming from this trend is akin to the 17th-century open Dutch economy. Much like the Dutch’s entrepreneurial traders, innovative banks will need to master the art of both interdependence and bilateral trade. Winners will create value from both export and import flows to secure their share of the new value being created, navigate a far more competitive market and drive tremendous growth—all at an accelerating pace.

Done correctly, banks can exploit bilateral trade to thrive in this brave new world—strengthening their customer franchises and brand, maintaining a defined culture and growing business through open collaboration with the world beyond financial services.

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GET OUTBOUND OPEN BANKING RIGHT

Outbound trade to stretch beyond bank walls to better serve customers

From an export perspective, with customers’ permission, banks will make certain customer data available to third parties in a regulated and secure way via a set of standard APIs. Third-party providers can then use those APIs to embed that information into their platforms to improve the products and services they offer. Under PSD2, third parties can also initiate bank-to-bank payment transactions on behalf of the customer.

Outbound masters will build customer loyalty, monetize their distribution reach, avoid becoming a commodity and generate new business by exporting information and services through:

Strategic partnerships within a larger, mutually beneficial ecosystem
Early API dominance, beyond the minimum regulatory requirements
New products and services, bank micro-services
New roles as Payment Initiation Service Provider (PISP) and Account Information Service Provider (AISP)

Two of our four winning bank models are best
placed to exploit outbound Open Banking:
Digital Category Killer & Utility Provider

GET INBOUND OPEN BANKING RIGHT

Inbound trade to enhance bank offerings through plug-and-play innovation

On the import side, banks can more meaningfully incorporate products and service features from third-party partners into their offerings. This can be everything from data (such as free credit scores) to merchant-funded rewards and more.

Inbound masters will rapidly enhance personalized banking customer service, build customer loyalty, generate new fees and lower the bank’s operating costs by:

Offering more banking products and services—such as loans, insurance products or money transmissions, wholesale funding lines and such—that lie outside of their capabilities or risk appetite
Extending their services beyond those traditionally offered by banks—such as home, auto, consumer goods, travel services and the like—to support a more complete customer journey
Embracing the range of product and service opportunities offered by fintechs
Innovating faster, taking ideas to market in a few weeks or even days
Distinguishing their brand when everyone has the same plug-and-play products