What is Open Banking?
Open Banking is a new business model that is to radically reshape the current banking and financial service sector. Indeed, traditional banks have to break up their closed operational and IT infrastructure and open it to third party service providers, be they Fintechs, BigTechs or banks.
What are the major challenges of Open Banking?
With the implementation of the underlying open banking concepts, banks will be able to extend the service offer to their customers and to develop their service by offering services to third parties by sharing available.
Adopting Open Banking requires banks to strategically position themselves as producers of services (utilities) offered to third parties at the one extreme or as distributor of third party provided services on the other extreme. However, it is expected that most of the banks will adopt an intermediary position. Some banks or new entities might evolve to pure platforms connecting customers to financial service providers without providing any financial services themselves (Uberisation of banking).
Ultimately, banks might even integrate non-financial services linked to their initial business (e.g. assisting the customer when s/he buys a car).
It should be stressed that Open Banking will only be successful if the trust and cybersecurity issues of the new emerging networks and ecosystems are properly addressed.
By Andrey Martovoy, ABBL, FinTech Adviser