Open Banking will boost collaboration between banks and fintechs
THE HUGE opportunities available in Open Banking are likely to trigger increased collaboration and mergers between traditional banks and fintech players, according to a report from fintech event organisers LendIt Fintech.
The report says the benefits of the Open Banking initiative, which mandates high street banks to share customer data with approved third parties, could outstrip even a recent £7.2bn revenue forecast by PwC.
“Neither this forecast of direct revenues from Open Banking offerings, nor the current emphasis on consumer accounts and payments, give a true sense of the substantial impact this open paradigm will have on financial services,” the report said.
The early stages of the online lending revolution led to debates as to whether fintechs or banks would win market leadership, according to the report, but Open Banking is prompting them to combine their strengths. The initiative allows fintech companies to cut out the major banks by accessing their data to offer customers low cost, innovative financial products.
Faced with this threat, banks are increasingly partnering with third-party providers and fintech companies. “Collaboration is now an unavoidable strategy in this space,” the report added. “The collaborations are taking the form of partnerships as well as early M&A activity.”
The report lists a number of initiatives which would help to drive the growth of Open Banking:
• Strong customer authentication and data security policies: Customers need to feel they have complete control over personal or business data that is to be shared with other third-parties.
• Banks and fintech players need to collaborate and share best practices. Banks and regulatory agencies need to explain the benefits of Open Banking and what value it adds for customers. The connectivity to different platforms and services would be key to attracting customers.
• Commonly-accepted governance policies need to be established so customers can select trusted third party providers. For example, a publicly available directory of apps approved by the regulator should be maintained.
Read more: Lenders gear up for Open Banking revolution