Open Banking: The Future of Retail Banking and Financing

Open banking is an exciting new financial services industry trend that is enabling third-party providers (TTPs) to offer a host of new services- and will shake up traditional banking models as we surge into the future. TTPs are defined as an authorized online service provider operating within the open banking realm. They exist outside of your direct relationship with your bank, but are involved in online transactions that you carry out.

Using open banking, financial institutions can securely provide other financial institutions and TPPs with access to customer data through Application Programming Interfaces (APIs). Banks will benefit from this arrangement by being able to create new business models which expand their value chains by working with these new TTP partners and API consumers.

Some global financial institutions have already embraced open banking in innovative ways. For example:

HSBC has partnered with the Hong Kong Science and Technology Parks Corporation to identify potential fintechs partners to build products for their customers. Using the new API EcoBooster program, the HSBC digital team also offers mentoring services to the successful fintech applying to the program.

-Dutch bank ABN AMRO– who was one of the first banks to release APIs- have recently released a clear pricing model for their Tikkie API. After extensively updating their developer portal to increase engagement with their API consumer partners, they present a clear value proposition that payments processing is more likely to be completed in the shopping cart and that payments are processed to business bank accounts faster. They also have a clear transaction pricing model, similar to that used for other payment processing APIs.

In the years ahead, it seems that trends are pointing to most retail banks will increasingly build APIs for their own internal use. The rapid increase we are currently seeing of digital transformation and the need to build new banking technical infrastructure will come at the expense of aspects of traditional banking- and banks are already planning downsizing in terms of branch staff, consumer financial products, and core infrastructure. This comes at a very pivotal moment in history, especially with respect to the Covid-19 pandemic. A recent study conducted in the United Kingdom had revealed that 1 in 4 customers ages 18 to 34 plan to use bank branches less or stop visiting physical banks altogether after the pandemic ends. If these numbers are indeed correct, then the timing for this could play out very well for banks who are ahead of the game in building APIs and updating their infrastructure.

Apaylo is also pioneering open banking, sharing data between our partner organizations in order to make our client’s lives and their customers’ lives easier with simple functionality where complexity is handled within the API.

For more information on open banking:

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