Regulators are lowering barriers for fintech entrants to bolster competition in banking. 2019 will see fintech startups expand on the back of open banking.
The UK’s Open Banking Framework has become a global source of inspiration.
Regulators around the world are using Europe’s playbook to adopt an open standard for accessing bank data via Application Programming Interfaces (APIs). The goal is to give consumers more choices by increasing competition between banks and fintech startups.
One of the fastest-growing cohorts of companies are digital-first banks, or challenger banks, that have leveraged open APIs to build their products. This has led to the debut of many challenger banks in Europe, like Revolut and N26, who are taking advantage of open banking to expand globally.
For banks, open banking promises more competition. One key benefit of transitioning to an open API framework is that it will streamline internal efforts to launch digital products. That’s because APIs decrease the costs and time to market for new products and services.
Ultimately, the biggest benefactors of open banking are consumers and businesses, which have more choices for products, access to cheaper services, and tighter control over which companies can access their data.
In this brief, we explore how open banking works, how regulators are adopting it in new markets, and how fintech startups are leveraging it.
TABLE OF CONTENTS
- A refresher on open banking
- Open banking is going global
- Fintechs are leveraging open banking to scale
- The path ahead
A refresher on open banking
The intent of the UK’s Open Banking Framework is to decentralize data and create an open banking system across Europe. The core recommendation set out by the UK’s HM Treasury department is to create standardized access to customer data and banking infrastructure APIs.
