February 28, 2020

Open Banking: landscape in 2020

You heard from us first, Open banking is here to stay and it isn’t going anywhere.

The introduction of open banking—also known as PSD2—served as the beginning of a revolution in consumer finance. And while data privacy matters poised as potential challenges, recent PWC research shows that as many as 39% of bank customers would be willing to share their financial data with banks and third-party providers (TPP), if they were able to receive benefits in return.  

But the important thing is – taking into account recent developments in the industry—the burning question that everybody wants to ask is how open banking will be impacting finance in 2020. Fret not, for we have prepared an introductory article to answer exactly this! Read on.

Open Banking: A Recap

Before we dive right in, however, let’s do a quick recap on what open banking is. Essentially speaking, open banking is a regulation that requires banks to share the financial data of their consumers with authorised third-party vendors. For a more in-depth explanation on open banking, check out our previous article here.

Platforms to Marketplace shift

Last year, the financial industry witnessed banks involved in open banking pour incredible amounts of capital to create or invest in developer API platforms which would allow TPPs—for example, corporates, consumer brands, FinTechs and more—to conveniently plug into.

For example, HSBC and Goldman Sachs were among the investors in a $20m funding round for Bud, a UK-based open banking startup. With Bud, banks are able to leverage their platform to create apps and services, allowing consumers to seamlessly manage all of their financial products in a sole banking app. Thus, a financial ecosystem is effectively created.

In 2020, however, it is likely that the banks would begin to consume the fruits of their labour. Namely, moving away from developing or investing in open banking platforms to actually using them. With that in mind, banks would begin forging partnerships with other banks, financial services companies and TPPs, resulting in a new period of financial openness. 

Hence, the shift from platforms to marketplaces. With the anticipated increased collaboration within the financial industry, banks will no longer offer only their own set of products. This would effectively transform banks into becoming ‘marketplaces’, offering a selection of products from other banks, organisations and TPPs to choose from for their customers.

In fact, Starling is a good example of a challenger bank already ahead of the curve. Instead of forging its own suite of financial products, the bank focuses instead on forging partnerships. Starling’s Marketplace provides customers access to a variety of third-party financial products and services, including mortgages, pensions, insurance, and savings. 

Increased innovation

Up until recently, whenever open banking was discussed, the examples that were given included money-management apps and multi-banking channels. However, with banks waking up to the revolutionary possibilities of open banking, there is a large potential for financial institutions to combine open banking with the use of innovative technologies to further improve the customer experience and on-boarding process. For example, the wealth of consumer data that will be accumulated through open banking combined with advanced analytics could possibly aid banks in preemptively detecting and preventing fraud.

In 2020, it is expected that competition within the finance industry will be fierce. Now that the open banking foundation has already been laid, incumbent banks that fail to innovate risk losing out on the front end. By offering better usability and leveraging API platforms to plug in existing accounts, FinTechs, challenger banks and other players—large tech organisations, for example—are now able to insert themselves between the customer and the underlying bank, effectively usurping the value from the bank and relegating them to being ‘invisible’. After all, it is no secret that tech companies are interested in the financial services industry and banks should be highly wary of that. It was in 2019 that Apple debuted its first credit card, Facebook launched Libra and Google is even set to launch consumer bank accounts this year. 

From a customer perspective, this increased pressure to innovate will result in creating better products and services. Thus, fret not! Open banking is not something to be afraid of. On the contrary, it stands to be a good thing for consumers.


Interested to learn more about how open banking will impact your business? CFTE is currently crafting our latest open banking course with industry experts and leading academics. Register your interest now.