Not just a financial market, but an open data market

GDS Modellica
Over the past few months, we have been looking at the seeming paradox developing with regard to Open Banking. On the one hand, there appears to be a firm commitment by all players in the sector to embrace Open Banking, regardless of their size, technological capacity or levels of innovation. On the other hand, there is an acute awareness that the market simply is not prepared enough. But regardless of whether the cautious approach is the right one or not, one thing is for sure: the moment the Open Banking ‘wave’ arrives, there will be no going back and things will move at a tremendous speed.

On this very matter, a recent report by Accenture, ‘Catching the Open Banking wave’, warns that a wave of changes is on its way as the various initiatives and regulations start to mature. We are now facing the creation of not a financial economy, but an “open data” economy with financial implications for users and customers. According to the authors, “The super app will be here before you know it”.

What is a super app? According to Accenture, a super app is a platform or ecosystem that “does everything, or almost everything”. In most cases, it is a massive market of offers made possible by three things: digital technology, big data and third-party integration. They cite WeChat and Alipay as examples and highlight that PayPal and Klarna are taking similar steps towards building ecosystems that integrate features like mobile payments, shopping, investing, savings, budgeting and crypto-capabilities.
Whilst Open Banking has not yet triggered a tsunami of disruption, it is only a matter of time, and it is closer than we might think. An early indicator, according to the report, is the rapid growth of third-party providers in Europe, who are already at the forefront of the Open Banking revolution. Two years ago, there were barely 100 TPPs in Europe. Now, there are more than 450. Furthermore, not only are they growing in number but in scope, moving from payments and transactional retail banking to touch the entire financial value chain.

  Is the reward really so enticing as to justify all this change? In the report, Accenture point to an analysis that they carried out based on datasets that include more than 20 of the largest economies, making up more than 75% of world GDP. According to their analysis, there is more than $416 billion in banking revenue at stake for those agile players who have recognised the opportunity.

  In such a high-stakes scenario, it is expected that there will be new players, like fintechs, neobanks, bigtechs and other non-traditional players, who manage to seize a good portion of these new opportunities. Despite having been the custodians of data and money for centuries, banks have had a somewhat mixed response to Open Banking. Some, in fact, have been decidedly slow to react. “Banks that are not yet considering where they will play in the open data economy risk yielding the market to their more agile competitors”, warns the report.

  None of this should be surprising if we accept that the new focus is not on finances but on data. One of the key enablers of the open data economy (particularly in the financial sector) has been the blurring of boundaries between industries. Furthermore, differences in the way that open banking evolves in different regions will create different nuances and disruptions in the market, and broadly speaking these can be expected to fall into three large blocks with their own specific behaviours.
Firstly, there will be consumer-enabled markets, such as China. “These are markets where most consumers are digitally enabled and prepared to embraced new-age financial services and products”. These markets will be expected to lead the way if their Western counterparts do not fight back.

  Secondly, there will be regulator-enabled markets, such as the European Union and Australia. These are markets where “consumer readiness is lagging despite a regulatory focus on open data and Open Banking”. These are markets with more regulations than a genuine will on the part of the consumer to use new products and services.

  And finally, there will be market-led markets, such as the USA. There, “banks and other members of the ecosystem are driving Open Banking in the absence of market infrastructure or a regulatory mandate”. This is a great opportunity amidst a certain “anarchy” that could cause as much noise and chaos as disruption and innovation.

  To finish with, the report also addresses the four core capabilities that banks will need to master if they want to stay relevant in the era of the supper app. Interestingly, they are areas in which traditional banks should already be able to flex some muscle: data custodianship, data management and analytics mastery, agile digital partnerships and striking a balance between trust, security and the customer experience.
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