Open Banking and Fintech: An Increasingly Stronger Partnership

GDS Modellica

13/12/2022

If there is one thing that we have been talking about for years on this blog, it is open banking, both in terms of market trends and regulation. Fintechs have also been the subject of extensive commentary here at GDS Modellica, and this is no coincidence. In reality, both topics go hand in hand, and the partnership that they have established is going from strength to strength.

A recent report by 451 Research for Discover® Global Network has identified the emerging trends that are giving shape to this ecosystem and bringing together finance and technology. The report covers aspects like connected commerce, embedded finance, real-time payments and, as expected, the advantages of open banking.

The proof of the strength of this relationship is even more clearly demonstrated by the fact that more than three-quarters (78%) of fintech companies consider open banking technology to be “relevant” for their business.

Furthermore, almost two-thirds (63%) of fintechs show a strong interest in partnering with a payment network to develop open banking solutions. “Fintechs are constantly looking for new ways to innovate and deliver for their customers and this year’s study revealed emerging trends like open banking and connected commerce have remained top of mind”, claims Kiran Pookote, director of business development at Discover.

One of the first figures revealed in the report is the consumer appreciation for open banking, with 68% having a positive opinion. More than two-thirds of consumers like open banking because it provides greater flexibility and a more consolidated view of their finances. Open banking is viewed particularly positively in the US market, where the vast majority of consumers (87%) have at least one fintech app on their smartphones. In fact, almost half (49%) have three or more, which is a significant increase from the previous year (36% in 2021).

To obtain these figures, the firm surveyed 4,037 consumers and representatives from 852 fintech providers (vice presidents, executives and founders) in the second and third quarters of 2022. The markets surveyed included Canada, China/Hong Kong, Germany, India, Singapore, the UK and the USA.

As well as the strength of the relationship between fintech and open banking, the report also revealed some other interesting insights. This time, here at GDS Modellica, we have decided not to produce our customary infographic because the report’s authors have already created a very good one, which we obviously recommend reading.

By way of a summary, here are some of the key takeaways from the information found in the report:

The benefits of open banking that interest the most consumers are receiving faster credit approvals (68% interested) and receiving a consolidated view of financial accounts (also 68%).
Emerging payment experiences are relevant for fintechs, with 63% interested in partnering with a payment network to develop open banking solutions, 60% to develop cryptocurrency solutions, and 60% to develop BaaS solutions.
Three-quartersrs of fintechs surveyed (75%) believe that embedded finance/BaaS (Banking as a Service) is relevant for their business.
Six of every ten consumers are interested in a loyalty programme that provides them access to personalised finance options. This figure reaches 75% for Gen Z and Millennials.
Two-thirdsds of consumers (66%) are interested in paying automatically for purchases by walking out of a shop and 58% are interested in having connected devices make purchases automatically on their behalf.
Almost eight of every ten fintechs (79%) indicate that connected commerce is very relevant for their business.