The financial services industry is already looking beyond Open Banking to the next phase of innovation, 'Open X', which will require deeper collaboration and specialisation, claims the latest World Fintech report from Capgemini.
More than a year into the UK's Open Banking era, many industry names at this week's Money 20/20 Europe are asking whether the whole enterprise has been a complete fiasco. Customer awareness is negligible, banks are dragging their feet in opening up to third party providers, and fintechs are having trouble growing.
With this in mind, the Capgemini report suggests that many leading industry players are already looking to simply leapfrog Open Banking and enter a period - dubbed by the firm Open X - of more effective and structured collaboration, facilitated by API standardisation and shared customer data insights.
The Open X period, it is argued, will create an integrated marketplace, with specialised roles for each player that will enable a seamless exchange of data and services, improving customer experience, and expediting product innovation.
Open X is being driven by a change in focus from products to customer experience, as well as the growing importance of data and the related shift from prioritising ownership to enabling shared access, and a move away from buying or building to partnerships.
At the heart of this are APIs. The report says standardisation is crucial to creating a marketplace, reducing fraud, improving interoperability, increasing speed to market, and boosting scalability.
The study also finds that industry players are looking at two potential monetisation models for APIs - revenue-sharing (which 60% of banks and 70% of fintechs think is feasible) and API access fees (supported by 46% of banks and 55% of fintechs). However, only about a third of banking executives said they are currently well equipped to monetise APIs.
Progress could be hampered by familiar concerns: data security and customer privacy, which are both cited by more than three quarters of banks as Open Banking worries. Another roadblock to collaboration is fear of culture clashes between banks and fintechs.
Anirban Bose, CEO, financial services, Capgemini, says: "Open Banking has long been regarded as transformational for financial services, but this report shows it is just one part of a much bigger picture. The industry is on the verge of a more comprehensive evolution, where there is opportunity to leapfrog into an integrated marketplace that we are calling Open X.
"In Open X, there will be seamless sharing of data, and ecosystem partners will be able to collaborate in a far more comprehensive way. Our research suggests that banks and fintechs need to prepare themselves for a more radical change than many previously anticipated.”
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