About the Author Writer and analyst Mark Boyd founded Platformable, a startup focused on helping businesses and governments measure the value of their ecosystems. He documents trends in open banking and open finance through Platformable’s Open Banking Quarterly Trends reports.
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Open Finance Steps Up Where Open Banking Fails to Tread Financial services are a paradox. On the one hand, they are increasingly ubiquitous: able to be accessed anywhere, whenever we need them. On the other hand, they are fading into the background so that we don’t directly deal with them in their own right. We can easily see this in action. Whenever we make a large purchase online, we may be offered a plan (that is, an ‘instant credit’ financial service) to pay for our purchase in instalments. Delivery is also arranged, and maybe we are even offered insurance at the point of sale. So we end up dealing with the retailer and multiple financial services all from the shopping cart, without having to engage with each business individually. This sort of experience in which financial services are provided within our main activity process is becoming the norm, thanks to application programming interfaces (APIs) coupled with an increasing demand for remote and mobile digital engagement. Even when we do access a digital financial service directly, it takes on three or four functions at once and does much of the legwork for us.
As a result, a new wave of customer-focused services are currently being implemented or are on the horizon: • •
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When you book travel accommodation, you can already arrange car rental, travel insurance, and even pay for additional event tickets at once. If you lease an electric vehicle, your car app could automatically book your service maintenance, copy the nearest EV charging stations into your maps and GPS, and even track your usage to recommend the optimal time to renew your lease.
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If you use a budget app, you could be told when to apply available coupons and discount offers, access cashbacks, or be switched to cheaper service providers automatically. For your small business, your accounting software can help you make sure you have the necessary paperwork to meet tax obligations and even submit your quarterly tax returns automatically for you.
APIs make these joined-up services possible by exposing the functionalities from each provider in a way that makes it possible to extend the customer value chain. This allows customers to personalise their experiences so they can pick and choose the elements that they need. But this also means that the service providers need new business models to work in an ecosystem approach. If you are a credit provider, do you give the retailer a revenue share if they introduce you to a new loan applicant? If you are a budget app, can you sell the anonymised, aggregated data of all your users to an enterprise that wants to study consumer buying habits, while also entering into a partnership deal to ensure your app users get a cashback or discount offer? Financial services infrastructure providers can be the conduit for these new business models. They offer various functionalities that can be plugged into the online experience. Often these can be provided within a digital service offering: a marketplace, softwareas-a-service, an app’s integration services, or so on. The financial services provider can be the innovator that identifies the new business models and works with partners to share revenue in ways that grow the opportunity for all stakeholders. This type of digital financial service delivery is often referred to as
