Summary
EU-wide and UK-specific regulations will force banks to open up access to their customer data by January 2018. This will have profound implications for both incumbent providers and the new entrants seeking to challenge their dominance. Open banking will lead to the creation of new business models, including banking as a marketplace. Here, a bank integrates third-party services into its own platform, effectively turning itself into a portal, or marketplace, where consumers can access products from across the market in one place.
Key findings
• Marketplace banking will lead to higher revenues. Not only will banks gain from charging access fees to partners, they will also be able to share the revenues from the sale of partner products. They can also access data generated by their partners to identify new opportunities for targeted cross-selling.
• Established banks can use a marketplace strategy to harness the expertise of fin-tech specialists and improve the weakest offerings in their product ranges in a cost-effective manner.
• Marketplace practitioners need to guard against the risks associated with sharing customer data with third parties. They also need to minimize loss of control over product development by collaborating with partners to co-create products, rather than passively integrating off-the-peg products.
Critical success factors
• Identify which products should be outsourced to third parties – This will be determined by whether the product is a core or a peripheral offering, how weak the product is compared to equivalent offerings from competitors, and how much scope there is for partners to add value to, or improve upon, the bank’s existing proposition.
• Set benchmarks for partner selection – This can be a mix of objective criteria, such as cost of integration, the financial stability of the third party, and their customer satisfaction scores, and subjective factors like brand image and reputation.
• Clearly define the terms and conditions for working with partners – Decide whether third parties should be compelled to enter into exclusive partnerships with the bank, or if they will be allowed to deal with competing providers. Establish service level agreements that cover performance, quality, reliability, cost, and other relevant metrics, and set out the precise circumstances under which either party is able to terminate the partnership.
The report “Banking as a Marketplace: Opportunities and Threats” explores the opportunities and advantages offered by the marketplace banking model for both new entrants and incumbents.
This report offers insight into -
• The status of regulatory developments that are driving open banking initiatives in the UK and Europe.
• The advantages of marketplace banking with respect to revenue generation, product provision, and alliances with fin-tech providers.
• The key risk factors banks need to consider when adopting a marketplace strategy.
Companies mentioned in this report: N26 and Starling Bank
Scope
• Marketplace banking will lead to higher revenues. Not only will banks gain from charging access fees to partners, they will also be able to share the revenues from the sale of partner products. They can also access data generated by their partners to identify new opportunities for targeted cross-selling.
• Established banks can use a marketplace strategy to harness the expertize of fintech specialists and improve the weakest offerings in their product ranges in a cost-effective manner.
• Marketplace practitioners need to guard against the risks associated with sharing customer data with third parties. They also need to minimize loss of control over product development by collaborating with partners to co-create products, rather than passively integrating off-the-peg products.
Reasons to buy
• Learn about the competitive and strategic advantages marketplace banking can offer providers
• Understand what potential risks and drawbacks are associated with this model
• Discover how banks in the UK and Europe are already implementing marketplace strategies and what they are aiming to achieve.
EU-wide and UK-specific regulations will force banks to open up access to their customer data by January 2018. This will have profound implications for both incumbent providers and the new entrants seeking to challenge their dominance. Open banking will lead to the creation of new business models, including banking as a marketplace. Here, a bank integrates third-party services into its own platform, effectively turning itself into a portal, or marketplace, where consumers can access products from across the market in one place.
Key findings
• Marketplace banking will lead to higher revenues. Not only will banks gain from charging access fees to partners, they will also be able to share the revenues from the sale of partner products. They can also access data generated by their partners to identify new opportunities for targeted cross-selling.
• Established banks can use a marketplace strategy to harness the expertise of fin-tech specialists and improve the weakest offerings in their product ranges in a cost-effective manner.
• Marketplace practitioners need to guard against the risks associated with sharing customer data with third parties. They also need to minimize loss of control over product development by collaborating with partners to co-create products, rather than passively integrating off-the-peg products.
Critical success factors
• Identify which products should be outsourced to third parties – This will be determined by whether the product is a core or a peripheral offering, how weak the product is compared to equivalent offerings from competitors, and how much scope there is for partners to add value to, or improve upon, the bank’s existing proposition.
• Set benchmarks for partner selection – This can be a mix of objective criteria, such as cost of integration, the financial stability of the third party, and their customer satisfaction scores, and subjective factors like brand image and reputation.
• Clearly define the terms and conditions for working with partners – Decide whether third parties should be compelled to enter into exclusive partnerships with the bank, or if they will be allowed to deal with competing providers. Establish service level agreements that cover performance, quality, reliability, cost, and other relevant metrics, and set out the precise circumstances under which either party is able to terminate the partnership.
The report “Banking as a Marketplace: Opportunities and Threats” explores the opportunities and advantages offered by the marketplace banking model for both new entrants and incumbents.
This report offers insight into -
• The status of regulatory developments that are driving open banking initiatives in the UK and Europe.
• The advantages of marketplace banking with respect to revenue generation, product provision, and alliances with fin-tech providers.
• The key risk factors banks need to consider when adopting a marketplace strategy.
Companies mentioned in this report: N26 and Starling Bank
Scope
• Marketplace banking will lead to higher revenues. Not only will banks gain from charging access fees to partners, they will also be able to share the revenues from the sale of partner products. They can also access data generated by their partners to identify new opportunities for targeted cross-selling.
• Established banks can use a marketplace strategy to harness the expertize of fintech specialists and improve the weakest offerings in their product ranges in a cost-effective manner.
• Marketplace practitioners need to guard against the risks associated with sharing customer data with third parties. They also need to minimize loss of control over product development by collaborating with partners to co-create products, rather than passively integrating off-the-peg products.
Reasons to buy
• Learn about the competitive and strategic advantages marketplace banking can offer providers
• Understand what potential risks and drawbacks are associated with this model
• Discover how banks in the UK and Europe are already implementing marketplace strategies and what they are aiming to achieve.
1. EXECUTIVE SUMMARY
1.1. Marketplace banking will significantly alter the financial landscape1.2. Key findings1.3. Critical success factors
2. CURRENT STATUS OF OPEN BANKING INITIATIVES
2.1. The CMA has set a deadline of January 13, 2018 for implementing open access to data2.2. The OBS is set to go live in Q1 20192.3. Work continues to ensure PSD2 will come into effect in January 20182.4. The US remains behind the UK and the EU with respect to open banking initiatives2.5. The MAS is promoting open APIs2.6. Consumers are largely unaware of the concept of open banking
3. MARKETPLACE BANKING IN DETAIL
3.1. Marketplace providers challenge traditional banking structures3.1.1. Marketplace banking is ideally suited to new entrants3.1.2. Consumers will be presented with a safe environment for choosing and using products3.1.3. Marketplace banks can choose the level of integration of third-party services3.2. Marketplace banking offers new ways to generate revenues3.2.1. Access fees3.2.2. Commission fees3.2.3. Data-driven revenue3.2.4. New revenue sources will be particularly advantageous for new entrants3.3. Marketplace banking offers significant opportunities for providers3.3.1. New entrants can become viable quickly and cheaply3.3.2. Established banks can improve their product ranges cost-effectively3.3.3. Banks can convert fintech providers from threats into allies3.4. There are a number of threats associated with marketplace banking3.4.1. Risks associated with data control and security are magnified3.4.2. The GDPR imposes clear data handling rules on banks3.4.3. Banks risk weakening their customer relationships3.4.4. Brand identities may become diluted3.4.5. Banks will lose direct control over product ranges3.5. New entrants are already using the marketplace banking model3.5.1. Starling Bank has the most advanced open API strategy in UK banking3.5.2. N26 in Germany has partnered with several providers to expand its product range3.6. How should incumbents respond?3.6.1. Why should established banks adopt a marketplace strategy?3.6.2. What potential problems should marketplace banking practitioners be aware of?3.6.3. What factors should be considered when adopting a marketplace strategy?
4. APPENDIX
4.1. Abbreviations and acronyms4.2. Definitions4.2.1. API4.2.2. Open banking4.3. Bibliography4.4. Further reading
1.1. Marketplace banking will significantly alter the financial landscape1.2. Key findings1.3. Critical success factors
2. CURRENT STATUS OF OPEN BANKING INITIATIVES
2.1. The CMA has set a deadline of January 13, 2018 for implementing open access to data2.2. The OBS is set to go live in Q1 20192.3. Work continues to ensure PSD2 will come into effect in January 20182.4. The US remains behind the UK and the EU with respect to open banking initiatives2.5. The MAS is promoting open APIs2.6. Consumers are largely unaware of the concept of open banking
3. MARKETPLACE BANKING IN DETAIL
3.1. Marketplace providers challenge traditional banking structures3.1.1. Marketplace banking is ideally suited to new entrants3.1.2. Consumers will be presented with a safe environment for choosing and using products3.1.3. Marketplace banks can choose the level of integration of third-party services3.2. Marketplace banking offers new ways to generate revenues3.2.1. Access fees3.2.2. Commission fees3.2.3. Data-driven revenue3.2.4. New revenue sources will be particularly advantageous for new entrants3.3. Marketplace banking offers significant opportunities for providers3.3.1. New entrants can become viable quickly and cheaply3.3.2. Established banks can improve their product ranges cost-effectively3.3.3. Banks can convert fintech providers from threats into allies3.4. There are a number of threats associated with marketplace banking3.4.1. Risks associated with data control and security are magnified3.4.2. The GDPR imposes clear data handling rules on banks3.4.3. Banks risk weakening their customer relationships3.4.4. Brand identities may become diluted3.4.5. Banks will lose direct control over product ranges3.5. New entrants are already using the marketplace banking model3.5.1. Starling Bank has the most advanced open API strategy in UK banking3.5.2. N26 in Germany has partnered with several providers to expand its product range3.6. How should incumbents respond?3.6.1. Why should established banks adopt a marketplace strategy?3.6.2. What potential problems should marketplace banking practitioners be aware of?3.6.3. What factors should be considered when adopting a marketplace strategy?
4. APPENDIX
4.1. Abbreviations and acronyms4.2. Definitions4.2.1. API4.2.2. Open banking4.3. Bibliography4.4. Further reading
