Voice of the Industry

INNOPAY Open Banking Monitor: existing players step up their game and new players enter the arena

Wednesday 7 December 2022 10:11 CET | Editor: Vlad Macovei | Voice of the industry

INNOPAY's Mounaim Cortet and Jorgos Tsovilis present the findings of the latest INNOPAY Open Banking Monitor in the Open Banking Report 2022.

 

 

The latest edition of the INNOPAY Open Banking Monitor shows that existing players in the financial industry are stepping up their game and providing interesting Open Banking product propositions.
Meanwhile, new banks are entering the arena.

In response to the rising demand for open, embedded finance, finncial institutions are increasingly offering white-label and (co-)branded financial services that other companies can integrate into their value propositions for their customers. This is also known as Banking-as-a-Service (BaaS).

This year’s edition of the Open Banking Monitor provides strategic insights into how financial institutions have progressed on their BaaS journey and product offering.

The key findings at a glance:

1. Competition is intensifying 

INNOPAY’s Open Banking Monitor shows the efforts banks are making in expanding their API product offering (the ‘Functional scope’ axis) and in improving the experience for API consumers (the ‘Developer experience’ axis). 

The latest edition of the Open Banking Monitor shows that existing players are stepping up their game and providing interesting Open Banking product propositions. Meanwhile, new banks are entering the arena. 

 

2. Growing API product offering

Notably, there is a trend towards banks offering more APIs, indicated by a 17% increase in APIs offered per bank. The APIs now cover a broader variety of common banking functionalities, but account information (for various account types), payment initiation (for various payment instruments) and payment management (for various user-initiated actions around the payment) still top the list. These are followed by customer information APIs (enabling the controlled sharing of selected data attributes), which have increased considerably. Similarly, a variety of corporate APIs have hit the market, further driving efficiencies and improved customer experience in transaction banking operations (e.g. trade finance, electronic bank account management (eBAM), and real-time cash pooling capabilities). 

‘Notably, there is a 17% increase in APIs offered per bank.’

While Open Banking APIs still focus on core functionality, adoption is accelerating and spreading to other products and services, as shown in the image visualising our analysis of APIs in the developer portals of 15 large multinational banks.

APIs per domain based on INNOPAY’s analysis of the developer portals of 15 large multinational banks.


3. Improved developer experience

The average developer experience score has increased by 11%. This raises the bar, meaning that competition is intensifying and banks need to step up their game to avoid falling behind their peers. The improvement in developer experience is mainly driven by: 

  • Community Development: 22% increase in banks actively investing in community development efforts through news articles, blogs, events, or partnership programmes. This indicates that banks are picking up on the importance of establishing an Open Banking community to drive innovation. 

  • Developer Usability: 21% increase thanks to additional – or optimised – development tools such as dynamic sandbox functionalities, detailed ‘getting started’ guides, or more comprehensive application and credential management features, contributing to a better developer experience by making life easier for API consumers. 

  • API Documentation: 3% increase in features such as information on API business context, API versioning & changelogs, and conciseness of the API specifications, all of which improve the overall readability of the API documentation and related content. 

‘Open Banking is not all about exposing and consuming data and functionalities, even more so it is about exploring new possibilities enabled through open business models.’

 

Three Open Banking trends to enhance the developer experience

We currently observe three trends that play an important role in enhancing the experience of API consumers: 

1. Consistent developer experience across countries and markets

API solutions solve a wide array of challenges for a variety of API consumers across multiple verticals and markets. A key differentiator for banks is being able to retain a consistent and intuitive experience, to ensure interoperability of their solutions, through a unified approach.

2. Collaborative solutions through ‘Partner APIs’ or ‘Mash-ups’ 

Open Banking is not all about exposing and consuming data and functionalities, even more so, it is about exploring new possibilities enabled through open business models. Banks with a collaborative mindset can establish a key position within new digital ecosystems by co-creating new mutually beneficial products in complete user journeys.

3. Flexible API solutions catering for diverging needs 

There is no one-size-fits-all solution and the needs of specific API consumers might differ in terms of security and authentication requirements or API formatting preferences. With this in mind, API solutions that cater for flexibility increase overall robustness and stimulate adoption at scale.

Three functional aspects of Open Banking to consider 

When it comes to the functional scope of the Open Banking Monitor, three aspects are considered when comparing API functionalities: 

  1. comprehensiveness of the API product;
  2. value enabled through the API;
  3. complexity of the API.

 

Time to act – Open Finance is just around the corner

For everyone in the Open Banking space, regardless of whether they are frontrunners or taking a more reactive approach, there is now a new challenge on the horizon: ‘Open Finance’. In this emerging paradigm in the financial services industry, value creation will come from sharing, providing and leveraging access to even more banking data and products through APIs. Open Finance is designed to support the development of more compelling, 'embedded' value propositions and experiences for customers and partners in digital ecosystems.

‘Open Finance is a game changer that challenges financial institutions to rethink their business models and get involved to unlock business value and secure their relevance.’

Besides the compliance challenges of Open Finance, financial services providers and other actors need to cope with an ever-changing competitive landscape. Emerging players are disrupting traditional value propositions and business models while simultaneously also presenting new opportunities for collaboration. We see a broad shift towards value creation happening in ecosystems, facilitated by seamless digital customer journeys and data flows. Organisations that execute ambitious Open Finance strategies are likely to come out on top in this data-driven economy.

Open Finance is a game changer that challenges financial institutions to rethink their business models and get involved to unlock business value and secure their relevance. It is safe to say that Open Finance is the key building block for financial service providers who wish to compete and collaborate in digital ecosystems. It is time for them to act.

Download the Open Banking Monitor report in full.

This article has been first published in the Open Banking Report 2022. Click here to download the report.

About Mounaim Cortet 

Mounaim is Director and Country Manager DACH at INNOPAY. He is a seasoned strategist fascinated by the nexus of business strategy and the rising opportunities of regulation, data, and technology. He works on strategic and innovation challenges in Digital Payments, Digital Identity, and Open & Embedded Finance. His focus lies on supporting financial services providers to (re-)define their strategy, business model, and operating model to successfully compete and collaborate in digital ecosystems.

About Jorgos Tsovilis

Jorgos is Senior Consultant and part of the Open Finance team at INNOPAY. With a background in Artificial Intelligence, his strength lies in combining technology and business value into user-centred strategies and services. At INNOPAY he has been closely involved with developments surrounding Open Banking & Finance and is leading the research and development work for the INNOPAY Open Banking Monitor.


About INNOPAY

INNOPAY is a consultancy firm specialised in digital transactions. We operate in the areas of data sharing, digital identity, openness, cyber resilience, and digital transformation. Our aim is to help companies, organisations, and consortia across Europe to identify and seize opportunities in a digital world in which everything is becoming a transaction. Together with our clients, INNOPAY experts develop innovation strategies, co-create new products and services, and digitally transform businesses. Our headquarters is located in Amsterdam.


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Keywords: Open Banking, Open Finance, report, API
Categories: Banking & Fintech
Companies: INNOPAY
Countries: Europe
This article is part of category

Banking & Fintech

INNOPAY

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