In times when the Open Banking market continues to increase in size, the key to success for Open Banking players lies solely in internationalisation. According to a recent report by Allied Market research, the global Open Banking market will likely have grown from an estimated seven million USD market share size in 2018 to an expected forty-three million in 2026. While the market grows, the question arises, which Open Banking players will be leading the way?
The answer to this rests heavily on the factor of scaling capabilities. The only way for Open Banking players to edge out their competitors going forward is to focus on scaling via internationalisation.
Internationalisation in Open Banking
Internationalisation ideally should not be viewed from a perspective of oversaturated markets in dire need of international expansion. It is more a matter of Open Banking players working together with their international customers, such as banks and fintechs, to push the Open Banking services created in their home markets into new ones. In doing so, both partners drive the joint scaling of their business models forward.
In order to meet this demand, European Open Banking players in particular must push the successive development of the relevant countries on the European continent and thus make full use of the PSD2 regulatory framework. In parallel, further strategic geo expansions into markets outside Europe should be considered with joint partners, in order to accompany large international customers in entering or expanding their activities.
Relevant markets for the geo expansion of Open Banking players often establish themselves from the fact that access to these markets is on the roadmap of their international customers, or will be on this roadmap in the near future. In addition, in many countries, such as those in the MENA region, the adaptation of the PSD2 regulation results in a simplified scenario for European Open Banking players. This can reduce the initial technological investments required to enter the markets, thus enabling a faster market entry. The focus can thus be placed on the operational development of the markets.
Internationalisation strategies
For European Open Banking players, the priority should be to integrate countries in the pan-European market in adherence to a strategic roadmap that prioritises the integration sequence based on business and market criteria. In parallel, strategic decisions must be made for further geo expansion. Various strategies can be adopted here. Building up one's own connectivity in the target markets is associated with higher initial technological expenses and may also increase the implementation time. A popular alternative to this is focusing on mergers and acquisitions in the respective target market. This offers the advantage of faster market establishment, but also the disadvantage of a subsequent integration of the services on an infrastructure with sometimes high expenses and loss of reputation with the existing customers of the market.
An alternative to geo expansion is to offer one's own platform together with an established partner in the target market. This can be essentially viewed as an Open-Banking-as-a-Service model. In doing so, the Open Banking provider enters into a licensing model that reflects their own technological competence to provide a platform, and the partner in the target market uses this platform with their market access to establish themselves as an Open Banking player in its region.
What will happen to Open Banking players without internationalisation
Win larger, international customers. Large-scale, multinational companies looking to make the most of Open Banking and embedded finance will most likely in future only look for service providers who can offer cross-market solutions. It’s also very possible that these players will begin to lose customers looking to expand internationally or broaden their offering beyond their core market.
Convince investors to stay or get on board. If other competitors are taking the large, international customers up for grabs, everyone else will be unable to present the necessary growth and revenue figures needed to persuade investors to participate in funding rounds.
To make a long story short: Those who can’t scale beyond their core markets will be bought up by those who can.
Internationalisation is the only way to fully unleash the power of Open Banking services and fuel the scaling of customers' and providers' business models in the long run.
As the CCO of finleap connect, Andreas Reuss leads finleap connect’s Commercial team, where he leads the Sales, Business Development, Go-to-Market and Marketing departments. He has over fifteen years of experience in project and process management, process optimisation and business model development.
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