Page 28 - GS241102

ChapterTitle
Insights and Expertise

Have we learned the enabling them to work with traditional banks and develop
new services that enhance customer experiences.
lessons from open Few would argue that, on the surface, this seemed a well-
intentioned and achievable goal.
banking? Unfortunately, like many such initiatives, instead of fos-

tering greater collaboration between companies in these
fields to benefit customers, open banking exacerbated
one of the longstanding fault lines that has always under-
mined the relationship between fintechs and banks: their
inherent tendency to compete.

As is often the case, a zero-sum mindset took hold dur-
ing the open banking revolution, with companies on both
sides becoming overly concerned about how it might ei-
ther expand or erode their market share.
The issues at play
While this doesn't apply to everyone, the issue did become
pronounced enough to create problems throughout the
implementation process. For one, it's fair to say that tra-
ditional banks could have done more to tackle issues like
API standardization and imbalanced service-level agree-
By Karthik Jagannathan ments with third-party providers.
Intix
More broadly, there's a sense that some of these institutions
anks and fintechs across the European overlooked the potential benefits open banking could of-
Economic Area have been using open banking fer their own businesses, instead perceiving it mainly as a
for well over five years. Over time, the project scheme intended to give fintechs a leg up.
B has undeniably divided opinion. Some regard
it as a major success, while others, like Starling Bank CEO At the same time, some blame must also be directed at
Anne Boden, have criticized it as an abject failure. certain fintech businesses, who didn't always cover them-
selves in glory. Some third-party providers engaged in
Notably, Boden once famously told a UK Parliamentary practices that placed unnecessary strain on banking por-
committee that open banking represents "a lesson in try- tals, leading to technical challenges and outages that tra-
ing to make something work when halfway through the ditional financial institutions and payment service pro-
project, we realized it wasn't going to work." viders were often left to resolve at their own expense.

While opinions on the topic vary widely, it is hard to claim When you're trying to foster a culture of collaboration, is-
that open banking, and particularly its implementation, sues like these can hinder progress, souring relationships
has been an unqualified success. Even the most ardent de- before they have a chance to flourish.
fenders of the initiative would likely admit that valuable
lessons can be drawn from the experience of implement-
ing the initiative, particularly ahead of similarly large- As is often the case, a
scale projects in the future.
zero-sum mindset took hold
Now, with Europe gearing up for new initiatives like the
digital euro, it seems an opportune moment to ask what during the open banking
those lessons are. revolution, with companies on

Collaboration versus competition both sides becoming overly
Open banking was designed to bring fintech and tradi- concerned about how it might
tional banks closer together, fostering innovation, com-
petition and collaboration within the financial services either expand or erode their
industry. By requiring banks to securely share customer market share.
data (with consent) with authorized third-party providers,
open banking aimed to level the playing field for fintechs,

28