Open Banking has not only been heralded as a paradigm shift in #financialservices but also as a potential replacement of card #payments. Can this be true and what are the implications? Let’s take a look.
#openbanking is about opening up information held by banks with the intention to trigger innovation by allowing third party providers (TPPs) to build new, added-value offerings.
However, beyond account information, the reason why Open Banking matters so much in today’s rapidly evolving payments landscape is because it not only connects merchants with consumers in a direct way, but it can also initiate payments directly from bank accounts. And this can be a huge game changer when compared to the oligopolistic set-up of traditional major card players, which own the rails based on which a large chunk of payments is conducted in the west (and for which they charge hefty fees).
In other words, what used to go – and still does – through traditional (debit and credit) card rails, has now a credible alternative to be routed through the consumer’s bank and settled directly between the merchant and the consumer, saving the main intermediaries in the cards’ model: the card schemes (above all) as well as the (card) issuer and the (merchant) acquirer.
Add the extra parameters of cost savings, increased security, convenience, zero time (instant) and enhanced user experience and you have a serious contender for an old business.
There is one more thing that needs to be mentioned: whereas the vast majority of modern #fintech offerings are built on existing infrastructure – having benefited from the decoupling of the front-end from legacy systems – open banking is powering for the first time in a long period the build-up of a real, additional infrastructure layer that has the potential to influence the entire finance set-up in the years to come.
On the other hand, Account-To-Account (A2A) payments are not new and have even found considerable success in individual countries, like in the Netherlands with iDEAL or in Germany with Giropay. However, they never took off on a European or wider basis due to fragmentation and to a lack of a unified clearing approach.
The open banking landscape is offering for the first time a more homogeneous set-up that when combined with the APIsation of financial services, the ascend of the platform #economy and the transition to more mature open finance use cases, can move the needle where other attempts have failed in the past.
Despite the existence of a business case as well as the good omens alongside an array of other factors, things will likely move slower than expected. We are transitioning to a multi-polar payments landscape where challenger offerings like real-time, A2A payments facilitated by open banking #technology will co-exist next to some of their more traditional siblings. What’s next beyond this is still open.
Opinions: my own, Graphic source: Tink, The future of payments is open
#openbanking is about opening up information held by banks with the intention to trigger innovation by allowing third party providers (TPPs) to build new, added-value offerings.
However, beyond account information, the reason why Open Banking matters so much in today’s rapidly evolving payments landscape is because it not only connects merchants with consumers in a direct way, but it can also initiate payments directly from bank accounts. And this can be a huge game changer when compared to the oligopolistic set-up of traditional major card players, which own the rails based on which a large chunk of payments is conducted in the west (and for which they charge hefty fees).
In other words, what used to go – and still does – through traditional (debit and credit) card rails, has now a credible alternative to be routed through the consumer’s bank and settled directly between the merchant and the consumer, saving the main intermediaries in the cards’ model: the card schemes (above all) as well as the (card) issuer and the (merchant) acquirer.
Add the extra parameters of cost savings, increased security, convenience, zero time (instant) and enhanced user experience and you have a serious contender for an old business.
There is one more thing that needs to be mentioned: whereas the vast majority of modern #fintech offerings are built on existing infrastructure – having benefited from the decoupling of the front-end from legacy systems – open banking is powering for the first time in a long period the build-up of a real, additional infrastructure layer that has the potential to influence the entire finance set-up in the years to come.
On the other hand, Account-To-Account (A2A) payments are not new and have even found considerable success in individual countries, like in the Netherlands with iDEAL or in Germany with Giropay. However, they never took off on a European or wider basis due to fragmentation and to a lack of a unified clearing approach.
The open banking landscape is offering for the first time a more homogeneous set-up that when combined with the APIsation of financial services, the ascend of the platform #economy and the transition to more mature open finance use cases, can move the needle where other attempts have failed in the past.
Despite the existence of a business case as well as the good omens alongside an array of other factors, things will likely move slower than expected. We are transitioning to a multi-polar payments landscape where challenger offerings like real-time, A2A payments facilitated by open banking #technology will co-exist next to some of their more traditional siblings. What’s next beyond this is still open.
Opinions: my own, Graphic source: Tink, The future of payments is open
