We are Open: Imagining the banking ecosystem of 2025
Following conducting research on the implications for digital banking customers and providers of PSD2, Mapa has been imagining what banking will look like in 2025. To do this, we asked two groups to list the words they thought best described banking in 2025, keeping in mind the regulatory context. The results are below.
As you can see, the general consensus is that banking will be considerably smarter, more personalised and – importantly – more open and aggregated than it is now in 2025. Of course, both providers and customers will have had time to respond to the mandated changes requiring banks to share customer data with any third-party provider granted permission by the customer.
In order to deliver on this vision, financial services providers will need to develop entirely new business models. Given the scale of change and the complex nature of all financial services, this is not going to happen overnight for any player, be they incumbent, challenger or FinTech. However, it is evident that providers falling into each of these three categories are laying the groundwork for an open banking approach now by embracing APIs to a greater or lesser extent.
As newer providers entered the market with an open strategy in mind, they are considerably further ahead than the incumbent players. Tom Blomfield, CEO of Monzo, wrote in an early blog post, ‘The bank of the future will be a marketplace. This is why [Monzo] has a singular focus – to build the best current account in the world – rather than selling dozens of different financial products. We can focus on what we know best, whilst offering our customers access to the best products and services from across the market.’ It subsequently exposed its APIs to third parties in February 2016, with CTO Jonas Hucestein, writing: ‘We’ll allow developers to build applications that can request access to customers’ data on an individual basis. For example, in the future, you could make an accounting app that connects to Monzo and customers could authorise you to access their account to extract their expenses.’
Similarly Starling Bank, which has just launched on the App Store, held a hackathon earlier this year to launch the Starling Developer Platform. The existence of the platform makes it the first bank to launch a public API that is already ready for PSD2. The API allows third parties to access customer data and build on top of the Starling Platform to create added-value products and services that consumers could pick and choose from to create a fully tailored service.
These API-enabled added-value services are likely to be presented to customers in some form of financial services ‘app store’ – an approach that has already been adopted by Fidor and Tide.
Fidor has open APIs that are accessible to third parties for services, amongst others, relating to banking, payments, credit, card management. In Germany, customers can browse the resulting services in the FinanceBay to personalise the products they hold with Fidor. Whilst UK customers do not yet have access to this digital marketplace, it is likely to be a matter of time.
Mobile-only SME provider Tide has already opened its ‘Toolbox’ to UK customers. As shown below, customers simply navigate to the relevant section of the app, click ‘Add new application’ and insert the name of the service that they want to integrate with their Tide account. Similarly, Revolut’s business account (which is currently in Beta) allows customers to use APIs to immediately plug into accounting software providers Xero, Sage and QuickBooks.
This is not to say that the high street giants are resting on their laurels. Lloyds Bank also has a Toolbox that is available to SME customers, enabling them to add or remove tools, such as accounting tools, credit checking tools and business planning tools, to their digital servicing platforms that suit their business needs
Keven Hanley, director of design and services at RBS, has stated that the bank wants to position itself as ‘the bank of APIs.’ Its website, bankofapis.com, acts as a developer portal for its Blue Bank API, which provides third party developers to access restricted account information as well as branch and ATM locations.
This is an approach also being explored by HSBC Group (covering HSBC, First Direct and M&S Bank), which has publicly available developer portals, and in 2016 Nationwide held an internal hackathon with Nationwide and Vodafone employees to explore the opportunities for open banking. Prototypes developed at the hackathon included an app that used information gathered from customers’ social media accounts to identify key life moments (such as getting engaged) to offer personalised financial advice on these moments that matter.
Finally Lloyds, Barclays and Nationwide all support FInTech Accelerators, giving them early insight into the latest third party tools that are being developed and consequential opportunities for partnerships (such as that between Metro and P2P lender Zopa) and Barclays, HSBC, Nationwide, Santander, RBS and Tesco Bank all have members on the steering committee of the Open Banking Working Group responsible for setting the Open Banking Standards.
Overall, it is clear that whilst it is not yet clear what an open banking ecosystem look like exactly, the future of banking is definitely open and failure to be adequately prepared for it when this new future arrives could be fatal.