Simon-Kucher & Partners, a global strategy and marketing consulting firm, today released the North American results from its Global Open Banking Study. The study gathers insights to determine the potential for open banking to create new streams of revenues and compelling customer value propositions for US and Canadian banks.
Open banking, where we are able to share bank resources such as data, capabilities or processes with third parties including Fintech firms, technology providers and other institutions through an Application Programming Interface (API), has the potential to transform the bank’s revenue model.
“Our research shows a willingness-to-pay from both bank customers and third parties alike,” said David Chung, a Partner at Simon-Kucher & Partners. “There is also a lot of excitement around the potential for open APIs to enhance current bank offerings with innovative features such as alternative payments methods, more accurate credit assessments and new lending products that can ignite revenue growth at banks.”
The survey offers guidelines to help banks navigate open banking. It includes insights on the bank customer’s preferences and willingness-to-pay for open banking features, and also identifies the preferences and challenges encountered by third parties including Fintech, non-Fintech technology providers and API management platform, when adopting bank APIs.
Some highlights of the research include:
Bank Customers want more High-Touch Services
- When asked to identify what was missing from their current bank’s product and service offerings, almost half of bank customers (44 percent of respondents) said they would like more personalization, convenience and a dedicated contact person at the bank. In another words, high-touch service features that can be supported by open banking
- A smaller percentage of customers felt that their banks were missing financial education and planning advice services (10 percent of responses) and speed of service (eight percent of responses)
Bank Customers have a Willingness-to-Pay for Certain Open-Banking Features
- Bank customers were most willing-to-pay for instant online account opening, pre-filled forms, access to credit scores, instant online loan approvals, and a consolidated view of their financial situation
Bank Customers have a Strong Negative Perception of Open Banking, Data-Sharing
- An overwhelming majority or 75 percent of bank customers said they are unlikely or very unlikely to allow their banks to share their account information, transaction history, funds overview and other data with third parties
- The term open banking tended to scare off US and Canadian bank customers. When told they were using a product or service where the bank allows a third party to access its database in order to provide the feature, more than one-third (39 percent) of customers said they would re-think their feature selections
- While the term open banking scares off bank customers in North America, it triggers a willingness-to-pay in Europe
Stability and Scalability Issues Challenge Third Party Developers
- When asked to identify the challenges they encounter when adopting bank’s open API interfaces, third party developers’ responses centered on issues of scalability and stability. For example, 40 percent of responses identified challenges related to the instability, low scalability and unreliability of bank APIs
Third Parties Partners Use APIs for Payment Purposes, Enhance Offerings
- Third parties use APIs primarily for payment purposes (40 percent) and to enhance or enlarge their product or service offering (38 percent)
- Third parties most highly valued APIs that provide end-client transaction history and account information, and APIs that enable payment initiation
Third Parties Partners Show a Strong Willingness-to-Pay for Certain APIs Features
- Third party partners considered the following features to be essential and they are willing to pay for them:
- Explanations of API attributes (56 percent of respondents)
- Sandbox (52 percent of respondents)
- Support for advanced application certification (52 percent of respondents)
Open banking is still evolving, and how a bank chooses to respond to this disruptive force will determine if they remain competitive and thrive in the future. The actions taken today will shape the extent they can fully-capitalize on open-banking’s potential to grow revenues, deliver seamless, engaging customer experiences, and position their institutions for the future.
Full research results are available on request.