Digitalization is blurring the boundaries between industries to the point that some will cease to exist. Will banking be one of them?
Anyone can build a bank. For example, peer-to-peer lending turns everyone into a bank. Banks could potentially have to compete against every individual because each person could be a lender. In fact, individuals can lend money, their car, their house or even their driveway like they do in London at ParkatmyHouse (Gartner clients see “Lead in the Digital Industrial Economy Using Insights From Symposium’s Analyst Keynote“).
Banking CxOs and line of business leaders will need to purposefully disrupt their own business models in order to succeed in a digital business world. Open banking APIs, apps and app stores are already enabling this disruption, but most banks have yet to become more open due to regulatory compliance and security concerns as well as cultural tendencies to remaining closed and controlled. However, regulators in some regions may in fact force open banking (for example, Articles 58 and 59 of PSD2 indicate that third parties that are regulated will be allowed access to account information, transaction information and payment initiation). In addition, new competitors are using open banking technologies (like APIs and app stores) and ecosystems (like partners and third party developers) to disrupt the industry faster than ever before. For example, nonbank APIs from Amazon, PayPal, Zillow and others are 2 to 5 years ahead of retail and commercial banking APIs. Continuing on a path of isolation will lead to dwindling market opportunities and customer irrelevance for banks.
Open banking is the self-service discovery, provisioning and creation of new business models and services by ecosystems inside and outside the bank (Gartner clients see “Reference Model for Open Banking APIs, Apps and App Stores”). APIs, apps, app stores, developer/partner ecosystems and other technologies provide CIOs with the ability to (Gartner clients see “API Deployment Models That Accelerate Digital Banking“) enable mobility and innovation, increase product and service accessibility and create new business models.
Banks are in a race to remain relevant. Open banking provides banking CxOs and line of business leaders with a way to transform what it means to be a bank.