Open Banking PTBR

The RISK Strategy and the New Banking Stack In this strategy note by Banking APIs: State of the Market co-author, Mehdi Medjaoui, we look back at how successful platforms have been built and discuss the technical and strategic implications for banks wanting to successfully create an open banking platform. Over the past ten years, startups have entered established markets and gained traction by moving quickly from being a cool app that does one thing, to becoming fully fledged platforms that are able to gobble up the whole vertical industry stream from customer experience to apps, from distribution to products, from products to platforms, and from assets to infrastructure, distribution to products, and from apps to customers. This strategy is now being seen in financial and banking services to some extent. Over the past decade, thanks to internal APIs and more agile, modern software design, startups have been at an advantage in some industries as they have been able to focus their energies on the user experience. They built their customer base by iterating quickly and often. They made assumptions about what customers wanted, tested those assumptions, and once they figured out what their market wanted, they were able to move quickly to provide it. Startups leveraged lean methodologies to gain traction and demonstrate their market value. Investment dollars then followed. Infrastructure Infrastructure Assets Assets The whole strategy was focused on filling the gap between the inability to deliver great digital products and creating the customer experience people want in a digital era. This is where startups belong, and where they can spread out in a blue ocean strategy. This pattern is now playing out in traditional financial and banking sectors, and it consists of four steps: 1 A focus on customer experience and gaining traction 2 Developing or integrating fast products 3 Developing their own assets, data, algorithms and ability to monetize their customer base 4 Developing their own technical, business and licen- sing infrastructure to build a full stack on the value chain. TransferWise is a good example of building this traction in the international payments transfer space. Venmo and Cashapp are leading examples for peer to peer payment transfers in the U.S. WePay did it for B2B and platform payments. Funding Circle for small business lending. NerdWallet, Mint and Yodlee for account information. They all filled a gap in a market dominated by the fact that banks thought they were the only one being able to deliver financial services. With the democratization of software, the ability to put people in networks more easily and with venture capital funding, these fintech startups have been able to develop financial services in niches that were put aside by big banks, because banks saw them as too small to customize applications or offer to invest in them. These startups will focus on the best customer experience application to win customers from existing banks, because the bank's apps "suck" in terms of experience. And it's cheaper for the startups to do that, as they don't need to develop their own bank infrastructure or ask for a new licence, they just need to use the bank APIs or scrape the website and they are able to exploit a bank's infrastructure at no cost. The only difference is that the user is attracted by the startup's app, not the bank's app. 05 The RISK STRaTegy

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