The ID Co – Open Banking as a Platform

Open standards for better interoperability between banks will act as a massive disruptor and opportunity for new digital services and startups.

Open Banking

As the feature video highlights ‘Open Banking‘ has reached the tipping point of mainstream media consciousness.

The term refers as you might expect, to the use of open standards within the banking sector, to encourage and enable better interoperability between the banks, to achieve more integrated consumer services.

Michael Gardner provides this excellent overview, highlighting the challenges and opportunities the trend will present, how banks will need to master better UI strategies and the use of APIs. The Open Bank Project lists a plethora of exciting startups pioneering different niches it exposes.

Naturally for any new tech trend one of the primary challenges is simply adoption, as you might imagine for traditional, monolith organizations like banks this is no small nor easy transformation to take on. The Telegraph reports how they are coming under fire for not moving quickly enough to do so.

Digital Banking, as a Platform

We can see this as part of the trend of shifting to all industries adopting the ‘Platform Business Model‘, the highly dynamic digital marketplace model pioneered by the likes of Uber and Airbnb et al.

McKinsey sets the strategic context for the scale and nature of the opportunity, and in his Linkedin blog Pascal Bouvier offers a reference model.

FinExtra suggests 6 Strategies for Building a Platform Bank and the NextWeb explores the sector by focusing on a specific niche opportunity of PSD2 payments that it might be targeted towards, highlighting that this change is a natural fit for a platform approach.

In the banking sector ventures like TransferWise and many crowd lending startups leverage the peer to peer model, and investment activity further illustrates the technology niche opportunities, such as VISA investing in Marqeta, who provide a developers marketplace platform for virtual and physical corporate expense cards that directly services this hyper-growth sector. RailsBank is a startup that specifically positioned itself as a BaaP venture.

Simone Cicero is an expert in the topic, offering a ‘Platform Design Toolkit‘, and quoting his work Sebastien Meunier begins to explore how the key principles might be applied to define disruptive FinTech ventures:

APIs and Open Banking Platforms

As Gartner describes APIs are at the heart of the digital platform business model, a topic they explore through their Gartner Platforms series, and major market players like VISA and Citibank have pioneered early API programs. The Open Banking Initiative has begun the industry-wide open standards work required to make this scalable and of course, truly open, such as publishing the first versions of the payment initiation specs and Open Data specifications.

In this documentary experts including Kevin Hanley of the RBS explain how they’ve shifted from ‘point to point’ integrations between business systems, to APIs because these are more efficient and critically, enable the open ecosystems that stimulate creative innovations that power new products that customers value.

Featured Digital Scot: The ID Co

A Scottish startup player in this sector is The ID Co, covered here in The Scotsman.

As they describe they “build products based on (Open) bank data that help businesses onboard their customers by removing friction caused in the application process by current challenges of risk, compliance, fraud and regulation.”

Their Direct ID product offers a range of options, depending on the depth of skills a bank might have and to what degree they want to adopt open banking standards, from a simple hosted page through widgets and the full API.

This case study for Fair Finance, explains that:

Before using DirectID, Fair Finance was a retail business with a shopfront model serving clients that came through the door. In order to scale the business, moving online was the company’s only option. With access to over 4,500 banks globally DirectID’s bank verification capabilities have enabled Fair Finance to expand their product offering purely online across the UK.

Further benefits included:

  • Reduce Bank Statement Fraud – DirectID Certified Bank Statements come direct from the bank.
  • Improved data quality – The bank can make responsible lending decisions based on Live DirectID Data.
  • The bank can spend more time with clients – DirectID Helps Reduce Loan Decisions From Weeks To 48 Hours.

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