Why the phrase ‘Open Banking’ won’t exist in 5 years’ time.4 min read - Strategy
Open banking is a huge opportunity and it’ll change financial services whether customers know or not, giving people more control.
That’s why we sat down with Vice President of Product Management at Mastercard Open Banking Solutions, David Head at the Open Banking Excellence meet-up this month to discuss the future of financial services. We explored the opportunities, the threats and what’s going to separate the winners from the losers. Watch the full interview below.
As a company built on facilitating trade and commerce, it’s no surprise that Mastercard is looking to take advantage of the opportunity that open banking offers. Mastercard is currently working with a range of financial institutions and third-party providers to enable the open banking ecosystem. The future of the banking industry relies heavily on open collaboration. And Mastercard is ready to facilitate the evolution of banking.
Q1. What’s the biggest opportunity in open banking?
“I think the opportunity is really to change the way that consumers and businesses handle their money. That’s ultimately what it’s about. Open Banking gives the chance to rethink how customers could interact with their money, giving them new and innovative ways to manage their money better. That’s the goal and the opportunity for everyone participating in the ecosystem; to change the way people manage their money.”
Q2. What’s the biggest challenge?
“I think the challenge is around co-ordination. You’ve got this ecosystem that’s developing but it’s early days. Therefore, you’ve got to make sure that you keep customer expectations aligned with new apps coming forward that are innovative. But also with the quality of the APIs the banks providing being open and secure. All that time keeping everything safe and secure. Anything getting out of sync in that equation risks the whole thing falling apart, leading customers and investors to lose interest. The skill will be in keeping it all co-ordinated and keeping everybody in step at the right pace.”
Q3. What will separate the winners from the losers?
“The ultimate winners will be those that can develop a proposition for consumers and businesses that is demonstrably different to what they have today and is worth them switching if they’re trying to win the customer.
If they’re one of the current incumbents, then it’s got to be good enough to stop customers switching away. In some ways, it’s all for the incumbent banks to lose. They have the biggest risk in the game.
The opportunity to win will come from anybody who wants to change the way customers and businesses interact with their money.”
Q4. What will the world of open banking look like in 5 years time?
“In five years time, the word open banking probably won’t exist. In some ways, it’ll just be banking in one direction. It will be a natural part, if it was successful, of how people interact with their finances. Their underlying account holder may be different from who they do their day-to-day transactions with.
So I think on one level, it will be just banking. I think also it will be beyond banking as well. It won’t just be current accounts. It’ll be savings, pensions and healthcare. All in a much more open data space.
In five years time, if everything’s successful, consumers won’t think of it as anything more than the way they do things naturally. But the banking industry will know that it was the open banking piece which kicked it all off. The framework underneath that keeps it all going.”
To find out how Open Banking is putting the customer in control, we’re talking to members of the open banking community. To view other full-length interviews in the series, click here or enter your email in below to get new videos straight to your inbox.