In June 2024, Visa Consulting & Analytics partnered with Tink to launch a new report: Commercialising Open Finance: The state of play, the direction of travel, and best practices from around the world.
Payments Cards & Mobile caught up with Jan Van Vonno, Head of Industry & Wallets at Tink for an update on the open finance movement, the level of momentum behind it, and the opportunities for European banks.
What’s the level of momentum behind Open Banking?
With the regulatory initiatives, the connectivity provided by banks, the arrival of hundreds of third-party providers, and the provision of many new open-banking-enabled solutions, we’re seeing a sharp acceleration.
Across Western Europe, there are more than 35m active monthly users, and a projected compound annual growth rate of 44%.
This gives you the sense that we’re now achieving the level of momentum we had been anticipating at Tink for many years.
Can you give us some specific examples of how Open Banking is changing the way we engage with finance?
From the information exchange perspective, you really see it with onboarding processes and credit applications.
They’ve been completely revolutionised by Open Banking, because you can quickly and easily verify your income, with no need to fill out forms or upload PDFs.
From a payment perspective, it’s brought more choice and convenience to situations where the current payment experience is subpar, such as the invoicing or billings space.
With Open Banking, everyone benefits from a convenient yet secure and immutable way of making account-to-account payments.
What would you say to banks to encourage them to treat open banking as a commercial opportunity rather than a compliance obligation?
The only reason a customer ever approaches a third-party provider is to get a value-added service that they cannot currently get through their own bank.
At Tink, the mindset shift we have been seeing among banks is that this represents more of an opportunity than a challenge.
So, forward-thinking banks are looking to replicate the services offered by third-party providers, or to develop similar-but-better services of their own.
And the only way they can do this is by viewing Open Banking as a commercial opportunity and not as a compliance exercise.
In short, it’s an opportunity to serve customers in a better way. That’s the whole point.
What’s your prediction for two-to-three years from now?
As we have discussed, we will see the momentum continuing to build around all the existing use cases. But we will also see some new opportunities emerge.
For example, there are new regulations coming which promise to remove some technical challenges faced by account information providers and will enable true real-time services.
We therefore expect to see the emergence of true financial digital assistants which, as well as providing insights, can anticipate needs – which could be thought of as PFM 2.0.
We also expect to see more payment service providers adopting and integrating Open Banking payments.
This will mean that merchants evolve their checkout experience, and consumers get more familiar and comfortable with a wider range of online payment choices.
What are your top recommendations for a bank that is starting to consider the commercialisation of Open Banking?
Banks need to decide which commercial model is right for them and invest accordingly.
And typically, they will consider three different commercial models. Some will look at banking as a service, by offering finance solutions through partners.
Others will look at banking as a platform, by offering a marketplace of value-added services from third-party providers.
Others will look at using Open Banking technologies to enhance and optimise their own financial propositions across every stage of the customer journey – from acquisitions, to onboarding, to credit risk assessments, to engagement and servicing.
Of these three options, the third is probably to most attractive to many banks, and one where Visa and Tink are exceptionally good at providing support.
Ultimately, through Open Banking, banks are providing a value-added service to their own customers.
So, they should look at the third-party provider ecosystem not as potential competitors or challengers, but as innovation partners.
The report, Commercialising Open Finance: The state of play, the direction of travel, and best practices from around the world, can be downloaded HERE
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