As the banking industry grapples with new open banking regulations, increasing competition, and the rapid pace of technological innovation, a handful of neobanks are adopting a new strategy to provide their customers with a full suite of the latest financial services without bearing the development costs.
Instead of developing a broad range of features and services in-house, these neobanks are creating banking marketplaces. A banking marketplace is essentially a portal through which consumers can select and use financial services products offered by multiple providers. Neobanks are creating these marketplaces by connecting to third-party services via application programming interfaces (API). This allows banks' customers to not only access the latest financial services products, but also to select products based on what fits their needs. For the bank, it can also become a source of referral and subscription revenue.
Recent changes in regulation are driving the marketplace trend. The EU’s Second Payments Services Directive (PSD2) and the UK’s Open Banking regulations both came into effect in January 2018. These regulations require banks to provide third-party access to user data at the request of their customers, generally via open APIs. Open APIs make it easier to provide customers with access to multiple vendors through a single portal. While banks are now opening their APIs to comply with the new rules, some are going a step further and [...]