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OPEN BANKING

A monetization playbook for banks

Viewpoint

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The banking landscape in the Gulf Cooperation Council (GCC) region is undergoing
a significant transformation with the emergence of regulatory-led open banking
initiatives. Open banking involves the consented-to sharing of customer data
with trusted third parties, such as other banks, financial technology (fintech)
firms, and payment providers. Directives mandating open banking could threaten
incumbent banks’ market position. However, with the right vision, these banks
can turn that challenge to their advantage. They can retain their market share,
redefine their identity, create new revenue streams, and forge deeper
relationships with their customers.

Download the PDF


OPEN BANKING REVOLUTIONIZES THE TRADITIONAL APPROACH TO CUSTOMER DATA MANAGEMENT
AND PAYMENTS IN FINANCIAL INSTITUTIONS.

The transformational impact of open banking

End users

 * Limited access to their own financial data
 * Fragmented experience across different financial institutions
 * Concerns about data security and privacy



Data holders (e.g., banks)

 * Centralized control over customer data with no legal requirement to share it
   externally
 * Limited interoperability with other financial institutions and service
   providers
 * High costs and complexity associated with integrating third-party services



Service providers (e.g., fintechs)

 * High barriers to entry due to integration challenges and lack of data access
 * Difficulty in developing innovative financial products and services
 * Reliance on manual process and screen scraping for data aggregation




End users

 * Greater control over their financial data through standardized permission
   dashboards
 * Enhanced visibility into their financial position across multiple
   institutions
 * Improved access to personalized financial products and services



Data holders (e.g., banks)

 * Facilitated data sharing with authorized third parties through standardized
   APIs
 * Enhanced competition and innovation through collaboration with fintechs
 * Improved customer experience and retention through expanded service offerings



Service providers (e.g., fintechs)

 * Regulatory clarity and compliance through standardized data use and access
   protocols
 * Access to a broader range of customer financial data
 * Enhanced customer acquisition, reduced barriers to entry, and faster
   time-to-market for new products


 

So, for ambitious banks, the question that prevailed until recently about open
banking regulations—“comply or compete?”—is obsolete. These banks can now work
on monetizing the disruptive possibilities of open banking by exploiting the
capabilities and technologies that they will develop through open banking
initiatives. Banks require a playbook composed of three elements that can
redefine their identity. Banks can undertake all three of these initiatives
simultaneously: power the core, expand revenue boundaries, and transform.


●
●
●
●
1
Power the core
2
Expand revenue boundaries
3
Transform

Securing customer consent for data sharing is a crucial step for incumbent banks
in defending their market position and preventing the outflow of customer data
to competitors in the open banking arena. Without customer consent, banks may be
little more than data providers, which their competitors can exploit. With
customer consent, banks become consumers of data from external parties, thereby
getting to know their customers better and supplying them with financial tools
that build loyalty.

Open banking allows banks to expand their revenue boundaries by targeting
previously underserved segments and by offering new products, such as premium
APIs. The sharing of data provides insights into financial behaviors and
personalized risk assessments. Using this information, banks can offer new
products tailored to previously overlooked segments such as micro and small
enterprises, along with gig-economy workers. Banks also can monetize their data
and services through premium APIs and by enabling the broader developer
ecosystem. These efforts would target many different kinds of enterprises,
including large and established companies that want to improve their efficiency
and startups that need premium services to serve their customers better.

Open banking allows banks to acquire new customers and revenues by acting less
like traditional financial intermediaries and more like technology companies.
One of the most important effects of digitization has been to blur boundaries
between industries and allow for new business models. Open banking allows
incumbent banks to turn that pattern to their advantage. As incumbent banks
accumulate capabilities and expertise, they can break down barriers between
industries and help to develop banking-as-a-service (BaaS) and banking-as-a
product (BaaP). Such digital offerings would have been unimaginable until
recently.



Open banking in the GCC region presents incumbent banks with a chance to go
beyond compliance. They can now reinvent their customer relationships and role
in the economy by offering their customers tailored products and services. Banks
can position themselves for open finance and the open economy. By transforming
their approach to markets, they can broaden their scope with new business models
and partnerships across industries.






OPEN BANKING: A MONETIZATION PLAYBOOK FOR BANKS DOWNLOAD THE PDF


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Dr. Antoine Khadige

Partner, Strategy& Middle East

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Nader Haddad

Principal, Strategy& Middle East

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Marwan Nadda

Manager, Strategy& Middle East

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