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Open banking will be a transformational success, but it is still ahead of its time. For the time being, genuine collaboration is the necessity for the high street banks. In the past, innovation partnership between banks and Fintechs has mostly been a failure because of legacy infrastructures, outdated processes, or people unwilling to change. It is tough for companies with thousands of staff members to embrace change across the board. Genuine collaboration, however, is gaining momentum. Digital-first banks such as Starling, Monzo, and Revolut have grown exponentially regarding customer sign-ups and value. The growth of genuine collaboration is connected to the growth of these digital-first banks.
Banks need to take quick action and build their hypothesis which will give rise to the new challenging technology. In the near future, joint budgets and ventures between financial institutions and fintechs will be prevalent, which will be potentially launched as new standalone businesses. These new businesses will be independent and enjoy the established customer base with the agility Fintechs enjoy.
Consolidation is going to be the center of attention in 2019 while banks are eager for collaboration within the payments sector. Financial institutions are in the process of purchasing different companies to extend their reach in the market. International players are also eyeing for acquisitions because of the realization that the payment market has a piece for everyone and this makes scaling easier. Mastercard and Visa are also trying their hand in this market. Both companies are aiming to revamp their payments networks to generate alternative revenue streams to protect themselves from the impact of open banking on their businesses.
Banks need to demonstrate open banking in practice to show the benefits to the customer. If genuine collaboration is going to save high street banks, then open banking will play an important role. Open banking APIs accelerates innovation and collaboration. The exciting part about open banking is that customers will not allow sharing of the data if improved values are not the part of the open banking consumer proposition. The firms or financial institutions that provide the best consumer value proposition will succeed. By giving customers authority over their data, banks and credit unions can become market leaders of personalized financial services.