The most significant impact of open banking initiatives — at least from the perspective of driving competition and innovation in the value chain — has been to catalyse the development of third party providers (TPPs) and the services they provide.
This group of competitors is defined by Celent as “non-bank providers that offer products or services which directly leverage customer data or other services consumed from account holding institutions. This may be based around APIs, bilateral connections, or through an intermediary.” As such, the term TPP encompasses many of the independent providers that would be considered as part of the “fintech” ecosystem, as well as a wide range of other non-bank companies that leverage bank APIs in their offerings.
Understanding the health and diversity of the TPP landscape is a sensible way to evaluate the impact of open banking in a country or region. Each TPP is a business founded or run by individuals that believe they have a potentially profitable value proposition that is enabled or otherwise enhanced by open banking. As such, there is a clear link to draw between the dynamics of this sector and the “success” — or better, “effectiveness” — of open banking.
In order to more clearly understand where open banking currently stands today, Celent has undertaken a detailed analysis of the European TPP landscape. This has been specifically focused on those TPPs that are licenced by a National Competent Authority (NCA) under PSD2. Europe has been chosen for this analysis both due to the relative maturity of the open banking framework, as well as its pan-regional coverage. This analysis includes the UK as, despite its subsequent withdrawal from the European Union, the requirements of PSD2 are part of domestic law and are being enforced. The aim throughout this research has been a simple one: To understand where open banking stands in Europe today in order to see where it may continue to develop and change the competitive landscape.
While the findings are specific to Europe, there are important lessons and parallels to be drawn by banks, regulators, and TPPs around the world in evaluating the current status of their own open banking initiatives.
